CEPIC International Congress

482

June 5, 2002

The CEPIC annual Congress has clearly become the premier place for stock agents from around the
world to meet and do business. This year 446 delegates from 33 countries met in Budapest, Hungary
from May 24th through 26th. The delegate count was up from 384 in 2001. Next year's Congress will
be held at the end of May in Lisbon, Portugal.

CEPIC stands for the Coordination of European Picture Agencies, Press & Stock and was established
in Berlin in 1993. It represents over 900 picture sources in Europe with members from 18 different
countries. The organization's aim is to be a united voice for the picture library and agency
associations of Europe in all matters pertaining to the photographic industry. The organization
also has observer status at WIPO, (the World Intellectual Property Organization).

The purpose of the Congress as described by Alan Smith, President of CEPIC, is to bring agents
together once a year in transborder harmony to discuss past problems and plan for the year ahead.

In his opening speech Smith pointed out that these are perilous times for picture agencies.
Agencies must deal with technology change, copyright piracy and theft, as well as the vested
interests of publishers and collecting societies that eat way at the traditional areas of activity
of agencies.

He said, "Many CEPIC member fear that they must gobble up or be gobbled up, merge or combine,
refinance and re-engineer, fight hard simply to maintain station in the roaring tide of digital
development. Technology is continuously creating new perils, but it also provides some answers."

State Of The Market

Smith provided the following resume of market conditions in Europe based on recent discussions
with many suppliers. "In general the good news is that there is a sign of recovery in the
advertising market. The editorial market is also recovering but is more cost conscious œ partly
because of the fright following 11 September, partly because of recession worries and partly
because of Royalty Free. (In Europe over 60% of all stock agency revenue comes from editorial
sales according to data provided at the last CEPIC Congress.)

He said, "All customers now are ready for digital delivery and increasingly use the web."
E-mailable light boxes are a necessity.
"There is some evidence that local demand is being filled from the web and the local agent
bypassed. Conversely, networking of supply sources is more important than ever and cross border
communications with partner agencies are very strong."

At this point Smith provided more specifics about the markets in each country.

Denmark: Prices are about the same but discounts are important and government spending
is down.



Finland: Mirrored the general trends outlined above.



Germany: There was a collapse everywhere after 11 September but now there are recovery
signs. Web and digital sales are up, but analogue is down, so there is no growth. Extensive
marketing is necessary during this period of recuperation.



Holland: News agencies have suffered and there has been a busy period of acquisitions. The
advertising market is recovering.



Italy: Prices are lower in the wake of September 11th and trading is slower. Royalty free
keeps prices down. Corbis and Getty web sites take sales. One agency closed, another was bought
and there is an air of wait and see.



Spain: 80% of the agencies have suffered in the downturn. Two old established ones closed.
However, early indications in 2002 suggest recovery.



Sweden: There was a serious market fall last year with ad agencies closing. But agencies
with the larger market share are doing the best and have a firm market.



UK: Advertising and news are down. There is greater concentration than ever on show
business and sports and supplying overseas partners. General publishing is stable but with an
unaccustomed interest in discounts. Small publishers are using Royalty Free more and web use is
up. There have been a number of mergers and closures but some startups. The news of closures is
constant. Some might think this is good news. Getty and Corbis might welcome less competition.
Everybody might welcome it if Getty and Corbis closed especially as Mr. Klein is always talking
about taking market share in preference to growing the market.



But I say that the new money of Corbis and Getty and the like has been the best thing for our
industry which suddenly needed serious capital. People who needed to have retired, firms have been
reinvigorated, bank managers and venture capitalists pay attention. And, as Sheldon Marshall said
of Image State last week, some of the firms they bought might not have survived the dot com
recession. We need a healthy industry. When a firm closes, ask not for whom the bell tolls, it
tolls for us all.

Highlights

There are seminars on important industry topics at each Congress, but most attendees attend for
the networking opportunities and the chance to renew and build business relationships with other
agents. In these difficult economic times such relationship are critical.

In the past, a major focus of the Congress was the display of Rights Protected catalogs. Producing
agencies would seek representatives for their catalogs in other countries. While RP catalogs were
still being shown in Budapest, the numbers appeared to be down from that of previous years.

Royalty Free

A majority of the delegates seemed to either be showing Royalty Free products, or interested in
finding products to represent. While I don't have an exact count, I estimate that at least half
the exhibitors were pushing Royalty Free. All indications are that sales of RF images in Europe
are growing dramatically while RP sales are either stagnant of falling.

