Getty Images - Business Fantasy Update

For those of you Getty-ites who are no longer in the seemingly ever-shrinking inner circle of Getty Images, you're likely missing the pie-in-the-sky missives from the Wizard himself, Mr. Jonathan Klein. Kleins' delusions musings about the future of the stock photography industry and Getty's place in it is like watching a CNBC panelist advise you to buy AIG:


Mr. Klein and the green-eyeshade brigade have resplendent ideas that are more in line with the musings of the great Hunter Thompson while on a bender with Amy Winehouse. Yet, because of his pedigree (not to mention the fact that his title is co-founder and CEO) the dwindling masses of Getty true-believers (note - those are the people who have not gone through their intervention yet) drink Kleins' missives as Jim Jones followers drank his Kool-Aid.

In recent days, Klein has, like Moses from on high, handed down what he terms his "Business Update", with a variety of confidences and pride that are best saved for the likely future screenplay - Fear and Loathing in Seattle. (Hint - that's the fear his writings could convey in the form of more layoffs, and the loathing the sobered-up employees have after the bender juice wears off). Reading the missive, and the commentary that follows it, you'll realize these analogies are not too far off their mark.

If you want to read the musings of Mr. Klein, feel free to read on:

(Continued after the Jump)

Business Update Jonathan Klein Co-founder and Chief Executive Officer Hello from New York! I have just returned from a busy week in Seattle with the Senior Leadership Team. We met to share ideas, plan for 2010, get complete clarity about the strategy and vision and, finally, to spend time together as we had not met since April of last year. The feedback we have received from the attendees was absolutely clear – it was a great week and one of the best SLT meetings in the history of the company. It is important that I share with the whole company some of the key issues that were covered.During the meetings, we spoke candidly about where we are today. But more importantly, we focused on the opportunities ahead in 2010, and the significant investment we will be making in our future. 2010: Investing in our Future Growth Simply put, 2009 has brought unprecedented changes to Getty Images, and the world. To name just a few: we have experienced a meltdown in the economy, a collapse in financial markets, acceleration in the decline of print advertising, and that is just for starters. We have taken our company private, obtained new owners, added a number of great SVPs (all of whom were internal promotions), reduced headcount, had a major clampdown on spending, acquired our second largest competitor, accelerated the integration of that business, brought in management consultants, paid no bonuses, decided not to give pay raises, froze pension matches in the US and launched many new initiatives, including with Flickr, with our partners from Time and now Daylife. If that was not enough, we worried about revenues since the beginning of the year and completely realigned our budget to respond to the environment. Just reading this far-from-comprehensive list is quite exhausting. Yet, I could not be prouder of our team – employees at all levels of our company – in both HOW we have managed these and other events, as well as WHAT we have done. The way we behave matters and the Leadership Principles have always been, and will continue to be, the filter through which we have made tough decisions. The choices we’ve made have been the right ones. I am absolutely confident that we have done almost everything right in this recession to be positioned well when it ends. 2010: Investing in our Future Growth Businesses are using imagery more than ever. This is great news for us, but it also means that we must shift our business model and change the way we operate to more directly align with how our customers use imagery, and where our business is going. The major trends we are seeing in our business today are: · Traditional creative stills (RM and RF) is becoming a smaller part of our business. Our customers use more imagery online, which means more volume, but at a lower price. Big-spend print campaigns are not dead, but there are certainly fewer. · iStockphoto is the fastest growing part of our business. It is expected to hit $200 million in revenue this year – that is growth of more than 35 percent. · Editorial imagery (news, sport, entertainment and archive) is also growing. We are taking market share and will grow significantly when market conditions improve and also when there are more major sports events next year. We were once thought of as outsiders in this area, and we are now regarded as stewards and leaders. There are many countries in which we can achieve major growth in this area. · Newer and higher-growth businesses are key to our success. Yes, Life.com and our partnership with Daylife are highly strategic. But this is not just about the “sexy new stuff.” It is about the businesses that have enormous growth opportunities, like footage, music, news, sport, entertainment, image.net and Media Manager. We also see growth potential in the Media and Corporate segments, as well as in certain countries and regions. These trends, among others, have led us to our Key Initiatives and Overriding Objective for 2010. Overriding Objective: Achieve company-wide revenue growth Getty Images did not grow overall revenues in 2009. We must be a growing business, and we must increase our revenue in 2010. Through continued focus on the Leadership Principles, our five Key Initiatives for 2010 will be: 1. Implement Project Perspective About four months ago, we brought in a leading global management-consulting firm, Bain & Company , to help us look hard at areas where we can and should improve. Bain gave us a fresh, outside perspective on how our business is run. They focused mainly on the areas of sales, finance, and editorial and creative operations. I think it’s important to note that, unlike many businesses