Micro Payment

6

July 21, 2006

I've been doing some research on micro payments sites and learning some things that many sellers using the more traditional sales venues will find surprising.

The question most image producers who are used to licensing rights to their images for an average of $250 to $600 ask is, "How can anyone make money selling pictures for $1.00 each?" (At iStockphoto the photographer gets 20% of the $1.00, but at other micro payment sites the percentage is higher.) Nearly, every photographer on the traditional side of the business believes it will be impossible for anyone to make serious money through the micro payment sites. However, it appears that a few photographers, at least, are able to do reasonably well.

Lise Gagne, the number one shooter on iStockphoto, has had 336,505 downloads since April of 2003. (This was at my last check, the number increases almost minute by minute.) She has 3,555 images on the site. It's hard to tell how these downloads translate into dollars because one would expect that the number of sales per month has been steadily increasing since 2003. Thus, probably much more than one-third or the sales occurred in the last year. Recognizing that it is probably unfair to estimate that there have been 112,000 downloads per year, in order to get some handle on revenue I'm going to use that number.

While most customers buy rights to images for $1.00 in some cases they pay as much as $40 for larger file sizes and the rights to use an image. An experienced RM photographer has recently posted a significant group of images on six different micro-payment sites in an effort to compare sales results tells me that he has made no sales of the largest size and that his average price per sale is $2.35.

For lack of a better number I'll multiply the 110,000 times $2.35 and get gross revenue of $258,500. Lise gets at least 20% of that, but if she is image exclusive with iStockphoto then she would get 40% because she is at the Diamond level with more than 25,000 downloads. My guess is that she is image exclusive because I don't see her work on other sites. Thus, her net revenue for the year would be in the neighborhood $103,400. Not bad, but remember she is number 1.

There are 57 image suppliers on the Diamond List each with over 25,000 images on iStockphoto. Based on the above, number 2 probably earns about $50,000. There are five more whose downloads are between one-third to 25% of Lise's and the other 50 all have less than 25% of Lise's downloads. Thus, number 8 may be earning around $23,500 a year and the next 50 are earning less. This assumes that all these people have decided to go image exclusive. If they haven't then they get 20% instead of 40%.

So what is this Diamond List? The standard royalty percentage for everyone on iStockphoto is 20%. However, if you agree to be image exclusive and achieve a certain level of downloads you can get a higher percentage. The Bronze group gets 25%, Silver gets 30%, Gold gets 35% and Diamond gets 40%. To reach Bronze you must have had 500 downloads, Silver 2,500, Gold 10,000 and Diamond 25,000.

The Diamonds are the top shooters and the 57th person on the list probably earns about $8,000 a year. Diamond shooters represent less than three-tenths of one percent of the more than 20,000 iStock shooters.

With all the above numbers keep in mind that if a much higher percentage of their total downloads were in the past year their annual revenue could be maybe double the figures I have quoted. And given the spectuclar growth of this segment of the market sales for everyone are certainly going up.

Exclusive Or Non-Exclusive

Why wouldn't everyone who reaches the 500 downloads level agree to image exclusive. I go back to my friend who has images on six micro payment sites. His current results show iStockphoto as number 1, but Shutterstock is running neck-and-neck with iStock. Fotolia generates 51% of iStock's revenue, Dreamstime 38%, Stockxpert 22% and Bigstockphoto 14%. He also says that Shutterstock is the easiest to deal with, has the quickest turn around on image acceptance, and is the most realistic in what it accepts. In his opinion iStock is over zealous in its selection process, but he says Dreamstime is the worst taking the longest time to review images and rejecting images for invalid reasons. All of Dreanstime's rejects are picked up by other agencies where they sell constantly which would indicate that Dreamstime is losing sales for itself and its photographers.

If these figures hold up for other photographers (and the figures are from a small sample for a short period of time) they indicate that if a photographer puts images with several distributors instead of just one he can probably make more than three times what he makes at iStock alone at 20%. And this is from day one, not after he has a huge number of downloads necessary to raise his percentage. If the photographer sticks exclusively with iStock the best he can do after getting a lot of downloads is 40%, not three times the 20%. And there are other micro payment distributors showing up every day where the non-exclusive images could also be sent.

My checking shows that a number of iStock shooters on the Diamond List also have the same images on a number of other sites, in addition to iStockphoto. Thus, it would seem that others have figured out that they can make more money be being on multiple sites rather than by being exclusive.

