Jupitermedia Corporation has announced a definitive agreement to acquire PictureArts Corporation (www.picturearts.com) for approximately $63.2 million in cash, subject to certain post-closing adjustments.
The acquisition includes PictureArts' quality brands: Brand X Pictures, FoodPix, Botanica and Nonstock, as well as its image distribution business. Jupitermedia intends to finance the purchase price with cash on hand and borrowings under a senior credit facility with JPMorgan Chase Bank, N.A. to be obtained in connection with the transaction. The transaction is expected to close during the third quarter of 2005 and is subject to customary closing conditions, including regulatory approvals.
PictureArts Corporation founded in 1984 by husband and wife team Jeffrey Burke and Lorraine Triolo offers images through a variety of specialized collections to advertisers, designers, publishers and other communications professionals and provides appropriate image solutions for their visual communication needs. PictureArts distributes its own Brand X Pictures brand (www.brandxpictures.com), an outstanding collection of high-end, royalty-free stock photography. PictureArts' FoodPix brand (www.foodpix.com), a leading specialty library of rights-managed food and beverage images, features images from many internationally renowned photographers. PictureArts also includes the Botanica collection (www.botanica.com), a rights-managed photography collection that focuses on a wide array of refreshing botanical images mixed with current lifestyle concepts and trends. PictureArts' Nonstock brand (www.nonstock.com) is an innovative, rights-managed photography collection with one focus: avoiding the ordinary. PictureArts has over 75 employees and is headquartered in South Pasadena, California. PictureArts also has a sales and creative office in New York City and serves its international base of customers through multiple distribution channels worldwide.
"PictureArts represents JupiterImages' most significant move to date toward being able to offer the highest quality rights-managed and royalty-free commercial images. Combining JupiterImages' already significant wholly owned digital photo collection and distribution network with PictureArts' image assets unquestionably makes JupiterImages the equal to any competitor in the business of commercial image licensing worldwide. PictureArts' specialty collections in the food and nature categories, as well as its other noted rights-managed offerings, further enhance JupiterImages' standing, particularly with high end photo buyers," stated Alan M. Meckler, Chairman and CEO of Jupitermedia Corporation. "JupiterImages intends to keep all existing distribution and contributor agreements in place. We anticipate significant marketing and business synergies between PictureArts and our JupiterImages division. We expect that this acquisition will be accretive to our earnings," added Meckler.
"Joining forces with the JupiterImages team is an extraordinary opportunity for PictureArts," stated Jeffrey Burke, CEO of PictureArts. "Our companies have similar objectives and complementary business models. This combination makes us both much stronger in the stock image business and will enable us to increase the range of imagery and level of service that we provide to our customers. Lorraine and I, and our very talented staff, are excited to be joining the JupiterImages team. Further, we believe this transaction represents an excellent opportunity for our nearly 1,000 contributing photographers," added Burke. Following closing, in addition to his PictureArts responsibilities, Burke has accepted the position of Senior Vice President, Product Strategy for JupiterImages. Lorraine Triolo will remain active in her current role as PictureArts' Creative Director.
Analysis
Jupiter has trumped Getty's recent play. As reported in Story 736, in May Getty dumped two of Jupiter's brands from its platform and refused to let Jupiter continue to sell its Photodisc and Digital Vision brands on its Creatas and PictureQuest web sites. Most industry observers felt this was a move on Getty's part to try to put a crimp in Jupiter's revenue and keep them growing. It is estimate that the move would cost Getty $12 million, a minor blip on their revenue stream, but cost Jupiter $6 to $8 million in revenue for 2005 and this potentially could be a much more serious loss to the photo side of Jupiter's business.
At the time Alan Mecker said he would have no problem in making up for the lost revenue in 2005 and that he would still be able to meet or exceed the $127 million guidance for the year that he gave investors in February. With the PictureArts acquisition, even with only one quarter's revenue, he clearly should have no problem.
Getty, on the other hand, has a new dilemma. Do they dump the Brand X, Food Pix and Botanica brands in order to sever all relationships with Jupiter? That will be a much more costly move than dumping Comstock and Thinkstock
Brand X has 19,927 images on gettyimages.com, FoodPix has 12,449 and Botanica has 12,114 for a grand total of 44,490 images. This is by far the largest collection of images on the site of any of the third party supplier. If we assume that these images generate the average amount of revenue for Getty of all images on its site, that would mean Getty would be dumping almost $30 million* in annual revenue. Add that to the $12 million they have already dumped by taking Comstock and Thinkstock off the site and refusing to sell their wholly owned brands through Jupiter and potentially they could have a drop in revenue of $42 million. That's a severe hit to take in order to try to keep a competitor from growing.
(*On average each RM image on the Getty site generated about $673.54 in 2004 and each RF images generated about $634.63. If we multiply the RM figure by the total RM images of 24,563 and the RF figure by the 19,927 Brands X images we get a total of $29,965,631.)
If Klein chooses to dump the PictureArts brands the investment analysts will certainly ask him to explain the "compelling business reasons for giving up that amount of revenue", and that's something that will be very hard to explain.
If Klein doesn't get rid of PictureArts it will be much more difficult for him to apply the kind of pressure on the other "Image Partners" that he has been applying. (See Story 722) The Image Partners are certainly cheering this move by Jupiter because despite the revenue Getty has been generating for them for the most part they feel very oppressed and locked into a situation with no good alternative. Jupiter and its various portals may now provide an alternative.