Klein Defends $49 Web Price

During the recent Getty Images conference call, Citigroup analyst Matthew Troy asked CEO Jonathan Klein to talk about the company’s dialogue with image suppliers relative to the $49 Web use for nearly all RM, RR and RF images.

Klein said, “I think it's fair to say that the way we communicated, the web-res product to photographers was somewhat lacking.” The company had “enormous focus on communicating to the customers, and our communication with the photographers didn't outline clearly enough what we had in mind.”

However, he said, “We’ve had very positive dialogue with a number of the photographer bodies” (spearheaded by the StockArtistsAlliance). He pointed out that licensing an RM image for $49 wasn’t new. The company has been licensing images for $49, and less, for book publishing projects and other publishing ventures or when somebody has a volume deal, for a very long time.

Klein said he believes photographers have become comfortable with the fact that the super-low-resolution file size cannot be used in other ways, and thus photographers are protected from unauthorized use. He continued, “Frankly, we had very little push back from those photographers, who we work with closely.”

Klein also indicated that the largest market for stock photography in terms of volume growth is online use. Getty Images licensed fewer than 20,000 RM and RF images (or about 5% of total images licensed) into the Web use market in Q2 2007. Meanwhile Klein claimed that most of iStock’s 4 million downloads in Q2 were for Web usages.

Klein said that at the end of 2005, about 10% of RM images licensed were for Web use -- and at that time the company had no way of determining the number of RF images being used on the Web because they were licensed by file size. These figures would indicate a substantial drop in use of traditional images for Web sites. And this has occurred as microstock usage has skyrocketed. This was certainly a key motivator to try something to reverse the trend.

(It is unclear how Klein was able to determine the number of RF images that were being used on the Web, since previously the smallest file size a customer could purchase was 1MB, and such images could be used in a number of different ways other than on the Web.)

In the first month after offering this new price, Getty has reached the volume levels of Web use sales equivalent to the entire fourth quarter of 2006. The company has also found that the overwhelming majority of users of this new product are either lapsed customers or completely new customers. Klein said, “It’s far too early to declare a victory. But it is certainly giving us a lot of confidence that it was absolutely the right thing to do.”

In his prepared remarks, Klein described the experience of a multimedia editor at one of Getty’s larger customers in the broadcasting and publishing fields who said, "I bought an image today for Web use for $49." Getty Images might be trying to get the micro-stock users to come back to buy licensed photographs. I see it as buyers such as myself saying to our marketing department, "Hey, I found a great picture for only 49 bucks. Do we have the budget for this?" And they say, "Totally, go buy it." That’s exactly what happened to me today. And I still like a new option for stocks that’s opened for me.