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Introduction
Whether you shoot for fun, or are a class-act assignment photographer
that shoots specialty subjects for a living, you may have considered the
possibility of selling your images as stock photography—that is,
selling your existing supply of photos to buyers who need them for catalogs,
books, magazines, ads, or a variety of other uses. There's no question
the opportunity is out there; the real question is whether you should do
it yourself, or have someone else sell your images for you.
If it were as easy as simply turning over images to someone else, there
wouldn't be a whole lot say about it. Indeed, there are many factors,
both pros and cons, associated with either choice of selling images
directly yourself, or by working with an agency. In fact, many people
do both.
One of the main determining factors will be your propensity for starting
and running your own business as a fulltime endeavor. It's not that you
have to do this to sell stock on your own, but if you make anything less
than a seriously concerted effort, the payback may not seem worthwhile.
Yet, even if you have what it takes to run your own business, it doesn't
mean you'll want to. There are also lifestyle considerations:
taking pictures is one thing; running a business is another. Doing them
at the same time demands a different quality of time that is often
incompatible with the photographer mindset. "Context switching" from the
creative mind to the business mind is not easy or enjoyable for those
who already find business a struggle to begin with.
For these and other reasons, it may be preferable to work with a stock
photo agency. This is a company that markets and sells images on behalf
of photographers in return for a percentage of the sales. In theory,
this is a great win-win scenario, since the agency handles everything,
leaving you to just go out and shoot as the money trickles in. In
practice, it's not quite so simple. My favorite quote applies here:
"If it were easy, everyone would do it."
If you're attracted to this idea, remember: you're not the only one to
think of it. So now there's that problem of supply and demand.
Scope of Discussion
This chapter addresses the nuances of the stock photography business. I
begin with an analysis of the stock photo business model, and the roles
of the players: buyers, photographers, and agents. The second chapter,
Working with Stock Photography Agencies, addresses the intricacies of working directly with a
stock agency.
These chapters do not discusses what to do, or how to go about it,
which is an entirely different set of considerations. Nor do I
discuss pricing methods in this context. For a general discussion on
that, see Photography Pricing. The goal here is to present an unbiased analysis
of how the process and the industry works, so that you can draw your
own conclusions on whether or how much to commit to this.
There are vastly differing opinions—many of them vehement—on whether
stock agencies are inherently good or bad for photographers. But this
assumes that every photographer has the same objectives, which itself
is a faulty assumption. People have very different business objectives
and personal goals, either financially or from a lifestyle point of
view. There are often tradeoffs, and each person can decide for himself
whether any given business model is appropriate.
I have worked with stock photo agencies in the past, but I currently do not.
I have instead chosen to represent myself, selling images directly to
buyers. (You can read more about this in Web-based Photography Business.) This does not
mean I am biased against agencies; it only means that I have found
that my skills, interests and business objectives serve me better (yield
a better return) if I represent myself. That is, I'm rather technical, so
I know how to build my own website, optimize traffic to it, market myself
effectively, negotiate prices, etc. There is a panoply of skills that people
excel in better than others; it's this mixture that determines whether (and
which) agency would serve you better than others, or than yourself.
The Stock Industry in the Digital Age
The evolution of stock photo agencies finds its roots in the days
when the demand for photographs exceeded the supply, and the industry
was better managed through a tiered network. This model operated quite
well for decades, but the advent of the internet
made it easier for photographers to get images to buyers, chopping
one leg off of most agencies. Similarly, the advent of digital cameras
made the supply of images grow—fast. This one-two punch resulted
in a difficult time for agencies to compete against photographers. Most
importantly, non-professional photographers, who provide the bulk of
images to the internet. As these photos get worldwide distribution, they
are seen, ranked, and index in some form or another via multitudes of
websites, such as social networks and photo-sharing sites, making it
increasingly easier for buyers to obtain images without the need for
agencies. As a result, the lion's share of licensed images from the
general public far and away exceeds those from stock agencies.
More detailed analysis can be found on pages found here.
Scrambling to maintain revenue levels, and to revive sales of images
that weren't moving at all, agencies started playing with several new
ideas. First, the concept of royalty-free images (termed "RF") was
born. Here, CDs with several hundred photographs sold for as little as
$150, and the buyer had no restrictions on use.