that Bain are brought in to review, they quickly realized that our business was tightly run and managed, and there were far fewer savings to be had than they had originally anticipated. That said, the plan is now complete, and now we begin doing what we do very well – execution and implementation. The main outcome of Project Perspective is the crucial need to drive our customers to increase the amount of unassisted sales so that we can remove the administrative burdens that currently fall on our sales and finance organizations. In order to do this properly and responsibly, our infrastructure must be improved. This means we will be increasing our normal technology investment by approximately $6 million, or 25 percent, to complete infrastructure and technology projects. Many of these projects have been waiting for years to be completed, and we will now finish this work, enabling us to be a more efficient business. Project Perspective takes us from being the best in our industry, to becoming the best in any industry, from both a back end and customer facing perspective. It is a continuation of the work we have done to make it easier for customers to purchase from us, as well as to convert prospective buyers into Getty Images customers. The timing is right. As a private company, we can now focus on our long-term strategy and invest in our business for growth. It’s important to mention that implementing Project Perspective will take time; there will be much more information coming to you soon as the plans are put into place, so stay tuned. 2. Build the market-leading subscription business Subscription is a fast growing part of the market, and an area where we have had a long-standing gap in our product portfolio. Jupiterimages Unlimited brings a very good base from which to start, but we will create an entirely new subscription business that builds upon it. This new subscription product will be a major initiative, with significant marketing support. It also represents a major collaboration between Getty Images and iStockphoto. We may not be number one in subscription – YET – but we know how to get there and will get there. 3. Sell all products in all markets As I noted earlier, traditional creative stills continues to decline, and even if we see a bump in revenue here after the recession, we must expect that the trends will continue for it to be a smaller part of our overall business. Yet we know customers are using more imagery than ever, and want our services across the board. This means we must sell more products to drive growth. We have seen some great success with some of the new pricing models for creative imagery, with cross-selling footage, music and our other products in 2009 – and we must accelerate that in 2010. Offering ALL our customers ALL our products and services in ALL segments and in ALL countries remains critical. 4. Enhance and build on iStockphoto's leading position in microstock and as the digital content destination for designers iStockphoto is the fastest growing part of our business, and it is the market-leader in microstock. But we cannot be complacent. We must embrace microstock, and we must evolve it. There are many synergies with the rest of the company that we will capitalize upon, especially in marketing, product development and technology. Additionally, designers are a growing segment for us, and iStockphoto has great brand and market position to allow us to broaden our product offering with this customer base. 5. Improve website conversion rates In recent months, we have seen significant success in growing traffic to our sites. However, we are facing challenges converting these visitors into buyers. This is not just a website issue – it’s also about product, pricing and licensing models. This Key Initiative dovetails directly with implementing Project Perspective – converting visitors into purchasers on our website means more unassisted sales. This is key to our long-term business, growing revenue and growing our business. You may see an overall theme emerging from our 2010 Key Objectives and Initiatives – in fact, it was also the overall theme of our recent SLT meetings – Investing in Growth. After one year of being a private company, and after navigating the rough road of 2009, we can and must think strategically, long-term, big picture. In the last few months, the bad news has come in droves. But optimism has played a key role in getting us through these tough times, and I am proud of the way we have handled it. It is up to all of us to continue to step up and inspire excellence. As we head into 2010, I look to each of you to collectively embrace optimism and to increase our standards of performance. We must also continue to maintain our strong focus on the Leadership Principles. They have been a key part of our company for eight years now, and have been essential to navigating the tricky times of the past 18 months. I am very proud of this, and am more certain than ever that we must continue to adhere to them as we turn our focus to growing the business. Finally, on a personal note, thanks so much for being on my team during this period. I know you are all working harder than ever, you have sacrificed personal time and put more of yourself into our company than ever before – this has not gone unnoticed. We will emerge from this year and this recession a much stronger company. Getty Images will be 15 years old next year and this is the best team we have ever had at the helm. 2010 will be a big year for us, and I look forward to the important work we will do together. Thank you, Jonathan Klein Co-founder and CEO

Let's take break out a few things, worthy of commentary:

Suggestions about being "...one of the best SLT meetings in the history of the company" and ending with "Getty Images will be 15 years old next year and this is the best team we have ever had at the helm" is hyperbole at its' best. This double-use of the word "best" is just laughable when you look at the history of the company, in the high-flying days when the company was at $92 a share on open market.

