Creative Eye Looks For New Money

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January 14, 2002

Creative Eye (CE), a photographer cooperative, is in financial trouble. CE was founded
in the summer of 2001 as a way to save the MIRA stock photo database that was
originally developed by ASMP.

The theory behind the cooperative business model was that it would give photographers
greater control of the marketing of their work, but the major driving force for
choosing this business model what that the National Cooperative Bank (NCB) had agreed
to provide financing for the venture. The NCB provided some start-up financing and
promises of all the financing Creative Eye would need to become profitable, provided
they met certain membership recruitment goals.

In November the bank re-evaluated it's loan portfolio and instituted a much more
conservative approach to its lending practices. They informed CE on the November 30th
that they would not be providing any additional rounds of financing, and that they were
prepared to write off as a loss the money already invested.

This left CE with a budget of over $1 million for 2002, and a best case scenario of
revenues of $500,000 for the year. CE began looking for new loans in December, but did
not initially inform the 900 photographers who are cooperative members of the problem.

The leadership of CE has said that a Fortune 500 company has given them "strong
indications" that it might provide the necessary additional loans, but no final
decision could be made before the second quarter of 2002. In the meantime CE must have
money to survive and move forward with their marketing plan.

On January 8th CE sent a letter to members with a plan for an "urgent pursuit of
alternative investment." Members were asked to vote before January 11th to approve a
plan to sell preferred stock to members for $1,000 per share. These shares would yield
a dividend "of an 8% share of profits allocated based on your level of investment."

It is not clear whether investors will receive:

1 - $80 per year for each share owned,


2 - Only a proportional share of 8% of the profits. For example if 500 shares of
preferred stock were sold and the profits were $50,000, then 8% of that (or $4,000)
would be divided proportionally among the 500 share holders who would each receive
$8.00 per share. If there were no profits there would be no dividends, or


3 - Some other system.

Selling Stock attempted to clear up this issue, and others, with CE Chairman, John
Greim, but received no explanation. In addition we were interested in knowing the
number of images currently in the MIRA database? What progress has been made in
migrating the MIRA database to StockMedia (a new search engine that should greatly
improve search performance and customer satisfaction)?

Photographers have complained of poor communications coming from Creative Eye. As the
principals move around the country holding meetings to recruit photographers, they are
continually asked about budgets and the timing on loans. Photographers were always told
that this was "proprietary information" and that they had to join before they could be
supplied with such information. However, even after joining, few specifics were
forthcoming to members. Photographers also report that even after November 30th CE
executives were still claiming that the NCB was behind them.

Photographers have also been bothered by the ads placed in Communication Arts that
presented photographers as an "endangered species." Such ads were aimed at recruiting
photographers for Creative Eye, but offered nothing that would appeal to CA's photo
buyer readership who are "purchasers" of photography.

In September Selling Stock did a major analysis of the Creative Eye business plan
(Story 430 ).
At that time the plan seemed to offer some potential, based almost
entirely on the guaranteed financing from the National Cooperative Bank. We pointed out
that MIRA had several problems to overcome, but with adequate financing it was
possible.

Creative Eye also hoped to develop several different income streams that were
conditions of getting the NCB loan. In our opinion some of these had little chance of
success. At that time the only income stream that had been developed to any extent was
the MIRA stock photo sales model.

CE has hinted to Photo District News that the "Fortune 500" company that might provide
a loan is "one of the major photographic suppliers". The only photographic supplier on
the Fortune 500 list is Kodak (number 141). Kodak has a history of providing various
types of support to ASMP and other professional photographic organizations.

It is important to recognize that given CE's co-operative structure such an investment
would not give that company any equity, or controlling position in CE. It would be a
pure banking transaction. It is hard to see that the company would receive anything for
this investment other than regular interest payments and "good will" with
photographers.

Other Fortune 500 companies with enough interest in stock photography to possibly
provide loans are Microsoft (via Corbis), AOL-Time Warner, Hewlett-Packard, Walt
Disney, Tribune Company, R.R. Donnelly, McGraw-Hill, Cox Communications, New York Times
Company, MGM and Knight-Ridder.

Feedback:

Paul Skelcher