Photographers and agencies worried that royalty-free CDs would destroy the
stock industry, but they only eroded the bottom-end of the market, where
very generic, medium-resolution images of everyday subjects reside. Those
images hardly made much money anyway, but the carnage didn't end there. As
revenue growth slowed from the booming levels of the mid-90s, so did
the valuation of stock agencies. Bigger companies swallowed up smaller
ones to reduce competition and increase image assets, to a point where
there are now only a few big stock agencies today. Little ones pop up
now and then, but usually don't survive long enough to gain a foothold,
let alone present any sort of formidable competition to the major players.
The next evolutionary phase for agencies came when more decided to choose
the "microstock" model, which is similar to RF, but instead of selling
collections of works on physical CDs, buyers could merely download them
from websites. As images continued to outpace demand, prices dropped.
While slim margins can still realize profits for individuals and very
small niche agencies, larger agencies are expanding their services
to include specialized photography services, where customized images
are produced on demand for customers: sports, news coverage, celecbrities,
and other kinds of event-related content is still difficult for the
consumer to compete with. Similarly, niche industries like fashion and
products still command higher prices, and larger agencies that can serve
these images are at least surviving. Agencies once again have a big edge
on the individual photographer in that their size and scope avails them of
equipment and space that most photographers only dream of.
So, what does all this mean about the prospects of the individual
photographer (professional or amateur) selling images? The answer is
the same whether you're with an agency or not: it's a hard, competitive,
and often conflicting market. Determining whether to work with an agency
requires examining different analysis than simply the nature of the
stock industry itself.
Photo Buyers
Before you can appreciate the stock photo business, you must have a
sense of who's buying images and why. If you think it's hard to get
noticed in the market as a photographer because of over-saturation,
think about the people who have to look for images. This saturation
affects them as well. "Stock images" (as they are called because it's
like any other inventory that's held "in stock") requires a huge amount
of time to sift through. The more images there are, the more likely
the buyer may suffer from "search fatigue," where all images end up
looking the same. This ends up having a curious effect on the perception
of value that the buyer has for the image he's looking for, as illustrated
by this excerpt from an email message I from a client:
"If I can buy an image from Corbis for $100, why are you charging $250
for your image, if the end use is the same?"
My usual response is,
"You can pay $100 for an image you don't want, or $250 for one you do want."
Search fatigue is the result of "too many choices," especially when few
of them satisfy the need. But the cause of this is not just because you
(or an agency) has too many pictures to choose from—it's an industry-wide
problem, which is because it's a world-wide phenomenon from (again)
truism #1. As long as there is over-saturation,
there will be a decline in the perception of value.
The real variable that trumps all this is the client's self-perception of
how important the image is for its intended use. A photo to used in a 60
foot banner in Times Square would be pretty important, and the chosen
image will not likely be chosen because it cost a few dollars less than
another image from another source. Alternatively, a photo used as a
portion of a ¼ page ad in a local newspaper is not perceived to
be as valuable, leaving the lower-priced image as the likely winner.
This illustrates that the market is often bifurcated between the high
end and the low end, with a wide gap in between. Depending on the
importance of an image, the perception of price can range along the
spectrum between the commodity "widget", where one widget is no
different than another, and the valuable name-brand photo that is
critical to a company's public image. These high-end images command
the higher prices, but those sales are few and far between. The low-end
images are sold at fire sale prices, but they often come in waves, where
money is made on sheer volume.
This is the point at which buyers segment into two categories:
the commodity buyer, where price is the driving consideration; or
the sophisticated buyer, who finds the image itself to be the more
critical element. I don't mean to imply a discrete separation of these
groups of buyers. In fact, it's more of a spectrum that graduates along
the endpoints, not a strict division between the two. Most buyers are
somewhere in the middle, although they do tend to bunch up towards one
end or the other, graphed like a two-humped camel.
Stock photography is a business that, for the most part, requires
volume, because the frequency and price of higher-end sales will often
pale in comparison to the volume of lower-priced sales in a photographer's
income statement. Buyers get used to this, and form the impression
that different uses demand different prices, and once the use is
determined (hence, their perception of the "value" of getting the right
image), they don't see that images themselves command different
prices. Given the same end use, they believe that any photo should cost
the same as any other. This perception is further supported by the fact
that most photo sellers (agencies and photographers alike) usually
have price points that vary among uses as well, where price points
apply to all photos in the catalog.
