Traditional Imagery Volumes Tumble at Getty Images

Gross revenue generated by Getty Images in Q2 2007 was $218 million, up from $204.8 million in the same period in 2006. According to CEO Jonathan Klein, revenues for the "creative stills imagery" side of the business were flat at about $161 million. However, it should be noted that this number includes iStockphoto revenue, not normally considered a part of creative stills. The number of iStock downloads in Q2 2006 was about 2.5 million and downloads rose to 4.25 million in the recent quarter. If iStock revenue was removed from both quarters, creative stills would be down.

"We are far from pleased, as we are not growing on an organic currency neutral basis," said Klein, "due to a decline in revenues for our traditional creative stills imagery business." He also pointed out that "volume is a challenge, rather than price." But to a great extent, volume is affected by the significantly lower price offerings available in the microstock arena.

Year-over-year volumes for traditional creative stills fell 6% to about 143,938 RM and RR images and 11% to approximately 240,117 traditional RF images (not including iStock). The volume declines for RF were primarily in the U.S. and the UK. Thus, a total of 38,865 fewer traditional images were licensed in the last quarter, compared to the quarter a year ago.

The chart below shows historical counts of the number of images licensed in the second quarter of each year from 2002 through 2007.

Note that the number of RF images licensed declined between 2002 and 2005 and then made a big jump in Q2 2005 when Getty acquired Digital Vision.

A closer look at what has been happening since Q3 2005 on a quarter-by-quarter basis gives a better picture of how the acquisitions of Digital Vision and later Stockbyte affected the number of units licensed. It also gives a strong indication of the impact microstock is having on traditional sales.

The number of RF units licensed began to steadily decline after Q3 2005. This was before Getty purchased iStockphoto in Q1 2006 and the microstock model got a big boost. But we know that in the last half of 2005, traditional customers were already discovering that micropayment images were perfectly satisfactory for many projects, and RF sales were heading down. With the purchase of Stockbyte in Q2 2006 the number of traditional RF units licensed got another boost, but there has been a steady decline since Q3 2006. (Getty did not supply details in Q1 2007 that would allow us to calculate the number of units licensed, but there is every reason to believe the trend was continuing.)

The totals in the first chart indicate that often when RF sales were falling, RM sales rose, thus keeping the total images licensed on a relatively level keel. Now, both are falling.

Getty's dilemma is that there are no more Digital Vision's or Stockbyte's left to acquire. And the trend toward using microstock increases every day. Klein says the smallest RF files sizes are showing the biggest drop in sales. These sizes are most often used for Web sites. Increasingly, Web customers are discovering that micropayment images are perfectly satisfactory for their needs. Much as Klein would like to reverse the volume trend, expect it to continue.