Corbis Reorganizes Sygma

443

December 7, 2001

Corbis has announced its intention to dramatically reposition and reorganize its production and
distribution systems of the Corbis-Sygma Press Agency. On November 29, 2001 it started the
process, required by French labor law that could lead to the elimination of 93 jobs out of a total
of 191 in the Paris operation. There will be no changes at the New York office of Sygma.

Included among those positions that would be eliminated if the plan receives the approval of the
Joint Consultative Committee are 42 staff photographer positions, 14 editors, 2 sales posts, 8
documentation/iconography posts, 19 posts in the technical department and 8 administrative and
financial posts.

Corbis-Sygma is made up of three former agencies: Sygma, Kipa and TempSport. In 2000 Corbis Sygma
had sales of FRF115 million and this was down 19% from sales in 1999 when they purchased the
company. This would mean that total sales of the three companies in 1999 was about FRF142 million.
Corbis had operating losses of FRF65 million in 2000.

In 2001 losses are expected to be another FRF65million and sales are expected to be less than the
FRF115 million in 2000. Corbis says they have injected more than FRF160 million ($21.6 million
U.S.) into Corbis-Sygma since 1999. According to Frank Perrier, General Manager of Corbis-Sygma,
wages and expenses represent 74% of the income in the past two years.

Corbis makes the point that no one has been fired and the employment status of the Paris
photographers of Corbis-Sygma has not changed, as of this date. What they have done is communicate
the scope of the problem as required by French law and begin a dialogue that it is hoped will lead
to a solution.

However, many of the photographers seem to feel that the Consultation process is simply a
formality required by French labor law before any terminations and that it is unlikely to bring
about any changes.

Corbis wants to continue working with the photographers, but under freelance agreements like those
they have with other photographers around the world. These agreements will be image-exclusive, not
photographer exclusive and photographers will be able to offer their services to other suppliers
on a project by project basis. In their press release Corbis said,
"Management's priority is to avoid compulsory departures with no compensation and, to that end,
personalized solutions will be proposed to all employees whose jobs are at stake. In addition,
assistance will be provided to photographers in order to help them set up operations as
independent producers."

Michael Croan, Corbis Director of Photographer Relations, "We're not proposing the elimination
of production in Paris, just reducing the amount and shifting the emphasis from local to
international. The editorial objective will no longer be to cover so-called 'hot' news
exhaustively and in real time -- something the wire services can do better and at a price
that prohibits any competition -- but to favor a more selective photographic service, for
which there is either an international or a potentially strong local demand."

French law treats photographers and journalists quite a bit differently than is the case in most
other countries. By law, every journalist with a professional press card has to be paid with a
"salary statement," even if part of their compensation is a percentage of sales. Agencies are
taxed heavily on these salaries to cover various "employee benefits" provided by the French
government.

Another very unique feature of the French photographer arrangement is that most "salaried"
photographers own their entire copyright and retain their moral and commercial rights to their
archives.
In the U.S., and most other countries, if you are salaried the company paying the salary owns the
copyright. Very few of the French photographers have signed "work for hire" agreements that would
give Corbis-Sygma the right to continue to sell their archived images once their employment
relationship is terminated.

According to sources there are three types of staff photographer positions at Corbis-Sygma. Some
photographers get a salary and a very small percentage of sales. Others get a minimum guaranteed
per month against sales. Then there are those who get no advance at all but the usual 50% of the
sales. All get paid with "salary statements." Sources also indicate that the photographers are
receiving between FRF8,000 and FRF25,000 per month in salaries. Corbis would not confirm these
numbers.

As far as we call tell most of the 51 non-photographer positions that are scheduled to be
eliminated are regular employees who get all their compensation from a salary and benefits, and do
not receive any type of royalty. They will no longer be needed if Corbis-Sygma is no longer doing
as much production photography as has been the case in the past.

Croan added, "Under the reorganization proposal, Corbis Sygma Paris
would still have an editorial strategy, an editorial team and a marketing team, plus a truly
international photography and report distribution service. If the editorial team is cut by
eliminating 14 positions, it will still have 23 remaining. Its principal mission would be to design
select and edit high-qualty subjects of international interest or with strong local sales
potential."

Photographers report that almost every single newspaper and magazine in France, as well several
from around the world, have called the photographers to tell them how shocked they are at Corbis'
decision. Some have offered to boycott future Corbis production, and have pledged to continue to
use the photographers wherever they end up.

Where Do Photographers Go From Here?

Corbis hopes that once the current system is eliminated many of the photographers will agree to
work for a percentage of sales and cover their own expenses. It should be noted that Corbis says
the intend to continue to support SOME production for which there is an international or a
potentially strong local demand.

To me, it seems unlikely that many of the 42 photographers will find the degree of Corbis' support
of production acceptable. There has been a lot of dissatisfaction and distrust among the
photographers ever since Corbis took over. Photographers are not likely to place much trust in
Corbis promises or to want to continue working with Corbis unless they have absolutely no other
option.

If our sources are correct and salaries range from FRF8,000 to FRF25,000 a month (between $12,000
and $40,000 a year) these photographers were not getting rich on salaries. Granted they were
entitled to a lot of extra benefits provided by the government, as a result of the taxes Corbis
was paying on their salaries. We don't know how much royalties added to these salaries. But since
Corbis still has to pay royalties, and in many cases the salaries were simply a draw against
royalties, it seems that the tremendous savings that Corbis needs will not be accomplished just by
eliminating salaries.

Where Corbis must cut costs is in production expenses. Expenses for the kind of productions the
Sygma photographers are famous for probably far exceed the salaries and royalties photographers
have been paid.