If there are, in fact, different classes of buyers and images, then we
should see a natural pairing between them in statistical data from stock
photo buying surveys. That is, we should see economic-minded buyers
acquiring lesser-expensive images from sources like royalty-free photo
disks; whereas the higher-end buyers will continue to license individual
images for higher per-unit prices from established sources (stock
agencies or direct from photographers). Indeed, the data does suggest
just that. What's more, that information isn't nearly as interesting
as the more pertinent data that shows no cross-over between the two.
That is, higher-end buyers do not use "royalty-free" disks or certain stock
agencies because they perceive their needs as being more "important," and
thus seek those images that satisfy those needs. And pay higher prices
for them. Conversely, those who buy royalty-free images know that they
aren't using them for huge-money deals, so they rummage around in the
bargain bin near the exit door. That is, you don't see people using a
generic photo of a car from a royalty-free photo disk in a full page ad
in a magazine.
The net result; royalty-free pricing has not affected the price points
for rights-protected images, and since different buyers exist for each
discrete market, an agency (or a photographer) could find a viable
business model doing either or both without compromising the other.
Buying images involves more than just determining whether the right
image can be obtained for the right price. Buyers also factor into their
decision two other very important criteria in the photo-buying process:
speed and quality. That is, they do not want to spend a great deal
of time finding the image they want, and they don't want to sift through
images that don't even come close to what they need. People will use
any source on a regular basis if it is consistent in satisfying these
criteria. Buyers don't want to waste time going from source to source;
they like to hone in on a limited set of reliable sources because it
saves time, thus satisfying both time and quality requirements. Because
most buyers who license images on a regular basis are the best customers
to have, most stock agencies try to cater to such companies by offering
specialty images that fit into the business model for their target market.
For example, a stock agency that deals strictly with weather-related
images may be a primary source for government agencies, travel companies,
or news organizations that need to license images to accompany a news
story, or to promote or vacation idea. Consider the huge number of images
on the internet that feature "lightning," but it takes a lot of time
for a buyer to sift through all those sources to find a set of viable
options quickly. It's more time-efficient to go to a single source for
this type of material, assuming that the source has a good track record
for providing suitable images over time. Experience shows that buyers
are willing to pay a premium for that convenience.
To summarize the buyer's perspective, the important elements are:
-
Time and convenience when searching and finding images
-
High percentage of quality images that meet buyer's needs
-
Price
-
Relationship to seller
The last point was not discussed in this section because it is addressed
more thoroughly later. That notwithstanding, the better you or your agency
is at servicing these needs, the more successful you'll be at being one
of those suppliers.
Photographer's Perspective
Having an understanding of where buyers acquire their images and
how, you must then consider how you fit into that model. What's your
specialty? (Or, are you a generic stock photo shooter?) What is the market
for your images? Who will buy them? For what uses? And most importantly,
where do the photo buyers for your target specialty acquire their
images? All photographers who want to sell their images must think
about all these issues before they can strategize on the best way to
conduct business.
Whatever your strategy, you will confront with the single biggest hurdle
that faces every single photographer and stock agency today, a point
that I beat into the ground every chance I get: the supply of photos
exceeds demand. You may, in fact, satisfy all the needs and checklist
items that satisfy the buyer. The question then becomes, is the market
big enough to fuel a business? Consider the photographer that has tons
of lightning photos. Let's assume he's also got stock photos of all sorts
of weather conditions and other related imagery. Now consider all those
buyers that need them. Sound like a viable business to you? If you
think you know, I assure you, you're wrong. One cannot predict the
size of any given market segment, unless one has been in the market
in some capacity already. If you're "thinking" of getting into this
business, but haven't already been in the business to know the answer
to that pivotal question about whether your own market size is viable
to support you, it's probably going to be a mistake.
But, all is not lost. For the serious professional photographer,
the decision whether to get into the stock business, let alone to work
with an agency, hangs on the answer to this question: is your stock
base is broad enough to appeal to a large enough audience, while
assuring that your quality isn't compromised? As often used in scientific
lingo, you have to exceed a "critical mass" of stock images in quantity
and variety to achieve a stable, reliable, and self-sustaining business
model.
Running Your Own Stock Business
Here are a few of the most difficult aspects of running your own stock
photo business:
Organizing and managing your photo base.
It's one thing to shoot a lot, but maintaining a photo database is
time-consuming, not just to ramp up, but to maintain. This is a doable
process, and those with experience with computers have a considerable
advantage over those who don't. There are programs that assist with this,
and it's beyond the scope of this chapter to review them. You'll need
to do your homework on what's "currently" available, and gauge your
own degree of competence in this area.
