Wednesday, September 12, 2007

Getty's Self-Immolation

Many in the photo industry are (rightly) up in arms over Getty's self-destructive behavior, plummeting what from what amounts to a $900 image license of their RM imagery (when you add up all the commercial uses and 10 year term) down to $49, or what amounts to a 95% discount fire sale price on all their images, 500kb or less.

Why did they do this? What could possibly cause them to seemingly slash their own throat?

(Continued after the Jump)

When Getty acquired iStockphoto, JDK famously said "If someone’s going to cannibalize your business, better it be one of your other businesses,”. Now, JDK has taken things one step further, authorizing a 95% firesale, which is tantamount to eating one's own, or self-destruction. You pick one, either way, it's going to get fugly.

However, the question remains - why? Why take such drastic measures? When GYI aquired iStockphoto, some assumed that they would move the best images, and also the best selling images, from RF to RM, as well as introducing the RF producers into a whole new world of revenue from their images, vis-a-vis higher dollars. Yet, that idea, which would have been a wise move, never materialized.

While industry leaders are circling the wagons and calling on Getty to revisit their pricing structure, (and with the genie out of the bottle, it's unlikely it'll be undone), Getty is keeping their reasons close to the vest.

Their publically stated reason is that designers have been budgeting $50 a photo for web use, and there may be some cases where this is the case, to be sure. Yet, there are rumors out there that this price-slashing is a preemptive move to reposition themselves prior to a major announcement of a new competitor to Getty. One that will make iStockphoto's licensing fees look expensive by comparison, let alone the RM collections of Getty Images. Certainly, Getty's nearest competitors, Corbis, and Jupiter Media are operating in a business-as-usual mode, however, something is amiss. We have made inquiries to determine the validity of the rumors. When we have either official confirmation, or unofficial yet substantiated confirmation from our sources, we'll have more to report at that time.

Let's look, however, at what the rumor isn't. It's almost certainly not a positioning for aquisition. Were that the case, a wholesale drop in pricing of the content would drastically diminish the valuation of the company, just prior to any potential acquisition. Heck, it does that to net revenues regardless of the reason.

For now, we'll remain watching and waiting.
Full Disclosure: I do not hold, and have not in the past held, GYI stock, nor those of any of it's competitors, nor do I have any plans to engage in any investment activity as it regards GYI, or it's competitors. While I've been critical of them in the past, I've not disclosed these facts, and I feel it's important to make that point clear.
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.


Anonymous said...

Check out some industry responses here at Stockasylum:

Note Steve Pigeon's (Masterfile CEO) comments:

"Ironically, Masterfile was considering a similar course of action months ago but we figured it would be next to impossible to get all our major RF suppliers onside. Getty solved that for us in one fell swoop and we won't be far behind. I like those guys."

I hear there's good money in plumbing... or plastering maybe...

Anonymous said...

Industry Groups in an uproar.


Leading Photographer Groups Call on Getty Images to Remove Rights Managed Collections from new $49 "Web Use" License

Heavy discounting of premium stock imagery risks future revenue potential from major digital uses, as budgets shift from print to online.

Last week, Getty Images announced a new $49 "web use" license for images from all of its collections, including its highest quality Rights Managed collections. With this move, Getty has effectively slashed the value of commercial web use licenses by up to 96% off their established rates for Rights Managed photography.

In a coordinated response, leading trade associations representing over 12,000 professional photographers have called upon Getty Images to remove all Rights Managed imagery (including their Rights Ready brands) from this new license product.

The Stock Artists Alliance (SAA), the American Society of Media Photographers (ASMP), the U.K. Association of Photographers (AOP), Advertising Photographers of America (APA), Editorial Photographers (EP), and the Canadian Association of Photographers (CAPIC) represent top advertising and editorial assignment photographers and thousands of stock photographers- including many Getty contributors.

Their shared concern is that this extreme competitive response by Getty Images presents huge risks to the image licensing business, and threatens the livelihoods not only of Getty contributors but of professional photographers industry-wide.

In a joint letter sent to Getty Images CEO Jonathan Klein today, the associations have urged the company to reconsider this plan and remove the Rights Managed collections from the $49 license scheme. "Offering your very best imagery at heavily discounted prices," they contend, "may well increase volume, but it also risks undermining Getty's core licensing business-as well as the businesses of the independent contributing photographers who create and own the majority of imagery in your RM collections."

Furthermore, the letter states, "As the market leader, Getty's actions affect the entire industry. We therefore expect that your action of devaluing digital usage risks the long-term earning potential from image licensing, whether it be stock or commissioned."

Anticipated consequences of this dramatic move, they suggest, include:

1. Loss of high-value digital license revenue.
Getty is unnecessarily giving up money from commercial and high-end advertising customers willing to pay premium prices for the most exclusive imagery. Now these same customers are rapidly shifting their large media budgets from print to the web as the internet emerges as their primary marketing platform. Spending for web advertising by these customers can easily rival traditional media budgets with many spending hundreds of thousands of dollars on relatively small media buys. This $49 deal gives away valuable rights for minimal prices that will not be replaced by increased volume for this kind of commercial usage.

