184
CONVERSATION WITH SHELDON MARSHALL
December 13, 1998
In a recent conversation with Sheldon Marshall, Chief Executive Officer of Visual
Communications Group, outlined some of VCG's future plans for involvement in
the royalty free market and for general marketing using the web. He also sheds
some light on several issues of recent concern to stock photographers including
percent of sales, the cost of catalog participation and photographer return on
investment.
The VCG group includes: the Telegraph Colour Library (UK), FPG (US), PIX (France),
Bavaria Bildagentur (Germany), Colorific (UK), Planet Earth Pictures (UK), and
Giraudon (France).
Royalty Free
JP - What plans do you have to introduce royalty-free products in the
future?
SM - Basically we have been looking at the market for some time and we made
a decision to enter the market by producing a range of products which will surface
in the middle of 1999. We are in a situation where fundamentally our clients are
demanding those products and we have a situation where Getty, Image Bank and Corbis are in
the game so we have to have a response.
JP - Will that be discs, on-line or both?
SM - At the moment we envisage both. But, it seems to us that the business
is very much gravitating toward the web. Having said that, not all markets are at
the same rate of development as North America. It will be a while before all
markets can have the same connectability to the web. So CD's will be an important
part of the whole marketing mix.
JP - Will you be putting out print catalogs with those CD's?
SM - Yes, we plan to produce a print catalog to go along side each CD.
JP - Will you attempt to acquire an existing RF company, or build a RF
division from scratch?
SM - At the moment we don't have any plans to acquire a business. Our
initial planning is to start the RF from scratch.
JP - It is my understanding that earlier this year you had discussions with
Digital Vision, and possibly others about acquisition.
SM - We were looking at a lot of options. Along the way we had discussions
with PhotoDisc and Digital Stock. Now, they have been acquired and Image Bank has
acquired Artville. We talk to everybody. We were trying to work out how best we
could go forward in the RF business. None of those discussions came to anything.
JP - What percentage of royalty free sales do you anticipate that the
photographers will receive?
SM - We haven't put together our final proposal, but we did announce to our
photographers that it would be in line with existing RF industry practice. My
understanding is that the current industry commission rate is about 20%, based on
the proportional number of images on a disc, or an on-line sale.
JP - As I understand it that is 20% if the sales are direct, and a lesser
percentage if a distributor is involved in the process.
[Editor's Note: We understand that in many cases the distributors of RF discs
get 60% of the gross sale leaving 40% for the disc producer. At that point the
photographer's 20% share of the disc producer's income works out to about 8% of
the gross sale. Sources also tell us that Getty and PhotoDisc are actively
attempting to purchase many of the PhotoDisc distributors which would give Getty
92% of the gross fee collected on many of their CD-ROM disc sales.]
[Based on Getty's model, the agent or representative in the country where the sale
is made, will receive their normal share of the sale before the remainder is
transmitted to the parent agent. In such a case the photographer will receive
much less than 20% of the gross fee.]
JP - Will you be looking for new suppliers of RF images for your discs and
on-line site?
SM - It is dependent on the type of imagery required. There are images
that are being sold as RF that don't fall into the traditional stock photography
mold, and there are areas where you need to have specialists which we don't
necessarily have as a stock agency. Our main focus is to work with a limited
number of our existing suppliers. But, these royalty free arrangements won't
necessarily suit everybody in terms of the style and range of photography that we
intend to publish.
The answer is that we will start with the people we know, but we may have to take
on people which can extend the image range that we can offer.
On-line Sales
JP - I understand that VCG has made arrangements with a California company
to begin licensing PEP (Planet Earth Pictures) images online, and that the
photographers will receive 25% of the gross fees charged for these usages. I'm
not sure whether there are images from Telegraph, or FPG included on this site.
Is this RF or will these images be licensed at traditional rates?
SM - It is not strictly RF. We've got a test site up for PEP because
obviously we want to learn more about the market. It has a relatively small
amount of images.
JP - What is the URL of that site?
SM - The site should go up by the end of December. It is actually up in
Beta form now. The site is looking at not only stills, but some footage as well.
JP - Do you own a footage agency at this point?
SM - We don't own a footage agency, but within the group (United News &
Media plc) there is a company, United Wildlife, which has a very large quantity of
footage specializing in wildlife, natural history and travel.
JP - But, in this site in California only still images involved are from
PEP?
SM - That is correct. There are a limited number of photographers who are
participating on the PEP site.
European Web Site
JP - What plans do you have to set up a VCG or Telegraph web site in Europe
that will have content separate from what FPG has on-line?
SM - We are currently working on that. We hope to have that site up in the
early part of next year.
JP - Will there be crossover images? Will you use some of the FPG images,
or will the European site be totally separate?
