As published in January 1998, one year before being hired to be the next head of Liaison Agency (Gamma-Liaison) in New York. Copyright 1998 Randy Taylor.

Top Secrets From Behind the Stock Curtain

When consultant Sandra Kinsler told ASMP meetings five years ago that stock would one day sell for three or four dollars per picture, she was nearly run out of town. Photographers reacted angrily to the messenger while players like Getty and Gates studied the message.

Today, stock photos are readily available on the web for $20 per use, a radical change that's going to wipe out many photographers and mom-and-pop stock shops while the big-boys compete for market share. This article examines the little secrets that are propelling these new trends and predicts some strategies for survival and profit in this brave new world.

The First Secret - Every photo placed in a stock agency's catalog adds at least $1,500 to that agency's value if the photo supplier is under long-term, exclusive contract.

Early purchases of entire stock agencies placed a de facto standard for an agency's value at $1,500 for every catalog image in distribution. Since catalog images (and their digital equivalents) represent 80% to 90% of agency sales, it's realistic to connect the sales price of an agency with the images in its catalogue. And, the price is going up. Getty's recent purchase of PhotoDisc for about $150 million works out to be around $3,000 for each image in their online database. The photographers, of course, receive no share of this wealth. And agency acquisitions are escalating.

The Percentage Secret - Agencies are working to lower photographer percentages to 15% to 20% of gross.

An excellent article in the January '98 Photo District News uses these quotes to illustrate the point: "I have no trouble going to photographers who are marginal and offering them 40 percent, take it or leave it," says Steve Pigeon of Masterfile in Toronto. Adds Craig Aurness of Westlight, "Still photographers have an abnormally high royalty. It's time to ask why that is ... The dynamics of the industry are leading us to 20 percent". Mr. Aurness says he won't be the first to drop percentages. Already, Image Bank shooters are accepting 30% on most sales minus duping and marketing fees.

Despite this trend, percentages in traditional stock sales are still much higher than in Royalty Free (RF) where photographers at PhotoDisc receive just 8.3% on average according to Getty documents filed with the SEC.

Discussing Getty via PR Newswire, stock analyst Keith Benjamin says, "[Profit] Margins can jump as the company begins to shift research, and eventually, image delivery over the Internet. Part of the cost savings can come from significantly lower handling costs and lower royalties to photographers."

The Cost Secret - Marketing and delivery costs are ready to plummet.

For sure, costs are temporarily up as agencies frantically increase catalog distribution and duplicate their efforts with hi-tech CD's and web sites that advertise the exact same images. But, with one print catalog a week arriving with a heavy thud on art directors' desks, this Tyrannosaurus Rex of marketing is nearing extinction. Million-dollar catalogs will one day collapse from their own weight, trying to keep up with the rapid growth and low-cost marketing and delivery of the lean, mean Internet. Agencies with viable web sites will see an increase of profit when this happens. (Note: Some trend setters like Photonica already separate catalog and CD marketing, putting different images in each.)

Traditionally, you could estimate an agency's gross sales by multiplying the number of its employees by $80,000 each. Agencies that rely heavily on catalogs bring in about $110,000 per employee. But, highly digitized archives, such as PhotoDisc, fetch about $190,000 per employee. This reflects the direction of profitability for hi-tech, low-labor companies.

The Bulk Secret - Pictures are selling for $5 - $10 per image in bulk deals.

Such figures are strictly hush-hush and, therefore, not verifiable. But stock giants are selling bulk access to universities (and other places where volume users of pictures can download images) at rock bottom prices. Because agencies have no production cost (they pay a percentage to photographers instead of a fixed price that is based on shooting expense plus profit), the price floor for stock (the lowest price that can be charged without the agency loosing money) is determined mostly by the agency's transaction and delivery cost. Since digital marketing, storage and delivery is a fraction of the cost of print catalogs, dupes, human research and Fed-Ex, the big agencies with computerized databases will soon be profitable selling bulk access at $5 an image. And, changes in credit card procedures in '98 may make even this low price level profitable for individual sales, as long as the orders are filled, delivered and paid for without human interaction.

The Price Secret - Prices are increasing in Royalty Free sales.

