Random Thoughts 94

6

January 14, 2005

Getty And Photographer's Royalty Rates

In my reflections at the beginning of the year (Story 691), I speculated that Getty might decide to reduce Photographer's Royalty Rates in 2005. On their Gettyartists site Getty has issued the following statement and made it clear that they have no plans to adjust royalty rates.

"We are writing in response to a recent press report in the U.S. that incorrectly suggested that Getty Images was planning to reduce the Photographer Royalty Rate.

"To avoid any subsequent concern amongst our photographers we feel that it is necessary to publicly state that we have no plans to adjust the royalty rates in the current standard versions of our Rights Managed of Royalty Free stills photographer agreements."

Getty has also announced recently that in 2005 they intend to "greatly expand" the Photographer's Choice opportunities which was another issue discussed in the article.

More On Corbis/Zefa

The London Times has reported that Corbis paid about 56 million Euros ($74,289,600) for Zefa. The Times also says Erwin Fey's share was 51% of that and the remainder went to 3i, the UK venture capital group. Corbis sources have told some reporters that this figure is totally inaccurate, but refused to elaborate on the actual amount.

I believe the original rumor started with sources inside 3i who wanted to get word to the investment community that their share of the sale was more than triple their 1998 investment of 8 million Euros.

I believe that the "inaccuracies" revolve around a substantial amount of Zefa debt that Corbis assumed as part of the deal. Thus, Corbis' total cost was probably much higher than $74 million, but the actual cash that went to Fey and 3i was probably in that range.

The Times also put gross annual sales of Zefa at about $43 million and it would not be surprising if the total cost to Corbis of the acquisition was somewhere in the range of two times annual sales or a little higher.

The Times also reported that there is speculation that Bill Gates is poised to announce a public offering for Corbis with a valuation that could exceed $1 billion. This is surprising because a year ago Gates told the investment community (See Story 607) that it was unlikely that Corbis would go public within the next three years, but that eventually (in a 10 year time frame) Corbis would be publicly owned.

However, the recent valuation of Getty Images stock in the range of $4.1 billion, more than 6.5 times gross annual sales, may be influencing Gates' to move more quickly to do a deal while the investment community thinks the stock photo industry is hot.

Images On Alamy

At the end of 2004 Alamy had more than 2 million images on Alamy.com.

Corbis Suit Against Amazon

In the case that Corbis brought against Amazon.com over the sale of posters on Amazon's zShops service the U.S. District Court in the Western District of Washington at Seattle, has issued a detailed ruling to several requests for summary judgment. For the most part the rulings favored Amazon.com. The court concluded that under the DMCA (Digital Millennium Copyright Act), Amazon is a service provider and had adopted and reasonably implemented a user policy for its third party vendors.

Corbis filed suit on June 30, 2003 against Amazon and 15 other vendor defendants alleging that Amazon was selling two copyrighted photographs through www.IMDb.com that is wholly owned by Amazon, and was also selling 230 other photographs marketed by various third party vendors through Amazon's zShops web site.

As of September 2004, Corbis had reached a resolution with each of the vendor defendants, leaving Amazon as the sole remaining defendant.

To sell on zShops, a vendor creates a web page on the zShops platform and includes information regarding the product being sold. The web pages are referred to as "listings." Amazon does not actively participate or supervise the uploading or linking of images, nor does Amazon preview the images before the link is created or the upload completed.

If the buyer pays by credit card Amazon's processing service is used to facilitate the transaction, but Amazon asserted, and the court agreed, that Amazon is not conducing the sale of the products offered by the vendors. Vendors pay Amazon a percentage ranging from 2.5% to 5% of the price of any product sold depending on the price of the item.

When Amazon receives information that a vendor may be infringing another's copyrights, Amazon's practice is to cancel the allegedly infringing listing and send an e-mail to the vendor with all pertinent data. It also reminded the vendor that "repeated violations of our Community Rules could result in permanent suspension from our Auction, zShops, and Amazon Marketplace sites." The court found that Amazon's actions in this case were sufficient to relieve them from responsibility for vendor actions.

On the claim for the two images that were on the Amazon owned www.IMDb.com site the court found that there was a legitimate question of fact as to whether Corbis' copyright registration covers the image in question and that claim against Amazon remains.

This copyright registration developed as a result of a database registration technique that Corbis and other agencies have been using to meet bulk registration requirements. The Copyright Office had approved the technique and this is the first time any court has ever questioned the form of this registration. It seems likely that, PACA, on behalf of all stock agencies and all images creators, will have discussions with the Copyright Office to determine an effective way to supplement the existing registration techniques in order to avoid a failure of proof situation in the future.

Corbis is reviewing what further action to take, including whether to appeal any aspect of the decision.

Digital Vision Production For 2005

Digital Vision has sent out a promotion promising as a New Years resolution to add 500 new images per week to their site. If they maintain that rate they will add 26,000 new images in 2005. However, accompanied with this offering were only 408 images, not 500, so maybe they are already having trouble keeping their resolution. In November they had 33,201 images on the GettyImages site (we don't know how many they have on their own site), but 26,000 a year would seem to be a huge increase in production.

