Corbis

6

March, 1996 - Corbis (formerly Continuum) is getting more and more aggressive
in their drive to build the world's most comprehensive file of editorial
still photography. While their marketing of this resource has been moving
at a snails pace they are likely to have a significant impact on the marketing
of stock photography in the future.

• They have supply from more than 200 sources including major collections
  from around the world which include: the Bettman Archives, Roger Ressmeyer's
  Starlight Agency, The National Gallery of London, The Hermitage in Russia,
  the Royal Ontario Museum, the Barnes Foundation, and many other collections.
  Some they own outright and with others they have 20 year licensing agreements.

  
  

  
  Expect them to buy more stock photo agencies like Starlight, particularly
  when a majority of the content is owned by one person.

  
  

  
  

• Top photographers have made portions of their file available to Corbis.
  They include: Tony Arruza, Dave Bartruff, Morton Beebe, Laura Dwight, Ric
  Ergenbright, Macduff Everton, Owen Franken, Stephen Frink, Dan Guravich,
  Wolfgang Kaehler, David Muench, Douglas Peebles, Charles Rotkin, Galen Rowell,
  Richard Hamilton Smith, Joe Sohm, Brian Vikander, Stuart Westmorland, Roger
  Wood, Adam Woolfit.

  
  

  
  

• Corbis currently has a staff of over 120 in Bellview, Washington and the
  UK making them larger than all but a handful of the world's major stock
  photo agencies.

  
  

• They are assigning photographers to National Geographic style projects
  (over 1,000 assignment days in 1995), and paying $350 to $500 per day for
  this work. No other stock agency in the world is spending so much on the
  production of new material. No other company in the world is spending so
  much to produce images without a clearly defined, immediate use for the
  images.

  
  

  
  

• They seem to have an unlimited source of capital (Bill Gates' billions)
  to invest in acquiring content.

  
  

  
  

• There is little evidence at this time that they are licensing many uses
  of this content. Licensing only began about a year ago. It is expected that
  their efforts in this area will expand in 1996. Their current attitude toward
  clients seems to be: "we'll sell you rights if you offer us enough,
  and if you jump through hoops to look at the material."
  

Their principle means of fulfilling requests is not on-line as might be
expected. Instead interested parties call Corbis and request specific subjects.
In house researchers go through their computer database selecting digital
images that might meet the client's needs. The selected images are then
either put on-line for the client to view, or delivered to the client on
a custom CD. As yet, this is not an overnight process, and normally takes
days.

Motives

One key to developing a profitable relationship with Corbis is understanding
Gates' real intentions for this database.

One way to look at Bill Gates is as a "patron of the arts" --
and compare him with the Renaissance patrons. These independently wealthy
people supported artists for their own enjoyment, and prestige. They wanted
to leave something for future generations. Their purpose was not to make
a profit from the art produced. If that's what Bill Gates wants to do with
his money - more power to him.

I find it hard to imagine that the Corbis file will ever turn a profit from
the file itself given the production costs, and their concentration on low-demand
types of material. However, some creators doing assignments may be able
to earn a good living as they build this file. The key to success will likely
be in the up front payments, not royalties.

Reasons For Caution

In public pronouncements Corbis has always insisted that their goal is to
license rights to all users. But, until we see more evidence of such sales
there is that nagging doubt that Gates' goals are to lock up content for
his own products at way below market rates and to restrict access of his
competitors to that content. His contracts with image suppliers make both
these options possible.

The little information we have about Corbis pricing lead us to believe that
Corbis is licensing multi-media rights to outside users at rates between
$100 and $400 per image. Rates for more traditional uses are in line with
the numbers in my NSPP guide. On the other hand, we recall that before PNI
started licensing digital usages they insisted they would always "take
the high road" on rates. Once they started negotiating real deals,
rates started falling like a stone.

In theory multi-media will be a major market for Corbis. In the November
1995 TS (Digital Product Economics, page 5) I outlined a scenario that would
have producers paying about $40 per image for a CD-ROM with 500 images,
assuming the producer was willing to share 10% of gross sales
with their image providers. Increase the number of images needed and the
dollars per image go down, unless the product is hugely successful at full
retail price. If image suppliers insist on higher usage fees it simply makes
it uneconomic to develop the product.

On their own products, Corbis thinks they can only afford to pay 1% or 2%
of net profits (that's after a lot of expenses are deducted
from gross sales) to content providers. Why would they expect outside producers
to be able to pay substantially more for their content? Corbis gives every
indication of being willing to lose sales rather than discount prices, which
may be commendable. But, I think it will result in very few sales to outside
producers.

This theory makes some sense when we examine their stock strategy, but it
totally falls apart when we see what they are doing with assignments. With
assignments they are paying so much for their content, that it could easily
cost them more than their competitors will have to pay to acquire similar
material through normal stock channels. When they use this material their
content costs are going to be much higher than 1% or 2% of net profits.
They almost have to sell this material to outside users if they ever expect
to recover some of their costs.

As a result I am totally confused as to the motives of Bill Gates. Maybe,
after all, his goal with Corbis it is not to make money, but to be a "patron
of the arts."

How Photographers Make Money With Corbis

Photographers working with Corbis might be able to make money through (1)
stock license fees, (2) assignment fees or (3) outtakes from assignments
that can be marketed in other ways. Actually, there is a fourth and probably
better way to make money. That's to get hired as a Corbis employee, but
that probably means you will no longer be producing pictures. Let's look
at each option.

(1) Stock License Fees. First recognize that the up front
payment is not really enough to enable you to do new production. The per
image advance barely pays for the time to caption and prepare the material
for delivery to Corbis.