RF is really just low-cost stock. Clients love the no hassle, no haggle convenience ... and are willing to pay for it. Realizing this, PhotoDisc actually raised it's prices recently. Look for many traditional stock agencies to post their price lists online as they realize that ease-of-purchase is at least as important as competitive pricing. Online price lists will show what the user would pay to license the most common usage rights requested, given specific file sizes of the images to be downloaded.

The Cash Cow Secret - Catalogs cost an agency very little compared to the effortless revenue they bring in.

Theoretically, an agency charges the photographer 50% of catalog costs. (At Tony Stone, that's now $800 per image.) The average agency then sells half its catalogs to foreign agencies to recoup even more of the production cost and pockets half of the revenue generated from the efforts of these sub-agents.

Agencies, wanting to clone this cash cow onto the Internet, are trying new formulas in which their web site is paid for by photographers or sub-agents or both. Stock Imagery has proposed that its foreign agents pay $200 to $275 per month for online links and referrals. They do not currently charge photographers to put images on the site. (Editor's Note: After this article was written, Index Stock purchased Stock Imagery.)

The Size Secret - Image size and film attributes no longer matter.

Old logic says that Fuji outsells Kodak at stock agencies 20 to 1 and that 70mm dupes outsell 35mm. But the days of comparison shopping on a light table are ending. In the modern marketplace, the client has usually already made the decision to buy based on a CD, Internet or print catalog, before having seen the physical image. And, technology is allowing a picture to be printed much larger than ever before, even though the original image size continues to get smaller. Stochastic printing, 72 d.p.i. web use and photography that uses fractals instead of bitmaps will soon make traditional measures of image quality irrelevant to all but the high-end ad agencies.

The Royalty Free Secret - Stock agencies helped create the RF market and are now openly embracing it.

Arrogant, old stock agencies channeled most of the early images to the Royalty Free market by refusing to accept the work of marginal photographers. And, unlike big ad agencies, small clients (the biggest growth area) have long perceived stock as "excessively expensive". By simultaneously shutting out photographers and failing to educate graphic artists and small shops about the high cost of producing stock images, stock agencies inadvertently encouraged both the supply and the demand for Royalty Free. Now that the flood gates are open, agencies will, of course, embrace their successful offspring. (Note: PhotoDisc sales are increasing 20% per month.)


Within 10 years, this writer believes that print catalogs will be few, digital marketing and delivery will account for almost all sales, photographer royalties will be 15%-20% of gross, $10 sales in bulk will be significant in numbers, and the total gross sales of the stock photo industry will be much, much higher than today.

Survivors of these shocking changes will have many strategies: 1) Prolific shooters who have already stuffed agency files will do well as their images enter online databases. After all, 1,000 sales at $5 each will be similar to dozens of sales for hundreds each. 2) Another option is to get on staff at a stock agency either as a photographer, editor, shoot director or photographer liaison. 3) Many photographers find selling stock directly to clients to be highly profitable if the images warrant the extra search-effort by buyers who normally tend to buy from centralized sources. 4) Some photographers will up the ante and bet they can make the transition to cinematography. 6) And, you can always buy shares in agencies. Photographers investing money (very long term) into Corbis, Getty, FPG/VSG and Index Stock will hedge their bets. (Note: Only Getty shares can be bought currently.)

But in the end, creativity and vision will rise to the surface and become the odds-on favorite for winning in this new era. Outside of the machinery of the hi-tech sales process, the true value of an agency is increasingly found in the creativity of its photographers and researchers. Niche marketers of top quality, visually exciting, unique images, such as Sharpshooters Premium Stock Agency, for example, will shine in the shadow of multi-national conglomerates. Great photographers will create the images that complete the puzzle of an art director's imagination. And great researchers will conceptualize with overwhelmed clients and guide them to photographic solutions that they don't yet realize they want.

Anybody can shoot a descent picture,

And, tools of technology are easy to learn,

But, creativity and vision are a rare gift with great value.

Copyright 1998 Randy G. Taylor
Local chapters of the ASMP are authorized to link to this article, including via "frames" technology, and to publish this article in chapter newsletters in its entirety without editing. All other rights reserved.

randy taylor1123 broadway suite 1006new york ny10010 usa917 834 9793