Marketing stock photography to clients.
This task requires skills beyond photography. See Marketing your Photography Business for
a detailed discussion. Your ability to market well is critical to
making it in the stock photo business on your own. Again, it's doable,
and more people can do it than who think they can, but it still isn't for
everyone.
Negotiating prices.
This is difficult at best, confrontational at worst. But, having a
top-down view on business strategies and working within the scope
of your long-term objectives makes this task more palatable.
Keeping track of your photos.
If you're still working with traditional film, you're going to find
a lot of overhead that your competition doesn't have. The stock
industry has moved towards digital faster than any other technological
change in the photo business. Whether film or digital, you still have
to keep track of your clients, your photos, and who has what and what
their issues are. Doing this with physical film requires infrastructure
in itself, not to mention the financial overhead of materials and
postage, but you may also need to pay an assistant. Worst of all is
getting clients to return images they have. With digital, that's not
so much a problem, but it's equally frustrating just keeping tabs on
who is considering what.
Getting clients to pay their invoices.
This can get really ugly at worst, and just plain time-consuming at
best. Again, how you weather this has everything to do with your
propensity for organizing yourself in a business environment.
It's beyond the scope of this article to address any of these points
in depth, but one doesn't have to read further to know these tasks are
a huge investment of time, money, and headaches. It's not that going
at it on your own isn't worthwhile, but it may not be for everyone.
If I've talked you out of trying to sell stock photography on your own,
and you're now eager to work with a stock photo agency, don't get too
excited. There are many downsides to this prospect as well, the most
important of which is the financial bottom line: the supply/demand
imbalance has forced prices downward, and the trickle-down effect through
the supply chain has a ripple effect. The stock agency gets the first
chunk of money, leaving the rest to the photographer, which, as you can
guess, is pretty low at this point. Worse, the photographer's income
is further eroded by the ratio of photographers to agencies: the more
photographers there are, the less the agency is compelled to pay them.
In order for photographers to make money, they must be as aggressive
with price as they can (meaning, "willing to take less") or the agency
will simply work with others. (Ok, it's not quite that simple, but
we'll get into that later.)
Putting this into perspective, let's say a magazine wants to license a
¼-page photograph for an editorial story. A fee for this might
be around $175. If the agency pays you 40 percent, you get $70. But, the
agency may need to outbid other offers, and it may come back and ask
you to accept the license fee of $100, leaving you with $40. Also,
if the agency has a lot of photographers, the chance your image is seen
(or purchased) is diluted by the volume of images from everyone else
in that agency. Some agencies may "suggest" that your images might be
ranked higher if you were to, say, give up another 10 percent in your royalty
agreement. So, now you're down to 30 percent, or $30 for a license fee that
would have paid you $175 if you'd done it yourself.
Of course, many agencies may deny that favoritism is given to those with
different royalty rates, and/or that royalties are fixed among photographers.
While that probably is true for the majority of them, exceptions are always
made for "exceptional" people/conditions. After all, business is business.
We'll return to this issue, and many like it, in Working with Stock Photography Agencies.
The hypothetical magazine example above doesn't even begin to touch upon
all the problems in working with agencies. But, to quickly jump to it,
here are the highlights of typical problems people most often complain
about when working with stock photo agencies:
-
Photographers' images are often unseen by clients.
-
Images are misplaced if not lost entirely.
-
The constant influx of new images pushes older ones too low on the
stack to matter.
-
In some worst-case scenarios, internal photo management is so bad
that no one knows who owns which images, and some photos are actually
sold without royalties paid to any photographer.
The frustration with stock agencies can be seen in empirical data. According
to the Advertising Photographers of America's (www.apanational.org)
2001 survey of the stock photography business, 35 percent of commercially
licensed images came from the big stock agencies, a drop from 70
percent ten years earlier. By contrast, 65 percent of images came
from photographers either directly, or through their own personal
agencies, run by themselves or with partners. It would seem that stock
photographers are moving away from agencies. But, is that really the
case? Stock agencies say that they are hiring more photographers than
ever, and their stock bases are considerably higher too. What can
explain this discrepancy? Back to truism #1:
the number of photographers has exploded. The answer is simple:
"Agencies are growing, but the number of photographers is growing faster."
This begs new questions: if the total number of photographers is
growing, why is a smaller percentage of them working with agencies?