In general RF suppliers believe that to be competitive they must continue to produce and
distribute print catalogs along with their discs. A few suggested that a less expensive form of
print marketing might be just as effective, but this philosophy didn't seem to have wide
acceptance. This attitude was surprising to many Rights Protected suppliers who are reducing the
number of catalogs they produce and distribute due to costs and relative ineffectiveness as more
customers move to digital search and delivery.

RF tends to solve the catalog cost problem by charging distributors more for the catalogs they
supply, taking a higher percentage of the gross sale, and using multiple distributors rather than
granting one seller exclusive rights in a territory. Some distributors were complaining that these
costs are excessive and it is difficult for them to sell enough product to turn a profit, but it
seemed unlikely that the producers will absorb a bigger share of the costs of catalog production.

The producers argue that their investment in new production has risen hugely and they can no
longer get by with the quick one-day shoots that used to produce a good disc. Now, the imagery
they supply must be more unique and less generic which is making it more costly to produce.

RF producers are generally agreed that their databases have too many images, many of them
outdated. They talk about the need to edit and "clean" the database. They acknowledge that their
customers have trouble finding the "right" image.

One problem for RF is the necessity to keep their prices uniform throughout the world. Since
buyers of RF get unlimited use anywhere the sellers must be concerned that some buyers will
purchase their discs in the country that offers the cheapest price, rather than continuing to buy
in their country of residence. This could drive RF prices lower instead of higher.

Nevertheless, there is a lot of pressure from RF distributors in some of the smaller markets to
lower prices because it is actually cheaper to buy Rights Protected images, rather than Royalty
Free, in their market. One agent reported that some German buyers are complaining that Digital
Vision's RF prices are too high. They say they can license a Rights Protected image for a small
limited use for less than they would have to pay for a Royalty Free image.

Mike Watson of Digital Vision denies that they have seen any diminution of sales in Germany, or
resistance to purchasing their products. He says sales worldwide in 2001 were up 30% over 2000.
But he also laments, "This industry (meaning RF) is very good at working ways to sell its products
cheaper. It's doesn't need to happen and its got to stop."

Other RF sellers in Portugal and South Africa report that Royalty Free is considered the
"expensive" option. Since most uses in these countries are small the fee to use a Rights Protected
image is often much less than the RF prices.

Smaller Markets

There was a lot of interest in some of the smaller markets as agents look for ways to grow their
business. Sellers in many of these markets are willing to accept digital files only and are not
requiring that they be backed up by print catalogs or dupes.

One of the sessions at the Congress was on "Trading with Eastern European Countries." It used to
be that the administrative costs of distributing print catalogs and dupes made it difficult for
smaller agents to profitably deal with many of the smaller markets. When only digital files are
required it makes it possible for a supplying agency to enter a market at a very low cost.

News Photography Seminar

The News Photography seminar lead by Mark Grosset of Icare Photos (former director of Rapho) and
Jean Desaunois of Imapress, (both from France) dealt with the perilous state of photo journalism,
in which France has long been a world leader.

In this session a resolution was presented by the French association (FNAPPI) and unanimously
endorsed by the entire Congress. It reads as follows:

"All the delegates attending the annual CEPIC congress in Budapest, 450 people, 260 companies,
33 countries require that the French authorities take into consideration the specific status of
photojournalists, who as independent authors should not be required by law to be salaries as this
partially prevents them to be paid as copyright holders and to be fully free to decide subjects
they shoot and how their features should be selected and used."

There were complaints that rates for usage have gone down. On top of that there are new
restrictions on how images can be used as a result of the Human Rights Act, the application of
trademark law and attempts to control images of stars and sportsmen and ordinary people. These
factors go together to reduce revenue.

The problem of personality rights was discussed. They differ from country to country. In the UK
there is still no absolute control of one's own image and when you are dead there is no control at
all as the dead cannot be libelled. It was pointed out that in the U.S. heirs of famous personages
have some rights to control how images of the dead might be used. Many European agents report that
they have received heavy-handed threats from agents of the Einstein estate.

U.S. Agencies Attending

The U.S. agencies in attendance that license rights protected Images were: Berliner Entertainment
Images, eStock Photo, Images.com, Index Stock Imagery, Natural Selection Stock, Nonstock, Peter
Arnold, Retna Pictures, PictureQuest, Scimed Stock, Stock Connection, SuperStock,
Workbookstock.com, and Retrofile.com.

Those that are exclusively Royalty Free were: BrandX, Central Stock, Creatas, Picture Arts, and
Punchstock.