OnRequest Expands Marketing

OnRequest continues to expand its operations to have its network of more than 1,600 professional photographers shoot speculative assignments for corporate and advertising customers (they call it Custom Stock). They claim to have created custom images for more than 200 leading advertising agencies and corporations nationwide.

Recent additions to their marketing team include Jennifer Lewi, Kathy Crosson and Kathie Hewitt.

Lewi will be working with leading advertising, creative clients throughout northern and southern California and specifically targeting industry segments such as entertainment, automotive and technology.

Lewi brings key experience in photography, entertainment production and sales, most recently as a representative in advertising sales for Corbis. She also has worked directly with artists as a sales representative for commercial photographers at several agencies, including Valerie London, Outline Press and Shooting Star Photo Agency. In her new position at OnRequest Images, Lewi will drive sales and new business development with top advertising agencies, corporations and design firms, specifically reaching target industry segments such as entertainment, automotive and technology.

While at Corbis, Lewi was the team leader in sales revenue for four-straight years, singled out as one of top ten sales team members worldwide for 2003. She covered eleven western states, implementing sales strategies and programs for all Corbis professional content. Lewi also negotiated exclusives, including the highest price per single image for the entire Los Angeles office. Prior to joining Corbis, Lewi was a producer for celebrities, submitting photographer profiles to publicists and managers for review, producing celebrity photo sessions and addressing materials usage and distribution issues. Lewi also boasts a bachelor of fine arts from the Art Center College of Design in Pasadena, California, selected to attend by scholarship.

Crosson and Hewitt will operate in the New York area where they will drive new business development and accelerate revenue among existing accounts. Combined they have more than forty years of sales expertise.

Crosson boasts more than twenty years of experience in the image industry, most recently as the director of sales at FutureStock. Prior to FutureStock, she was a sales manager for Corbis, supervising 55 sales representatives, and increasing sales from $9 million to $27 million in only one year.

Hewitt has nearly twenty years of sales and marketing experience. Most recently with RR Donnelley, Hewitt worked as the senior sales representative driving new account development for advertising, catalog, retail and corporate clientele.

When a customer requests an image concept up to five photographers will be assigned to shoot the subject at their own expense and return the results to OnRequest within 48 hours. The customer may decide to use an image from one of the five photographers, or reject everything offered. If the customer decides to use one of the images a fee is negotiated based on standard stock photo usage rates. The photographer whose image is used receives 50% of the negotiated fee. The other photographers receive nothing. The images that are not accepted will be offered for licensing through OnRequest's online stock collection that is expected to be launched in the first quarter of 2005.

Some photographers ask why they receive such a small percentage of the assignment fee and nothing for expenses since a standard rep percentage is much lower than 50%. Obviously, part of the answer to this question is the cost of the high-powered marketing talent necessary to generate these sales in the first place.

Sheldon Marshall Partners With Content Mine International AG

Sheldon Marshall, Executive Chairman of Heritage Partners London (www.heritage-partners.org), has acquired a controlling interest in Content Mine International AG (www.contentmine.de). The Shares were previously held by the Financial Investor Markus H"fels.

Sheldon Marshall, former CEO and a founder of Visual Communication Group (sold to Getty for 220 million dollars) and ImageState PLC the AIM listed public company in the UK, sees a great potential in the partnering of Content Mine International AG and Heritage Partners London. The new alliance will consist of at least 1.5 million digital images available on-line from summer 2005 onwards.

Both companies concentrate on the acquisition and marketing of rich media content including still and moving images to image buyers worldwide.

"Rights managed and royalty free stock photography and film footage play an increasingly important role in our future, but the primary investment focus of the group is the acquisition of archives which have a long-term global marketing potential with heritage based subjects like Art, Culture, History, Science and Travel." Sheldon Marshall

The strategic management of the new partnership will be spearheaded by Frank Golomb, the Founder and CEO of Content Mine International AG and Sheldon Marshall.

"With the recent acquisition of ZEFA in Germany by Corbis, the new alliance Content Mine /Heritage Partners will be well placed to be amongst the leading independent image providers in Europe. Content Mine International headquartered in Cologne, Germany is actively looking for new content partners and sales staff," said Frank Golomb.

SAA And ASMP Stock Seminars

The SAA and ASMP are co-sponsoring and hosting an evening orientation on the business of stock photography in five U.S. cities during the next couple of months. Betsy Reid, Executive Director of the SAA (StockArtistsAlliance) will outline today's opportunities for marketing and licensing stock images and introduce new and creative business models. Attendees will hear and see profiles of successful stock photographers and should expect a candid look at the realities of the stock industry with regard to licensing and distribution. They should come away from the meeting with a grasp of both opportunities and obstacles to consider as they develop, or refine, their stock road map.

Events in Boston and Philadelphia have already occurred and the remaining events are listed below. The cost is $25.00 for SAA and ASMP Members, $40.00 Non-Members and the locations are:

• January 18, 2005 - San Francisco, CA - Blue Sky Rental Studios, 2325 Third Street, Suite 434
  
• January 20, 2005 - Seattle, WA - Glazers Meeting Room, 525 Dexter Ave. N
  
• February 17, 2005 - Atlanta, GA - PPR (Professional Photo Resources), 667 11th Street NW