Sea Change At Getty

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October 25, 2006

Near the end of his quarterly conference call, Jonathan Klein, CEO of Getty Images, in response to a question from Peter Appert of Goldman Sachs, outlined some radical changes in strategy for the company. Getty has been having a bad year relative to expectations and the company's share price has dropped 56% since it's high in November 2005. Story 885 reviews Getty's disappointing third quarter results. Reviewing the third quarter results may help readers better understand the need for the dramatic strategy shift outlined.

The new direction will certainly lead to some radical changes in the way both Getty and non-Getty photographers conduct their businesses. On the whole, I expect photographers to cheer these new directions. As things are spelled out in more detail there may be a few land mines to avoid, but identifying them will require extensive analysis and explanation. I will deal with them in future stories. For now, I will just give you Jonathan Klein's Vision of the Future.

What is most important for people to recognize is that the day is coming soon when we will be able to get a creative image from a photographer's camera to our site with the same speed and efficiency that we do with editorial. In addition to that, what we will be able to do, and are beginning to do right now, is to significantly reduce our costs involved in getting content while increasing the value we add to the offering. WE ARE PLANNING TO OPEN OUR CONTENT TAPS VERY BROADLY. We want to get much more imagery in, with much more flexibility.

We are building a new creative workflow (called Open). The new system will be easy and efficient. WE WILL OPEN OUR SYSTEM TO ALL PROFESSIONAL PHOTOGRAPHERS WHO MEET THE CRITERIA. This will give us access to masses of content and provide the ability to shape and mold our collections instantly by opening or closing the taps as needed. Our content will always be much more fresh, will not be based around legacy models and the inherent flexibility of the system will enable us to create collections of brands and products and distinguish content almost on the fly.

This is not based on something we're smoking, this is something we are already doing at iStockphoto and we plan to use those tools, techniques and approaches in our core stock photography business.

At the same time as that we are changing our approach to photographers who contribute photos to Getty Images under the old system. This may be controversial, but it needs to be said. In the future, our main relationship with the thousand of photographers who are not employees of the company will largely be as a distributor for them. Be under no illusion. Photographers are clamoring to give us more content, not less, and they will embrace this. The current system of photographers contracted to individual brands, submitting images where we carry the entire cost of handling the images will be completely reworked.

We will over time be entering into new contracts with photographers. The key approach with these new contracts is greater flexibility to enable images to go into the right collections thereby optimizing their salability. At this point we have no intention of changing royalty rates with photographers. However, we do intend to continue to invest aggressively in shooting wholly owned imagery. We find it a phenomenal use of our cash.

In light of that you then asked a question about our capital expenditure. Our capital expenditure we expect to be lower in 2007 than it was in 2006 not withstanding investments in wholly owned content. And something I alluded to very directly, but is worth putting in front of you again, is the plan to have a significant increase in investment in our film business so we can ingest film content extremely quickly.

If an image is on the web site it will sell. If a film clip is on the web site it will sell. It is incumbent on us to get more images, much more quickly onto our site. And that's why when I talked about change during my prepared remarks I dammed well meant it.