Why do photographers work with agencies at all? We already examined the
pitfalls of going at it alone, so is it a question of choosing the lesser
of two evils? What about those who do not complain about agencies?
They must be doing something right, or at least, the agency they chose
is doing something for them that keeps them loyal. To understand that,
let's look at the agencies perspective.
The Agency's Perspective
While it seems that a photo agency has the upper hand on photographers,
it too has its own business issues that aren't so easily solved:
-
Managing a vast number of physical images.
-
Managing the relationships with photographers.
-
Managing the relationships with clients.
-
Keeping a fresh supply of new images in the queue.
-
Managing the business itself.
Each of these items could be a book by itself, and I can't possibly
flesh out the details of each suitably. For example, the first point
about "managing physical images," requires tasks like scanning images,
building and maintaining electronic databases, keywording and describing
images, building and designing the hardware and software necessary to
do all these tasks, synchronizing all this data with the web server,
keeping slides in the right boxes, tagging and tracking where the original
slides are, where they go next, getting them back from where they were,
and (deep breath) collecting them all back up and sending them back to
the photographer after he's notified you that he's terminated his
relationship with you because you haven't been able to sell any of his
images.
You probably got the idea by now. There's a lot to running an agency,
which is why most stock photo agencies go under at the same rate that
restaurants do (and often for the same reasons). A great cook thinks that
he wants to open a restaurant, only to find out that he's under-capitalized,
and has no business experience. Well, the same often happens with stock
agencies. But, of course, not all restaurants are a failure, just as not
all stock agencies are. The point is, "it's hard," and keeping the photographer
happy is only a small portion of the difficult tasks at hand.
Relationships: the Great Equalizer
Ironically, and perhaps unexpectedly to many people, the most pertinent
issue for the success of an agency is managing its relationships,
including both its photographers its buyers. For photographers, this
includes not just how they're paid, but how they're represented, what their
priority is with respect to other photographers, what kind of communication
they get, whether they are assigned a dedicated sales rep, and so on.
On managing the buyers, it's a matter of getting them the right images,
providing good service, etc.
To see how these relationships can be rather tricky to satisfy
simultaneously, let's review that magazine example, worth $175 (of which
$30-40 goes to the photographer). To put things into perspective, this
is not a huge revenue-generator for the agency. That image could have
been provided by any photographer in the agency, so it's arbitrary whose
is used. Or is it? Was the decision purely arbitrary? Given the low
dollar amount, the agency didn't choose the photographer solely because
of a more advantageous royalty structure. There must be more to it.
To see how seemingly unrelated events fit together to form a complete
picture, let's break away for a moment and consider an entirely different
scenario. We'll get back to this example afterwards.
The Fashion Photo Example
Let's say the agency is trying to supply images to an ad firm in the
fashion world. In this industry, photos are often licensed for tens
of thousands of dollars for a high-profile ad placed on a billboard,
or in a high-profile magazine. Here, the photo agency must have access to
top fashion photographers, or it won't get the business. It follows
that the agency wants to keep its top photographers happy. If a
photographer generates images that yield high income, that photographer
(and his images) will (and should) get special treatment. After all,
if it were you, wouldn't you demand that your income achieve a certain
level? After all, if you really are that good, you could easily be
lured away by another agency who would give you that guarantee, even if
you don't ask for it. Here, it only makes good business sense for the
agency to feed its golden goose so that it will produce golden eggs.
So now let's return to that small $175 stock image sale: sure, the
client may have been shown an image from another photographer in the
agency, but if the agency wants to keep its top photographers happy,
it's more likely to promote their portfolios over the other, lower-rung
photographers. In the big picture, the agency must first look out
for the interests of its goose that lays golden eggs. How can we
measure whether this works? By looking at the income levels of the
photographers in any given agency and running a graphical distribution
chart and examining the results. According to reports from Getty Images,
as an example, 80 percent of its payouts go to 20 percent of its
photographers. That mysteriously consistent 80/20 rule applies again,
which we'll return to again a little later.
How Agencies View Photographers
If you're still stuck on the idea that "quality sells," and that the agency
should present the photos that are better than other photos, regardless
of who the photographer is, then I should remind you of the joke from
chatper 1:
 How many photographers does it take to change a light bulb?
 50. One to change the bulb, and forty-nine to say, "I could have done that!"
If you're at all like most photographers, you will, at some point in your
career, proclaim the very true and valid statement (usually in a high-pitched,
very annoying voice):
"Hey! MY photos are better than HIS!"