SM - The FPG site itself hasn't got full inventory yet. The group images
(images from other agencies in the group) are not yet up online. In principle,
both sides will have group images. The current model is to reflect the catalog.
There is a different publishing program in North America so the images on the FPG
site are in many cases different from the edits that take place for Europe and the
rest of the world. Eventually the whole editing will reflect, perhaps, a more
common approach, where we can show the same images on both sides.
[Editors Note: We did a story in October on the launch of the FPG site and
pointed out at that time how poorly keyworded the images were on that site.
Rebecca Tayor of FPG told us at that time that they were still importing data and,
"We hope to add additional data in a week or two and have all the data in place in
at least a month." In doing some test searches today, almost two months after the
story was written, there is very slight improvement. Rebecca Taylor reports that, "No
changes have been made to the site so far." In my estimation the FPG
site is still a long way from being an efficient search tool.]
Charge For Web Site Participation
JP - How much will photographers be charged for images that go on these
sites?
SM - We haven't finalized that yet. We are looking at increasing the
existing space charge for images in the print catalogs to cover on-line costs.
[Editor's Note: If they increase the charge for print catalog participation
then the web site costs will be paid from sales generated by the print catalog,
not necessarily from sales made from the web site. This guarantees VCG earlier
payment of costs as the web site is developing customers, but is not necessarily
in the best interest of the photographers.]
JP - Will the only images on your web sites be those that appear in the
print catalogs? What about images that don't make the catalog?
SM - We haven't addressed the individual non-print-catalog images. When we
launched the FPG site we didn't charge anybody anything. We wanted to get the
site out there and we wanted to get some experience. But, there are costs in
maintaining, operating and marketing these sites. We need to look very closely at
all the charges. We started off with catalogs and dupes. Now we are producing
CD's, high res files, and a web site. There are numerous levels of expenditure in
which we are involved.
Going forward the role of the catalog itself may change. The web will become the
on-line catalog for most of our clients. So there may be differences in cost
structure over the next three to five years. We are currently looking at these
changes group wide. We want to come up with a uniform package.
JP - But, you have not established a price to photographers for putting
images on the web site?
SM - To give you an indication we said at a recent meeting that we were
looking at a cost of about $80 increase in our current space charges (for the
print catalog) to reflect the making of the high res file, the indexation of the
image and getting it onto the web. But that is not a confirmed number yet. We
will be getting back to our photographers within the next month or so with a more
validated answer.
JP - Whatever the charge turns out to be, will it be the same regardless of
whether the image ends up on one site or both sites?
SM - Again, I haven't got an answer to that. At the moment we haven't made
a charge in North America for adding images to the site. I suspect there may be
two charges. One of the reasons is that we are calibrating slightly differently for
the North American market.
JP - Your calibrating differently?
SM - Yes, the printing process in North America is different to Asia and Europe.
We scan in CMYK but customers calibrate differently in the two areas of the world.
It is an issue of printing inks, density of inks and the way
separations actually come down on the paper. There is a fundamental difference in
printing in the U.S. market. That results in calibrating in a slightly different
way. The effect of that is that we scan images in one way for the American market
and we will be re-scanning them in a different way for the European market.
JP - How large a file are you normally producing when you scan?
SM - We are scanning 28MB files which are then compressed down for the
Internet.
Percent of Sales
JP - I believe all your wholly owned offices keep 50% of any fees collected
before submitting the remainder to VCG and that amount is then split with the
photographer giving the photographer 25% of the gross sale price. Is that true?
SM - That is correct.
JP - How long has that policy been in force?
SM - Obviously, you know that the group has grown by acquisition and that
it has acquired more recently its German agent (Bavaria) and FPG in the U.S. In
the case of FPG it has always operated on that basis with us, even when we had a
cross representational agreement with them, prior to acquisition.
JP - It is my understanding after doing some recent checking that as far
back as the late 1980's FPG was allowing many of the foreign agents who took their
catalog to keep 50% of the gross fee collected.
I believe most of their photographers (myself included) thought the split was
60/40 in favor of FPG, and thus the photographers thought they were receiving 30%
of the gross sale. In fact we were receiving 25%, but we failed to ask the right
questions and thus never understood the true situation.
SM - We offer a range of commissions where the selling agent retains
between 40% and 50%. We also have figures in between depending on performance
levels and commitment to marketing, etc. We've always had a similar range and we have
always been direct with the photographers about it.
JP - Where are your wholly owned offices?
SM - Germany, France, UK, and North America.
[Editors Note: It is generally believed that these four areas of the world
represent in excess of 80% of the gross sales of stock photography worldwide.
These wholly owned offices retain 50% of all sales for their operations before
submitting any income from images produced outside their territory to VCG group
headquarters for later division and distribution to their photographers.]
