Thursday, April 9, 2009

NFL and the Wayward Getty Images

Getty images has made what can only be a colossal blunder in losing the NFL's commercial licensing deal to the Associated Press. Sources close to both parties reveal that this is a done deal, minus official announcements, Photo Business News has learned. As an interesting side note, it is unclear how the AP would have noted in their annual meeting in San Diego recently that the deal is done, prior to the NFL actually announcing it.

So, what does this portend for the actual people making images under Getty's contract?

The problem is multi-fold.

  • Getty loses what amounts to the cash cow with a large portion of all their commercial sports sales, according to sources.
  • Getty loses what is seen by many as their most prestigious sports relationship
  • Getty likely loses what is arguably the most prestigious group of sports photographers to the AP
  • Getty could find themselves in legal trouble if they preclude "their photographers" (that is, contractors) from doing other work for another media organization, forcing photographers to choose between leagues.
(Continued after the Jump)

Getty's Commercial Cash Cow

With the stock licensing image revenue streams in freefall, commercial sales have remained profitable for photographers, especially Getty. The deal that was in place is an estimated guarantee of $400,000 in revenue to the NFL, and one rumor has the guarantee of revenue from their new partner, the AP, in the $700k-$800k range, and possibly $1m or more.

Further, one photographer we spoke with who migrated from Wire Image to Getty reported to us that in addition to being staff, he also earned a percentage of sales as well. Another source reports that this is one carrot that has kept select Getty staff photographers happy, so this could also mean a huge slash in revenue for Getty photographers that "stay behind" and don't follow the NFL deal.

The NFL, likely frustrated with seeing Getty paying upwards of $200M to acquire Wire Image, wanted a piece of that figure, according to some, relative to seeing a paltry sub-million-dollar figure being paid/guaranteed, so when the contract came back up for renewal, even in this troubling economy, it was the NFL's turn to exact a more lucrative deal.

Another issue, is the ill-conceived premium access revenue model Getty began pushing recently, which has further eroded photographer's editorial revenue streams in the last 6 months, and will likely cause even lower sales figures in the coming months.

Lastly, this deal was worth millions in revenue, not just to Getty, but also a great deal for the NFL (from revenue to servicing their corporate partners), and was a decent source of revenue to those staffers and contributors partaking in resales percentages, and an even larger portion of revenue to contributors. With $4m-$5m in gross sales from the editorial and commercial sales combined, this should have been a lot of money, but perhaps, to a company focused on a breakup, not so much?

Getty Loses Prestigious Business Relationship

Arguably, the NFL was Getty's crown jewel in their sports photography division. All other sports leagues have followed the NFL's lead on everything from merchandising to television rights deals, and so on. The NFL deal not only solidified Getty's place as the sports imaging leader, but as noted above, was their main sports cash source as well. Getting this deal for Getty (via the Wire Image acqusition) was akin to the billion-dollar deal the the NFL signed with Fox and CBS back in the 90's. In that situation, The previous deal being for much less a year, and the NFL cut a deal which, combined, was worth $2.2B (that's billion!) a year over eight years . Getty became a real player when they got this deal, as did the, at the time, largely non-existent Fox Sports division.

The AP on the other hand, really is not equipped to handle or manage a Getty-like service, and the NFL may, unless the AP overstaffs with photographers, editors, not be as prepared as they should be. The problem is, AP staff photographers are already grumbling about having to file their outtakes (known as OTK's) in the day(s) following an assignment, during down time. The time commitment to the AP/NFL deal will tax the AP's photographers even more, as they look to bulk up their image archive to squeeze every dime of sales. For example, the AP is now encouraging staff photographers to file vacation, and off-hours photography to them, offering a paltry 30% on the sales of those images, but here's the kicker - when that staffer dies, neither their spouse, nor heirs, will continue to get that revenue, and that's just plain wrong.

Further, AP staff photographers have a limited knowledgebase when it comes to commercial keywording, and how to maximize revenue in that manner, so there will also be a serious learning curve on that front.

Look next, for the other leagues to re-evaluate their Getty contracts as they come up for renewal. When you are the sole source for commercial licensing of sports images, you can set your own prices without competitive downward pressure on pricing, and now Getty has lost that, and will likely lose others. While the AP had bid on, and lost the MLB contract a few years back, they are now distributing the the NCAA images from Rich Clarkson's deal with them (Getty had also tried to secure that deal), so this is the next step for the AP in their evolution towards more sports imagery.

Getty's Talented Team of Sports Photographers

En masse, Getty's sports photography team is probably the most talented sports photography department in the country. While Sports Illustrated may have a dozen amazingly talented (and some might say more talented) sports photographers, the 30+ team that Getty has assembled to serve not just the NFL, but the other leagues year round was a can't-be-beat team, especially in serving the commercial marketplace. The mindset is not just editorial, but also very commercial in nature.