Yet, if your images were chosen, some other photographer would make
the same valid complaint against you. In short, "quality" is subjective.
When it comes to dealing with large quantities of images, and making
business choices on what to "push," quality, per se, isn't as responsible
for a sale as "the relationship" is. This goes between the photographer
and the agency as much as it does between agency and the buyer.
Of course, I do not imply that there is a single star photographer
and the rest are pawns. Many agencies treat all photographers the same,
or try to. But, seniority (of all its forms) usually manifests itself
somehow. In short, there is an "order" to the pecking, and this order is
fluid and somewhat unstable and transient. (I.e., people move up and down
the ladder often. As is often said in the film industry about an actor's
career, he's only as good as his last movie.) This is why managing
groups of photographers is so difficult. It may not necessarily be the
case that a formal "order" exists, one could assume that the agency has to
balance its need for profitability and management with its photographers
to decide what to do next at any given decision. Thus, an "implied"
order usually forms as a by-product of this business management process.
Again, not all agencies work the same; this discussion is only to
illustrate an abstraction by which an agency operates. There are
some photographers who've witnessed this type of thing, even though
the circumstances and conditions may have been different.
Remember, it's difficult and costly to run a stock photo agency,
and unless care is taken to assure profitability, the agency may not
survive. Again, most don't. This isn't necessarily because people
didn't apply some of these rules—in fact, it could be because they
did apply them, but did so poorly.
The Top-Tier Photographers
Based on the above discussion, the question becomes, what does it take to
be one of the chosen few star photographers in the agency, whose works are
viewed more often than everyone else's? Put succinctly, the top-tier
photographers usually are one or more of the following:
-
People that have been shooting for years—like around 25+—and
have already gained a personal reputation in the industry.
-
Photographers with reputations in specialty areas, or who come
with a huge collection of immediately marketable images ready to go.
-
Photographers who moved up in the ranks from lower rungs.
One thing that all these have in common is years. Time exposes
people to experiences, and from those come maturity. A young kid
out of college with exceptional skills, an innovative style, and a very
unique vision may be a potential gold mine for a stock agency. But
what is untested is whether this person will evolve, or how he
performs under stress, how he interacts with the agency's staff or
its clients. Sure, skill, talent and vision are great, but nothing
can replace what agencies really want: reliability. And that can
only be developed by time.
For completeness, I should point out that yes, talent, vision, style
and a demonstrated success are important, but to be a top-tier
photographer, you need all that, plus reliability. If the agency
can't depend on you and confidently assume that you're going to come
through and perform consistently, time and time again, you're a risk.
(You're only as good as your last project.)
The 80/20 Rule
Ok, so the top-tier photographer may not be you. For most, that's ok.
Perhaps you may be one of those people that says,
"I'm not that serious about photography, and I just want to make a little
of money on the side. So, let the agency sell my images for whatever it
can, when it can, and I'll take whatever income that occurs."
There's certainly nothing wrong with that perspective; in fact, you're not
alone. Most people who go to agencies today have this very mindset.
That's not to say that all photographers at agencies think this way.
It's just that a large percentage of them are more casual about their
income expectations. Ok, if that's the case, what kind of income expectations
should you have?
To answer that, we can now put together various topics we've discussed to
understand the full picture of how photo agencies work. As we've seen,
some business yields small revenue, other business is lucrative. If, at
the end of the year, one were to itemize each "deal" on a pie-chart graph,
a very familiar pattern will emerge, one that seems to be intrinsic to
most commodity-based businesses: the 80/20 rule. In summary,
-
80 percent of the revenue comes from 20 percent of the clients; and
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80 percent of the best-selling product comes from 20 percent of the suppliers.
In the stock photo business, you can state the concept this way: "a
small percentage of clients are paying high prices to have access to
a small percentage of photographers' images." It's a self-perpetuating
formula: for the agency to make the big bucks, it has to keep its
star photographers happy, thereby turning more business their way, which
reinforces the 80/20 breakdown. This is why the pattern is so common in
commodity-based businesses.
We can test this in the real world by citing actual data.
By doing a search for "stock photography survey" on the net,
we will eventually find data that points to a 2001 press release from
Getty Images, one of the largest stock photo agencies. Here, the report
divulges income data for the photographers in their Tony Stone Images
group, a subsidiary that represents some of their top-tier photographers.