For example, at the time of the announcement Corbis had three photographers in Afghanistan.
Patrick Robert spent almost two months there sharing the expenses 50/50 with Corbis-Sygma before
Time Magazine put him on assignment and agreed to pay the expenses for a third month. (Even with
the photographer paying half the expenses Corbis-Sygma is still losing money.) Consider what those
expenses probably were for transportation, hiring guides and interpreters, satellite telephone
calls to transmit every image, etc. These days it is harder and harder to get the publication
licensing the usage to cover expenses.

The only way to reduce expenses is to do a lot fewer production, or put the total responsibility
for expenses on the back of the photographer. If Patrick had to pay 100% of his expenses in
Afghanistan he probably could not have afforded to go.

Selling Direct

Some photographers believe that when the Corbis-Sygma photographers are released from their
contracts, many will simply start dealing directly with the major publications that have been
using their services for years. In this case the photographers would get 100% of any assignment or
use fee instead of the 50%, or less, they have been getting in the past. That could work, if most
of a photographer's income comes from major publications that hire him or her for long assignments
with the publication covering all costs. However, my suspicion is that this is not what usually
happens.

Sources Of Income

I believe most Corbis-Sygma photographers have three basic sources or income. They will need to
examine past sales to determine the amount of income that comes from each category. These sources
are:

1 - Income from prime customers who are first to use the work. In many cases this will be
because the photographer is on assignment for a particular publication, or because a publication
makes extensive use of a particular project.


2 - Income from multiple sales to lots of small and medium size publications in the first month
or so after a shoot.


3 - Income from the file that is generated months or years down the road. Many of these uses may
have very little connection to the specific purpose of the original shoot, but the image chosen
illustrates a point that is useful in the publication's new context.

If most of the income of a photographer comes from working on assignments (Category 1) then he can
operate very successfully by dealing directly with the customers. With e-mail it is fairly easy
for a photographer to make his availability, at any given moment, known to a select group of
customers. Images are shot and transmitted digitally. The photographer, of necessity, does a lot
of his own editing. In this case there may be little need to share a percentage with an agent.
However, my guess is that for most of the Sygma photographers this type of work represents a very
small percentage of there total income.

I believe the bulk of photographer income comes from Category 2.
The photographer may have one company providing a guarantee, and even paying a good portion of the
expenses, in order to get first look at the photographer's work. But chances are that this primary
company will not end up using very many of the photographer's images. What tends to happen is that
various images produced on the shoot will get used by many different publications throughout the
world. The photographer makes most of his money, not on a few big sales, but on a huge volume of
little sales to many different publications in different countries. Sales to the major client may
cover the photographer's overhead, but the profit really comes from all the small sales, not what
the photographer receives from the major customer.

If this is the situation then the photographer needs someone editing and talking to customers,
while he is out producing the next images. There is too much detail work in all the little sales
for the photographer to try to do that and produce images too. If most of a photographer's income
has been coming from Category 2 then one way or another that photographer is going to need to find
representation.

Category 3 sales come after the fact, usually from someone totally unexpected, who is looking for
images that illustrate certain points. The role of the salesman in these situations is simply to
let customers know that a file of images exists, and provide convenient service when that customer
comes looking for images. In addition someone needs to price the usage, negotiate the sale, make
sure that delivery is taken care of and collect the money. The processes that go into managing
such a library operation are very different from the processes involved in a production operation.

In theory, a big agency like Corbis-Sygma provides all three categories of service. But from the
photographer perspective one category may be much more important than the other. Specialists
agents who concentrate their work in an area where they have special expertise may be more
valuable to the photographer than a generalists operation.

Photographers may make different decisions as to what they need from an agent depending on which
category is more important to their livelihood.

As I see it Corbis should be as concerned about what those 14 editors and 2 sales people decide to
do as what the photographers decide. The editors and salesmen have relationships with the
photographers and the customers. They could easily set up a competing operation with a much lower
overhead aimed at getting photographers support to do productions, and focused just on hard news
sales.

Being pushed out of Corbis-Sygma at this particular time gives each photographer an incentive to
set up his or her own network of agents in several different countries rather than relying on a
single agency to handle that distribution. All that has to happen when a photographer uploads a
digital file is that it goes to a site that can be easily accessed by the photographer's agents
and customers in Germany, UK, US, France, Italy, Spain, Japan, etc. instead of the former process
of letting the French agency handle this distribution.

The photographers then contract with several agents in different countries to handle sales for
them. They receive a royalty of 50% to 60% of the sale from each of these prime agents, instead of
the 25% to 30% they have been receiving when the sales are made by a Corbis-Sygma sub-agent.
Immediately, with very little effort, the photographers are making more money. In some cases the
photographers may contract with other existing operations to handle the library function.

Most of the photographers already shoot digitally and transmit the images by satellite. Since the
photographers will be required to bear all these expenses they might as well maximize their
return.
Today almost anyone can set up a digital delivery system for a fraction of what Corbis has spent
to set up their's. The little guys can get into business without much difficulty. The stock photo
business relies heavily on personal relationships. It seems likely that small operations with a
tighter focus, may be more effective than big agencies. No longer is an operation needed that will
process film, massively dupe, and ship pieces of film all over the world. The minute the
photographer uploads the digital file it can be available to all authorized sellers as well as
customers.

As soon as the photographers get over the shock of being pushed out the door, I believe they will
see that rather than hurting them Corbis-Sygma has offered them a tremendous opportunity to
develop new methods of operation and working relationships.