Some photographers like Morton Beebe are very enthusiastic about the results
they are seeing. In addition to getting the advance as soon as he supplied
the captioning for his images, he got a call for other travel images of
San Francisco which one of Corbis' clients just happened to request. Fortunately,
it was easy for Morton to go out, shoot the needed subject matter and supply
it to Corbis.

The royalties for this project gave him a 10% credit against his advance
so he figures that within ten months to a year he may have his advance paid
off and start receiving actual commission checks.

With projects like this travel book, done by a third party publisher, the
photographer gets a 45% royalty. However, the royalties for Corbis produced
products are much different. In those cases the photographer is paid a percentage
of net cash revenues of the products actually sold. These breakdowns
are: All creators of work included on the product share a 7% portion
of the net cash revenues for the first 10,000 units. They then get 2% for
units between 10,000 and 40,000 and 1% thereafter.

We believe net cash revenues is another way of saying net profits, a favorite
term of Hollywood accountants. In Hollywood everyone knows that even box
office blockbuster hits never have any net profits - after all the expenses
are deducted.

So the critical question -- back to motive -- is what percentage of the
uses of images will be for Corbis produced products and what percentage
will be by outside producers. Unfortunately, no one can give you that answer,
even for the next few years, and certainly not 20 years down the road.

(2) Assignments. Corbis is trying to "document the
world in a comprehensive and meaningful way," according to Win Scutter.
Therefore, they are being very selective as to what they put into their
file in order to get a balanced coverage of the world. They want to avoid
an overemphasis on any particular subject area.

Some of the material they need can come from photographer's existing stock
photo files, but Corbis has found there are gaps. Subjects they
would like to have simply have not been photographed in a comprehensive
way.

Thus, Corbis has decided to make assignments to shoot that material. There
may not be any immediate publication plans for this material. It just fills
a gap in the file. No other stock agency in the world has ever risked the
kind of money they are talking about on such a speculative venture. No other
company, that I know of, would dare.

These assignments may be long and relatively open-ended in terms of when
work must be completed. Thus photographers can schedule shooting around
their other assignments. Some photographers point out that Corbis is funding
projects which no other publication in the world has been willing to fund.
If a photographer has a book project in mind on some social, cultural or
political issue partial funding may be available through a Corbis assignment.

Fees range from $350 to $500 per day depending on the nature of the project.
All expenses are paid. Travel days are billed at $175 per day and research
days (preparing for the shoot) are billed at $200 a day.

For this fee Corbis gets all rights to all images they select from the shoot
-- and to all similars of any selected images. There is no limit on the
number they can select.

The photographer also gets some minimal royalties in addition to the day
rate. For any sales made to third parties the photographer gets a 10% royalty
for 10 years. After that, nothing. If the use is a Corbis produced project
and more than 50% of the images are the photographer's he/she gets a pro
rata share of 2.5% of the net profits (remember my analysis of net profits
above). If the photographer has less than 50% of the images the photographer
shares 1% of the net profits on a pro rata basis.

The photographer is also allowed to get access to any of the selected images
for the purpose of using them in self-promotional material, fine art prints
or books exclusively featuring the photographers work.

(3) Outtakes From Assignments. The photographer does get
outtakes from assignments which can be marketed through a stock agency or
in any other way the photographer chooses. But, the photographer does not
get "similars" to selects and the definition of similars is very
open ended.

Depending on how Corbis edits, there might be value in these outtakes; there
might be no value whatsoever. I believe it will be impossible to make a
judgement as to whether the outtakes will have value until after the assignment
is completed. The photographer will simply have to gamble if he or she needs
to make more than the day rates in order to justify doing the project. Investing
in pork bellies might be less risky.

It is interesting that one of Roger Ressmeyer's arguments for giving up
editorial shooting and taking a staff position with Corbis was, "I
found that every week I was fighting a skirmish with a publisher who was
trying to acquire more rights for not enough money for me to make a balanced
living." (Roger felt that to make a balanced living he
needed normal assignment fees plus a significant number of
stock sales. See TS, September, 1995, page 9.)

Final Thoughts

Until Corbis starts showing some track record of significant sales to third
parties -- not to Corbis or Microsoft -- photographers should assume they
will receive little or no future royalties from Corbis. Base the degree
of your participation on upfront payments. While Microsoft is technically
a third party it would be easy for Gates to move the production of multi-media
products to Corbis. Corbis could then hire Microsoft to handle the bulk
of the marketing of such products for them. In such a case royalties would
be calculated based on the in house production rates.

Maybe this is my paranoia, but there are many major companies that accuse
Bill Gates of taking unfair advantage of suppliers and competitors. The
contracts as they stand allow him to do this. It would be very easy for
Corbis to put a clause in the contract that limited the percentage of use
for Corbis produced products in relation to the percentage of use by outside
producers unless Corbis came back to the photographer and negotiated a specific
exception. So far, they have flatly refused to make any change of this type.

On the other hand, in talking with photographers who are working with Corbis
you hear nothing but praise for the way they are treated. They are impressed
that the company has hired many of the industry's most experienced and well
respected people. Photographers talk about how helpful and professional
everyone is at Corbis. They say the people are nice, trustworthy and always
deliver what they promise. Photographers say that everyone at Corbis makes
a sincere effort to see that photographers are happy.

One photographer commented that this is a refreshing change from the "f___
you" attitude often encountered at many publications and some stock
agencies. He continued, "When someone treats you like a human being
it helps make you want to work with them."

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