In the report, the top 20 percent of photographers (280-300) earned just over
$40,000 a year (although other survey data suggests that $55,000 is a
more accurate number). However, the bottom 80 percent of photographers (1120-1200)
earned an income that "exceeded $400 a year." (It's hard to nail down
precisely what this means, since lots of numbers exceed $400 a year.
Yet, one can assume that number was chosen because it was closer to the
"real number" than, say, $500 a year.)
The 80/20 split wasn't "soft"—that is, open to interpretation—so it
firmly establishes a huge disparity between the top tier photographers
and those on the bottom. So, when you said that you weren't that serious
about photography, and you wanted to let whatever money the agency made
trickle in, that's exactly what you're going to get: a trickle.
This now prompts the question, "if the revenue is so low for 80 percent of the
photographers, why does the agency represent these masses of photographers
at all?" One would think that the overhead of dealing with so many people
would justify dumping the majority of the non-performers, and put more
investment in the sales and promotion of the top performers.
Turns out, there are several reasons for keeping the under-performing masses:
Efficiency of Scale
A business has to have a certain degree of infrastructure to operate,
and in the stock photo business, this includes sales people, software,
hardware, and, above all, "expertise" in the industry. Having this type
of operation means that you have to keep the "assembly line" full, or
you will lose money by the simple virtue of dormant resources. So,
the agency can (no, must) take advantage of the efficiency of scale
by keeping the infrastructure operating. It doesn't cost any more to
put more product into the supply chain than to leave it empty. In fact,
by not filling the market's capacity with something, profitability
can be compromised.
Playing The Lottery
Because images are subjective by nature, one never knows if an unknown
photographer will supply a "sleeper hit" (an image that surprisingly
seems to have selling power) or, better yet, staying power.
So, it's always good to bring in images on an on-going basis as a way to
inexpensively "play the lottery," so long as the production capacity of
the company's infrastructure isn't overburdened.
Incentive Sales/Fostering Relationships
Since the real objective of the agency is to lure the lucrative clientele
that contributes to 80 percent of the agency's revenue, the firm needs "bait"
to attract them. While there are many ways to do this, one method
that the agency has at its disposal is the use of "incentive sales."
Here, an agency may supply an image (or a few) for free, or at a very
discounted rate. It will still make the contracted royalty payment to
the supplying photographer, but this is likely to be a very low rate,
a price easily absorbed as part of the predictable costs of developing
a new client. Obviously, the agency isn't going to give away
an image that would generate a lot of money, nor would it license an
image for a lucrative use, as that would defeat the very purpose of the
end objective. No, the "give-away" images are for small-time uses that can
help establish the rapport with the client. The image will most likely
come from one of the 80 percent of photographers on the low end of the tier,
justifying another reason for keeping them on staff.
Completeness
Last, but not least, it's good to have a large enough supply of images
from a broad set of photographers, so as to meet the needs of any given
client. If you're a stock photo supplier and a client requests a particular
image that you can't provide, this looks really bad.
Quality, of course, is important, but there's a perception value
associated with the mere appearance of having multitudes of images and
a cadre of photographers.
Other Notes
Keep in mind that stock agencies like Corbis and Getty don't just sell
stock images they acquire from independent photographers. They also
hire a staff of photographers who shoot (mostly assignment work) for the
agency's clients. These photographers are typically paid a flat rate
(salary). In fact, much of an agency's profitability comes from these
assignments. The images they shoot usually end up in the stock image
supply, much like what was done years ago by the first agencies. Here,
the stock agency doesn't really look for long-time photo celebrities,
they look for young, recent photo-school grads who know the techniques
and basic photography skills to get good commercial work done. In return,
these shooters get a handsome "salary," but then are paid a very low
royalty from the sales of the stock images they produce. (Note that these
are photographers are not part of the income survey referenced above.)
Many old-school photographers today complain about this, claiming
that the new-school photographers are being taken advantage of. But,
the cost/benefit analysis usually shows that the flat salary paid to
assignment photographers often compares nicely against the potential
for royalties in the short term. Granted, the longer-term prospects are
less advantageous, but the job is not designed to be a long-term career;
an assignment photographer should only do so long enough to get experience
in the industry and later move on. (Unless, of course, he can demand a
higher pay salary for his work, which is not uncommon.)
All this relates to career strategies, which is discussed in
Photography and Business Sense.
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