JP - As you know there are many major agencies that only allow the selling
agent, even wholly owned offices, to retain 40% of the gross fee collected. Thus
the photographer gets 30% of the gross fee instead of 25%. Given this choice, why
would a photographer want to put his work with a VCG agency rather than getting a
larger percentage with someone else?
SM - There are a number of agencies that work in a number of different
ways. The commission element is an important part, but not the only part. We
have always been very selective in the choice of our (agency) partners. We have
worked hard to make that relationship meaningful. We don't have thousands of
active photographers. We have a fairly tight nucleus of producers for the group.
I think those people, in general, are happy with the arrangement, which they were
well aware of when we entered into the arrangement, and with the results we have
actually delivered.
Cost of Catalog Participation
JP - It is my understanding that VCG advances all the money to pay for
catalog production costs until the catalog is distributed. At the point that
sales are made on a particular image VCG gets all the money collected until the
photographer's share is paid off. Is that correct?
SM - That is correct and that has always been our policy. I think most
agencies operate on that basis. We have not had a problem with it.
JP - Some agencies give the photographers some part of the early sales. In
some cases the photographer receives 50% of his normal share of the fee until the
catalog fee is paid off. There are also discounts for photographers who pay in
advance. There is not one uniform system.
SM - The other point is whether it is done on an image basis or a portfolio
basis. When a photographer has a portfolio of images he will be earning something
on some of those images. That's the offer we have had on the table all along, and
we haven't changed it.
JP - Since the charge is on a image by image basis, if a particular image
does not sell well, it is my understanding that the photographer is not charged
the total catalog fee for that image. For example, if the image fee is $400, and
over its lifetime the image only produces $400 in fees which would make the
photographer's share somewhere between $100 and $200 then the total the
photographer would ever be charged for that images would be the amount he would
have collected, not the $400. Is that correct?
SM - That is correct although it is generally not a problem.
Photographer Return On Investment
JP - What is the average length of time after the catalog has been released
for photographer's to pay off their catalog fees and start earning income from
their images?
SM - That is a difficult question for me to answer. With the number of
catalogs we have been producing the life cycle of the catalog is getting shorter.
We are seeing in some markets a quicker "up lift" in sales immediately (after
release of the catalog) and a "burn out" quicker than when we first started
producing catalogs. This is because of the competition.
Because we are in that many more markets -- we operate in 67 countries worldwide
now -- you have a lot of arms feeding you. The combined effect of that is that
photographers are seeing a return quicker than later.
JP - I have been hearing from some photographers with more than one image
in the Telegraph catalog that it is currently taking about a year before their
catalog fees are paid off and they begin to earn money from their catalog images.
Would you say that is representative.
SM - It could be. Without getting into the detail of the photographer and
the image, it will vary. Obviously, the markets we control (where they have
wholly owned offices) are more receptive to our strategies. Where we deal with
agents, collections can be difficult and the payments can drag out. It can take
longer to get a return.
We have guaranteed out photographers a return in 90 days after a sales report. So
we are, in fact, financing many markets (that take longer to collect and pay). In
some markets, if we get a return in less than 90 days that compensates. But, the
average time does vary tremendously with the photographer, the image, and the
range of images they have in any one catalog.
New Contracts
JP - It is my understanding that earlier this year FPG offered new
contracts to approximately 170 photographers, and it is the agencies intention
to make this group the core of the new FPG. What happens to photographers who
didn't receive a new contract? Will they be asked to leave?
SM - We are not taking new images from the photographers who didn't receive
contracts. If any of these photographers want to leave and want their images back
we will return them. If they want to leave their images in the file they will be
allowed to do so and we will continue to market those images.
JP - What about the number of photographer with the Telegraph? Will you try to
keep that number at about 200?
SM - We don't have a specific goal. We have less than 200 active photographers
working in Europe currently. Our aim is to work with a limited number of the best
photographers in both the U.S. and Europe.
Payment for Foreign Sales
JP - Can you explain why you are having trouble paying photographers on
time for foreign sales? It is my understanding that FPG photographers receive one
check for domestic and one check for foreign. There was no foreign payment in
September. At that time photographers were told that there was a processing error
and it wouldn't happen again. They were told it would be caught up in October and
indeed the extra payment did come through in October. However, in November there
was no foreign sales payment again.
Photographers in the U.S., particularly, are concerned about what is happening.
It is my understanding that all payments from foreign offices go first to VCG
before going to the agency that supplied the image. The parent agency must wait
until VCG sends them a check before they can pay the photographers. VCG did not
send checks in September and again in November.
SM - Some photographers were paid in both September and November, but we
have had a problem with some of the payments from London not
arriving in New York in time to meet the deadline for the photographer checks being
written and mailed out of New York. This is not an issue of financing. It is a
process problem. All back payments will be made up in December. We have identified
the problem and we will see to it that payments arrive on time in the future.
JP - Thank you.