2. Devaluation of RM licensing.
Flat-rate license fees run counter to the Rights Managed premise that price and value are commensurate with usage. The $49 deal lumps together buyers for global online ad campaigns with small mom-and-pop shops and local web uses. Flat-rate unit pricing is already being offered in Royalty Free products, and this new product will offer value-conscious customers access to quality RF imagery. There's no need to extend it in RM. Offering the very best images at a bargain price point communicates to customers that all images, even the very best and most creative, are all worth the same.

3. Erosion of prices across the board.
The devaluation of web usage prices will lead to devaluing print and outdoor usage that will pave the way to further steep price cuts across all types of licenses. Once customers can obtain a major use license of an RM image at this cost, they will likely question the validity of being charged significantly higher rates for other uses.

4. Reduced return for photographers.
Lower per-image returns for photographers make it more difficult to produce the highly creative images that form the core of creative RM stock collections. These images cannot be produced in volume, and photographers are already feeling the impact of reduced revenues. This move further strains the viability of independent photographers' businesses, and will result in less fresh imagery available for customers.

5. Reduced recovery value for images.
The offering by the world's largest stock image supplier of all their images across the board at a $49 price point will have a serious impact on the valuation of claims in the courts for copyright infringement and lost/damaged originals. It also undermines the proposition that each image is unique and has to be valued on its own merits. Infringements of stock images are already at crisis levels-especially for web and digital uses. We are alarmed that a consequence of the low value established for web uses will dampen efforts to enforce copyrights and recover otherwise lost revenues.

Evolution is Needed
There is no doubt that stock licensing and pricing models must evolve to address the needs of a diversified marketplace of new media users, which include major stock image users, as well as new kinds of customers. An essential part of this evolution must include logical and consistent licensing and pricing structures that make sense to the customer, and that preserve the value of high quality professional imagery.

In closing, the association letter states: "We are eager to work with Getty Images and other leaders in the industry to find ways to evolve image licensing that address the changing needs of new media customers, and which leverage the distinctive value associated with Rights Managed imagery in a changing marketplace. We have a mutual interest in growing our image licensing businesses but respectfully contend that we must explore better ways to do so, which do not risk the value of what we have created."

SAA president Roy Hsu, an Advertising Art Director specializing in digital media and stock photographer, explains: "Digital advertising is currently the fastest growing segment and will become the key source of high end advertising within the next few years. Internet based campaigns now can define brand campaigns and make headlines on their own, which used to be reserved by print and broadcast. Media budgets for online are now comparable and sometimes higher than those of traditional print media. This pricing scheme oversimplifies a complex industry by mixing the high and low end users together, and the discounting these digital uses is in effect giving up on the high-end customer."

Coordinated Action by Photographer Associations
This is the latest example of coordinated advocacy initiatives by leading photographer trade associations who are increasingly working together to address issues of common concern to their members. They have also joined together as members of the PLUS, The Picture Licensing Universal System; and the Imagery Alliance, a diverse coalition of industry stakeholders formed to respond to proposed "orphan works" legislation, and to champion the need for industry licensing and metadata standards, and copyright education.
Background Information
About two weeks ago, Getty Images began offering a $49 "web-resolution" license across all of its collections, including Rights Managed (RM) and Rights Ready (RR), as well as Royalty Free. For $49, Getty will now license an RM image for digital use (website, web banner ad, email, mobile device or multimedia project) for one year. For up to ten years, an RR image can be used for any one project across all digital and web media.

The $49 license applies to Getty’s exclusive ”house” brands as well as third party collections. So, it includes the premium RM imagery presented in the Stone, Stone+, Taxi and Photonica collections as well as the RM images moved into the RR model over the past year in the TIB, Iconica and Riser collections. It will also affect the images in the Photographer’s Choice RM and RR collections for which contributors pay a participation fee. Only two collections are excluded -- Image Source (RF) and the Arnold Newman Collection (RM) along with selected editorial images.

The price point varies worldwide. It is 49 EUROS (around $70) and £39 GBP (around $100).

Getty’s press release describes the product as offering customers “access the entire breadth and depth of its collections -- even the premium collections -- for their online media and advertising campaigns.” Jonathan Klein, Getty Images’ CEO states that "customers who once considered alternative sources of imagery for use in their online media and advertising campaigns, no longer need to sacrifice the quality of imagery.”

By “alternative sources,” Mr. Klein is presumably referring to microstock (such as iStock which Getty owns) and RF subscription products. Last week, Getty also launched Valueline, a brand which offers RF images starting at $19. This product was soft launched two weeks ago, with only Royalty Free ecommerce enabled. Getty reports that RM and RR pricing will be online by late September, with the license available across all collections by calling Getty Sales.

On site promotions began last week with various taglines such as “All you need is a little pocket change” and “Wipe the drool from your mouth. Now you can license even rights-managed quality images for a flat rate of $49 each.”
Please let Getty Images hear from you!

Key contacts are:

Jonathan Klein, Getty Images CEO -
Paul Banwell, Getty Images Artists Relations -
APA greatly appreciates SAA's efforts to arm us all with as much information as possible.

Unknown said...

I Get IT! They are trying to make there stock look expensive. You see a GYI share is about the same as "BUYING" a photo - at this rate hopefully their stock will look cheap to an iStock Photo.

Anonymous said...

GYI going to $6. Bank on it.

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