In a recent conversation with Lee Torrens, author of Microstock Diaries and a leading advocate for microstock, I argued that the main problem with microstock pricing was not that pictures are sold for low prices to students, individual bloggers or personal Web site owners. The problem arises when images are sold to organizations that will receive substantial value from their use at these same low prices. Images used on billboards, in a million brochures, as part of an ad in several large circulation magazines, as a magazine cover, or as part of a textbook distributed to hundreds of thousands of students are worth varying amounts more than if used by a single student on his blog or cell phone.
Torrens said: “I cannot understand how you believe large corporations need to pay more for their photos because they can afford it. What other business services and products do they buy above the market value just because they can? You are talking about price discrimination based on who the customer is, not the quality of the product (in this case, the photo itself and the license).”
I believe we should discriminate. Market value should vary depending on how the image is used—the value the customer receives. Microstock images are not priced based on the quality of the product, but on file size, regardless of any quality standard. The distinguishing factor is between renting and buying a product.
Photographs are not the only products that may be licensed based on usage. If someone needs a car for a day or a week, the rental price is based on the value received—in this case, the time they keep the car, its usage.
It is also possible to rent bicycles, sailboats, golf clubs and other recreational equipment at prices below the cost to own them. The price is usually based on how long the customer wants to use the item, or the value received.
If you want to see a movie, you are more likely to rent a DVD than to pay a higher price to own your own copy. It is also possible to rent, rather than own, computers, VCRs, large screen TVs and gaming systems. It is even possible in many airports to buy a book, read it and then return it at a different location, where you can get another book at little or no additional cost. The fees customers pay to use products differ depending on the value each customer receives.
If you have a new baby, it may make more sense to rent a crib, stroller or car seat than to buy one, particularly if you are traveling. When you want to repair your home or work in your yard, renting certain power tools may be more cost-effective than owning them; the price you pay will be only a fraction of the cost to own such tools, and it will be based on how long you need it. When you want to use a special piece of camera or lighting equipment for a one-time shot, it may make more sense to rent rather than buy it.
In all, renting based on value received is a very common practice.
With photographs, rather than giving customers unlimited, unspecified use of the image, it makes more sense to give them all the uses they need and charge them an appropriate fee for the uses. Microstock companies do this to a certain degree. They do discriminate. They don’t charge every customer exactly the same price. They adjust the price based on the file size delivered. Part of the theory is that there are certain larger uses that a customer won’t be able to make if he only buys a small file. However, this is not an effective limiter, because file size has very little relation to the value the customer will actually receive from use of the image.
Microstock sellers also place high limits on the number of copies customers can print and require them to pay more to use the images on products, but these restrictions are inadequate when measured against the huge value a few commercial customers receive compared to the value the majority receives for the same price. It is like charging a one-day rental for a car and telling the customer, “Keep it for a year. We will not charge you anything extra.”
Torrens also said: “I can understand your logic in tying price to usage, though I do not think it has any hope of working in an oversupplied market. There are too many photographers competing for too few sales for the market to sustain such a complication to the convenience of license conditions.”
A modified microstock pricing system does not have to be as complicated as today’s rights-managed pricing. It just has to move toward establishing some large categories of use and pricing, each based on the value the customer receives rather than the file size delivered. (For more on such a pricing system, see “Modified Rights Ready Pricing.”)
Torrens points out that “the rest of the market is too competitive and commoditized for that to work. Even if you miraculously convinced the top 10 microstock agencies to agree to a usage-based license standard, new agencies would pop up and compete based on the fact they offered the old all-you-can-eat license model, and buyers would switch.”
I have to partially agree with Lee on this point. If the existing agencies were to adopt such a policy, new agencies would pop up. But I cannot quite see why image creators would run to dump their images in these new agencies, when the know that by sticking with the existing agencies, they will make more money. If the system I am proposing were to be implemented, 90% or more of microstock customers would pay the same or less than they pay now—the rest would pay more, and in some cases substantially more. If suppliers would not rush to give their pictures to large commercial customers for less, these customers would be forced to settle for something less than what they wanted in order to get the lower price.
Still, Torrens is right. There is no chance of my proposal being implemented. Everyone would rather stick with the status quo and lose money.