Wednesday, July 2, 2008

70 Is The New 80 - Digital Railroad's Mis-Step

I recall with great fanfare the buttons and messaging - "80 is the new 20" that was heralded from the booth of Digital Railroad during last year's PhotoPlus Expo (PhotoPlus Expo Day 2 - Highlights, 10/20/07). What exactly does that mean, I wondered.

The explanation was quite simple, actually. Major agencies were collecting, say, $100 for an image license, and paying the photographer $20, or, a 20% commission. Conversely, Digital Railroad instituted just the opposite approach - paying photographers 80% of the sale, and keeping 20%. To me, that made perfect sense.

Until now.

(Continued after the Jump)

Before I get into that, let me go back a bit. Back in the days of film, it was common for there to be a 50/50 split, and it was justified because your agency marketed your images, their library, handled requests, sent film out, billed for the use, recieved fillm back, refiled it, and so forth. It WAS a lot of work. Now, images sit on servers, and there's little manual labor involved. So, it would make sense that the 50/50 would shift in the photographer's favor. I know that when I took a large collection of images to a library, I was successful in negotiating 60/40 for me. As costs diminished, it would only make sense that things would swing in photographer's favor. But that was not to be, thanks to Getty and Corbis.

When Digital Railroad announced their percentages, (DRR was the first to put out their percentages over PhotoShelter), I expected that it would be 85/15, and then I was disappointed with it was 80/20. As someone with images with both, 80/20 was not what I was hoping for.

Then, PhotoShelter came out with 70/30, and I was frustrated by that. But, both were surely better than a 50/50 deal.

Amongst the many comparisons that were made, by me, and many others, It remained that Digital Railroad continued to offer 10% more per license sale than PhotoShelter. To some photographers I talked to, they considered that a selling point. However, they also factored in the $50 a month they would have to pay to be in Digital Railroad, against the cost of - "free" with PhotoShelter, and thus, it was bet that they would do better without the monthly fee, and thus, some opted to go that route.

For me, I use both services to also service client image requests and assignment delivery, so paying for both (PhotoShelter does offer a Personal Archive paid package of services too) gave me the ability to service those clients, and so paying isn't such a big deal for me.

Which brings me to the "70 is the new 80" problem.

Yesterday, in my inbox, an e-mail arrived titled "Important Pricing Changes to Your Account". Uh Oh. That can't be a good title for an e-mail, I thought.

They first couched the bad news by something good. They're selling 80GB of storage for an extra nickel. $0.05. That's like, $0.60 a year. Could it be that there's just extra server space sitting around?

But then comes the reason for that $0.60 offer:
We are also announcing another important pricing change: our Marketplace transaction fee. With our recent release of robust automation tools (our new automated price calculator in particular), strong month over month growth in Marketplace traffic and Marketplace sales, we've officially moved out of our Marketplace beta period. To reflect the changes that are bringing significant value to our members, we're increasing our image-licensing transaction fee from 20% to 30%.
Then they say:
Digital Railroad is as committed as ever to returning the bulk of the licensing fees to our members – now and in the future.
Actually, no. If you were that committed, you wouldn't have decided to take another 10%. "the bulk"? Why not say "a majority", so we know that it's headed downwards again, until it arrives at 51%, in a year or less?

Then they wrote:
if you've recently renewed your subscription and it's not set to expire for several months, please note that we will respect your current agreement until your next renewal date. All new pricing and fees will then apply upon renewal.
Does this mean that you won't get that extra 80GB for the additional $0.05/mo unless you also agree to a 10% per sale reduction? Hmmm.

Back in January, we wrote about staffing cuts (Digital Railroad makes major layoffs, 1/10/08), which ended up being about 50% of the total number of people working for them, both on staff, and contractors, and in November I wrote about a major leadership change (Stepping Down, or Stepping Up? DRR's Nisselson Makes A Change, 11/21/07), which, from all appearances, ended up being the eventual shift out of Nisselson, actually, if not symbolically. I've heard of some folks who are not getting their customer service calls returned, as a result of a slashed staff.

This move removes one differentiator that I think photographers looked at when making their decision to choose a service platform, between Digital Railroad and PhotoShelter.

Bad move DRR.

Please post your comments by clicking the link below. If you've got questions, please pose them in our Photo Business Forum Flickr Group Discussion Threads.

6 comments:

Gary Crabbe / Enlightened Images said...

I already have nearly a half dozen sales with DRR, and none through PSC (yet). DRR also seems to be attracting a stronger buyer base, where PSC still seems to be more actively soliciting photographers. (per the ad For me, I'll gladly take the extra space and - 10% for a company that has returned $$$ well beyond the cost.

Fotografia said...

In this time it seems that there are no rules. Photographers are looking for money and a lot of them accept every thing from agency and clients. I don't like what DDR did. I believe that only all toghether we can do something but we are not united.

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Anonymous said...

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