Many members of that team had come from the NFL shop when the NFL essentially outsourced the photography so that they could use those bodies on the West Coast to boost the NFL Television division. Many of these are not actually employees, and are covered under contracts that have them as independent contractors, and this is where the devil is in the details. Somewhere around 65%-70% of all NFL sales by Getty have come from the freelancers or contributing photographers, with the remaining amount generating wholly-owned content and a the larger percentage of the sales.

That said, the AP is going to have to develop a far more fair contract than a work-for-hire one-size-fits-all arrangement that they currently have now, or the talented Getty team will likely not move an inch, nor should they. Some photographers, however, at Getty, were (rightly so) grumbling about the NFL split, with 40% going to Getty, 40% to the photographer, and 20% to the NFL, when the NFL requirement was, according to one source, 10%, so the question is - why was Getty offering an additional 10% to the NFL, and shouldn't that 10% the NFL wanted have come out of the Getty portion?

From a stylistic standpoint, shooting "AP-style" is far and away different than shooting for stock/stories/commercially, as the Getty team has honed their skills in doing. Filing your OTK's from images you just so happen to have taken, is not the same as having the mindset to capture those iconic images as well as telling the stories that the Getty photographers have fine-tuned their abilities to do.

In the end, whichever photographers don't go to the AP, will, frankly, see less revenue and less work as compared to those that do work in the more lucrative commercial sales market. Those that stay with Getty being left in the editorial dust of low end revenue.

Getty's Potential Legal Troubles

There are several tests that the IRS applies to determine if you are an employee, or a contractor. If Getty started to preclude these photographers from, say, working for Getty for the NBA, NHL, and MLB because they stuck with the NFL deal and migrated to serve another client (in the form of the AP, who will undoubtedly need to bulk up photographers ASAP) this would be a big problem for Getty.

When Getty senior staff were asked about, say, filing images with Getty for editorial sales, and the AP, for commercial sales, Getty demured, and gave what amounts to a non-answer, during a conference call three days ago. Suggesting to the photographers that they can't cover both is akin to the Getty photographers being school-teachers, seasonal workers, and idle the rest of the time.

One problem for the current contracted team of photographers, is that they may be contractually required to stay, since nothing in their contract said anything to the effect of "if Getty Images loses the NFL deal, photographer can, at their sole discretion, terminate this contract..." so Getty may try this heavy-handed tactic to keep this stable of photographers.

Other Complications

One of the issues at hand is the "Iron Mountain" collection of upwards of 2M analog images. While there are hundreds of thousands of contributors' digital images on the Getty site, and even more when you count the former Wire Image photographers, the analog history of the NFL sits in cold storage, and the expectation is that the management of those images would go to the AP, but that issue seems to be a bit of an unknown. NFL team owners recently learned of what is literally the history of their teams being inaccessible or otherwise potentially in jeopardy, and are now moving the status of the analog collection to the fore so that these images can be accessible, but the ability to monetize that collection may be questionable, and moreover, personal feelings may be clouding business judgement, but the costs to do the digitization may now move to the AP ledger.

In addition, Getty was trying to charge each team a reported $30,000 each year to maintain the image archives for each team, hoping to recoup as much as $960,000 in the process. Will the AP try to do this too, and were they saavy enough to have included these types of a la carte services with thoughtful pricing in their contracts?

How Did This Happen?

When Getty was negotiating this deal, they were at a strict disadvantage, because of the sentiments surrounding how much Getty paid for Wire Image. Signs point to the real possibility that Heller & Friedman, focused on the breakup of the company, saw the sports market as a distraction, and not a division that met their profits-to-expenses ratio, so it was not so difficult to let go, not to mention the likely reality that they didn't want to be "re-investing" (dumping?) $1m into the contract, and the NFL percentage may have been migrating upwards.

As a final question - the AP is supposed to be in the business of gathering and reporting on the news, and while the sports leagues have argued for years that they are entertainment, and not news, the impartiality of the AP certainly will be called into question as issues like athletes taking banned substances comes up, as well as other sports controversies. For example, would the AP have been as aggressive in covering the Michael Vick story - a taint on the NFL's image, had they been "in bed" together last year? Getty's "editorial integrity" was called into question following the NBA's brawl last year, and the void of coverage and available images after that event. Censorship clearly took place then, with images being pulled from Getty's site at the request of the NBA. Will the AP allow this?

This question will continue to linger, and ad to the AP's struggle to serve the news and new commercial market that they have carved out.

Final Lesson: Photography, properly managed, with rights, licensing, and so on, can be a significant generator of revenue, and should not be sold out to the lowest bidder.

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