Revenue From Multiple Sites

The photographer with images on six sites is averaging a combined total return-per-image of $11.41 per month. (That works out to $136.92 per year.) The majority of his images are non-people images and we know that people images outsell the others by a huge margin. On the other hand this photographer has been a top stock shooter for many years, knows the subjects that are in highest demand, and the images he has put into the micro-payment market are all of high demand subjects.

These are very early statistics and we need several more months of data before it is possible to come to any firm conclusions. However, this photographer's return-per-image is very surprising when we consider the current average gross return-per-image from some of the major image suppliers. The average gross RPI from Getty for RM is $363.42 and for RF is $370.02. (These numbers are down from $775.29 for RM and $652.58 for RF at the end of 2003. Keep in mind that these are gross numbers of which the photographer gets only a percentage.) If we divide Corbis' gross annual revenue of $128.65 million by the one million commercial images they say they have on file we get an average return-per-images of $128.65 and Alamy's annual return on the images of one agency it represents is about $18.00. It is also important to note that these are averages and many images generate much more, or much less.

Expectations

It is interesting that some of the photographers with only a few thousand downloads seem very happy with iStockphoto. One who had tried a traditional stock agency before going to iStock said he had "abysmal" sales at the traditional agency and described it as "a lackluster experience with bad support and sub-par quality standards on many images". He was also upset by the lack of sales statistics offered by traditional agencies, but praised iStock for its instant status updates on sales, great individual support and payment requests on demand.

Compared to what some of the top shooters have earned producing RM stock images the micro payment site money is peanuts. The first reaction of many will be that, with very few exceptions, no one would be able to make a living shooting for these outlets. After all the 57th shooter on Diamond list is probably earning about $8,000 a year and the Diamond shooters represent less than three-tenths of one percent of that total 20,000 iStock shooters. Everyone else makes less. (Fotolia currently represents 30,906 according to its web site.)

On the other hand we are often quick to forget that the vast majority of RM shooter are not making a living from stock photography either. Most are selling stock images as a supplement to another source of income. If producers look at stock photography as a supplement, not a sole income source, then there are a number of business strategies for stock production that make sense. There are lots of reasons why a few thousand dollars a year might be a nice supplement to an existing income, and a nice tax write off.

It is interesting that 24 of the 57 Diamond shooters list themselves as Designers or Illustrators. In some cases most of what they offer is illustration, but some of these people are also providing still photos because they have an intimate knowledge of what they buy and what is needed. I don't have any good way of measuring the number of Designer suppliers on the site, but I suspect that a good percentage of the total fall into this category.

Such people are probably also micro-payment image buyers. They need images for their design projects. For them, it may be more important to get inexpensive photos for their projects than to earn revenue from their own photos and this is their primary reason for participating and supporting the micro payment community. The access to low cost images is of more value to them than any revenue their images might generate. In many cases designers may charge a fixed fee for a design project that includes the cost of all the photos and illustrations involved. If they can purchase the images they need on a micro-payment site rather than having to go to traditional RF, they get to keep a lot more of the total fee for the project than they would otherwise. The additional revenue from their primary line of business can easily be much greater than any revenue they might earn from downloads of their own images.

Photographers whose only interest is in earning as much as possible from the licensing of their images may need to find some other justification for making their images available at these prices. On the other hand many of the photographers participating on micro payment sites are not starting out with high expectations and they are happy as long as their revenue continues to grow, even if it is much lower than what some RM shooters are making, or have made in the past.

The experienced RM and RF shooters have built their lifestyle around their former level of earnings. As that level begins to decline it is difficult for them to readjust. In many cases they have high overheads as a result of constantly trying to improve the quality of their images by using better models, better sets and in general higher production values. They point out that many of the images that can be found on the micro sites don't use professional model and at current prices it will be very difficult for photographers to move up the scale in quality. But clearly the fact that these images sell so robustly is an indication of how much demand there is at this price level for what is available.

Some have pointed out that the Achilles heal of the micro-sites may be that they have priced their product so low, and provide so low a royalty return, that it will be impossible for a photographer to make up the cost of a shoot that includes quality models and more production values. The micro payment industry seems to have forgotten the lesson of traditional RF where in the initial stages it was priced in the $14 to $19 range. It took years before the pricing came up to where photographers could begin to include decent models in their shoots.

On the other hand, maybe the additional quality is not a critical factor and the fact that the prices had to be raised on regular RF has driven away a huge segment of potential image buyers who are now the core of micro payment customers.