Usually, when someone in the higher echelons of a company writes "Simply put, 2009 has brought unprecedented changes to Getty Images, and the world", they are speaking in the positive sense. Yet, the "unprecedented" is in reference to the negative aspects "meltdown in the economy" and "acceleration in the decline of print advertising" and others. He goes on to talk about all the great SVPs they've hired, and then holds out the hope to those who did not get a promotion that theirs just might be coming, when he writes "(all of whom were internal promotions)". Nice way to hold out hope. He goes on with the superlatives "Yet, I could not be prouder of our team – employees at all levels of our company – in both HOW we have managed these and other events, as well as WHAT we have done. " Really? How about the pride you had when you aquired WireImage, team members that secured sports league contracts, and so on? You're prouder now than before? Really?

Klein acknowledge the obvious when he notes "Traditional creative stills (RM and RF) is becoming a smaller part of our business" followed by "iStockphoto is the fastest growing part of our business. It is expected to hit $200 million in revenue this year – that is growth of more than 35 percent", but what he does not do is link the two. The growth of iStockphoto has been at the expense of the RM/RF image revenues. Thus, a 35% growth of 10,000 $1 sales means you grew your business at the expense of about 4 of your previously stated average RM sale of $970. Wow, that's great!

Klein states "Getty Images did not grow overall revenues in 2009. We must be a growing business, and we must increase our revenue in 2010. " Good luck on that one. With the growth of $1 images, and the decline (in several cases self-inflicted price-point declines) of RM image licenses, I don't see how that can happen.

Klein acknowledges that they had Bain & Co in, in an effort to slash costs. Their conclusion? not much fat on the bone to cut. You could have saved a lot of money if you had just asked your over-worked photographers and front-line editors who would have told you this, and then maybe they could have gotten those bonuses you said you didn't pay.

Klein discusses their goal to "build the market-leading subscription business", which has been the laughing stock of many of your contributors, who point to $0.46 payments from these business models as the real analysis of where stock photography is going - down the tubes.

Klein cites the reality that "traditional creative stills continues to decline, and even if we see a bump in revenue here after the recession, we must expect that the trends will continue for it to be a smaller part of our overall business." Hmmm, does that mean you're done wreaking havoc in this market and you're headed off to ruin other markets in the same way?

It was just a short time ago Getty's new website was touted to have "Numerous enhancements make it easier than ever to find a specific image or discover an expanded selection of relevant visuals", and "Extensive customer input and usability studies informed the development of Getty Images' added site features", with Klein being quoted as saying “We owe our customers a great deal of credit for this innovative rebuild...[t]heir input and expertise has allowed us to preserve the strengths of the old site and introduce a host of new features, resulting in a more agile and interactive gettyimages.com that is uniquely equipped to enrich the current and future communications landscape.” Yet, in the missive above, Klein acknowledges "we are facing challenges converting these visitors into buyers. This is not just a website issue..." - thus, this great website is an issue, and it's not the only one. I thought you said your customers told you what they want - and now they don't want it? Which one is it?

Klein begins to close the piece "In the last few months, the bad news has come in droves. But optimism has played a key role in getting us through these tough times, and I am proud of the way we have handled it. " I would submit that it's not the optimism of your staff that got your remaining staff through the tough times, but rather, fear of being unemployed, and their loathing for the guy that has carried their company into the gutter and created a laughing stock. Hey, there's something - can you monetize humor? I think there are laugh-tracks you could hawk for a few pennies over at Pump Audio!

Klein closes with "Getty Images will be 15 years old next year and this is the best team we have ever had at the helm. " Really? Kids at 15 are just getting their learners permit, and you seem to have driven Getty into a ditch, spinning your wheels in the process because there wasn't an experienced adult at the helm. Too bad you can't actually be required to have a license to do what you do, otherwise those along for the ride wouldn't have seen your company dash their dreams. As the elderly are eventually required to turn in their licenses when they are a danger to themselves and those operating within their proximity, perhaps someone should come to you, Mr. Klein, pat your on the back, and tell you your time to run the Getty ship is over, given the damage your business models have done.

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