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- _NOTE: Since I wrote this article in 2005, much of the "concern"
over royalty-free images have been replaced by exactly the same concerns
over "microstock" agencies, who sell images at prices that are roughly
equivalent to the "royalty free" image-packs on a per-image basis. One
can read this article both as a historical record and as a basic lesson
in economics on the law of supply and demand. Ultimately, whether you're
talking about royalty-free images, microstock, or anything else, the
market is doing nothing more than setting prices in direct response to
the imbalance of supply vs. demand._
That photographers feel that royalty-free licensing (RF) has eroded
rights-managed (RM) pricing is understandable, but suffers from the
common problem of misperception of cause-and-effect. Just because event
B happens after event A, it doesn't mean that A caused B. Both could
be the byproduct of another, entirely different set of circumstances.
The fact underlying the stock photo industry at large is that the supply
has increased. Naturally, prices would come down. Is the low per-image
rate that comes with RF pricing the _cause_ for the increased supply,
or the byproduct of it?
It's important to address this because efforts to remedy RM price
erosion need to be directed elsewhere, and perception of RF needs
to be reconsidered. This would have a great impact on how individual
photographers choose to run their businesses, from how they do their
marketing, pricing, distribution, and (perhaps most importantly) where
they spend their "productive time" in developing future strategies.
The discussion of this analysis starts where I usually start all of
my articles when talking about the changes in the photo industry: the
abrupt shift in the supply-demand-distribution model since the emergence
of the Internet and critical-mass adoption of digital photography. It
was at this time that we saw the quick emergence of the RF licensing as
well as the erosion of RM prices. The question still remains: did those
changes occur consecutively, or were they concurrent (within a very
short timeframe)?
We look for answers by looking at three data sets:
- The growth curves of the number internet users in the 1990s
- Sales data for affordable, professional-quality digital cameras
- Licensing (sales) survey data from photo-industry groups
There is an apparent synchronicity between all of these events,
showing that there is a direct correlation between them all. In other
words, pricing for images was dropping across the board at the same
time the number of internet users was growing, as well as the increase
in the sales of professional-level digital cameras.
Because of this synchronicity of these events, we can surmise that
the emergence of RF did not "cause" the fall in prices for RM. Instead,
both are the result of the changes caused by the two factors,
supply and distribution. But, how solidly can we trust
this summation? "Simultaneous" must be within an allotted timeframe,
since it's hard to really pinpoint cause-effects on a day-to-day basis.
In economic theory, for one to claim that a particular event is the
cause of another, there needs to be a latency period where the effects
can permeate through the supply chain, and for the societal impact
to have taken place. Here, people would have to have "fully adopted"
one particular event (ie., technology, fad, fashion or method) before
the culture (or the industry) phased to the next event (which would be
said to have been "caused" by the previous event). In a book called
"Crossing the Chasm", by Geoffrey A. Moore, he describes this time period
as the chasm because it's a period after an event occurred, where
"nothing happens," other than people adapting to that new paradigm. It
is during this time that the next generation of people take it to the
next step (caused by the first step). This applies to technology, toys,
food, music, and yes, marketing and pricing models. Data analysis from
all sorts of industries over the years has produced reliable predictions
on how long this chasm tends to last. Usually about ten years. (with
some allotment for some variances)
So, for us to study whether the emergence of RF licensing models
has affected RM prices directly, we would like to have data that shows
that RM prices remained stable for a considerable period of time before
the marketplace finally caught on and said, "Hey! We're paying too
much!" Even with the most generous and liberal interpretation of sales
data in the photo industry, there is no way we can establish that RF
has had a deteriorating effect on RM prices. In fact, all the data shows
that RM prices eroded simultaneously with the emergence of RF.
The statement that RM prices have eroded for no other reason than the
supply has exceeded demand by a larger margin is a lot for photographers
to accept, especially when faced with tough negotiators on the other
side of the table. If you are told, "I can get an RF disk for $X, so
you should charge less," that may be true, but it's not because
of that RF disk that you're getting that tough line. You can get a line
from the endless supply of classic negotiating tactics, including these
hits: "our budget only allows for $X," "we can get it from Joe for $X,"
"we promise to pay you more when we are bigger," "if you give it to us
for $X, we promise to buy more in the future," etc...
For those who are still clinging to the premise that "if RF didn't
exist, we wouldn't have this problem," or "if pros just wouldn't
participate in RF programs, the problem wouldn't be as bad," they're
ignoring certain organic realities about the nature of economics.
In fact, that royalty-free images emerged is an interesting
development whose explanation is not too different from how physicists
explain why the laws of nature are the way they are: if they weren't that
way, the math wouldn't add up and the universe wouldn't exist. Einstein's
quip about this was, "God may not have had a choice in how he designed the
Universe." In a sense, royalty-free licensing, as one of the many forms of
life in the "licensing and distribution" part of the photography world,
is an inevitable by-product of having a free and ubiquitous distribution
channel (the Internet) and the ease, low-cost and simplicity of producing
production-quality images by anyone.
The inevitability of RF comes in the form of plain and simple
free-market economics: When you have a ton of assets that used to
have value, but are now threatened by a flood of new supply, you want
to get rid of that inventory for whatever you can get. What's more, if that
new supply is continuous, it will find a distribution channel to
flow through. And even if the photographers who shoot these images didn't
actively solicit their images, there will be entrepreneurial types who
will see some value in this vast of fresh supply churning out of the
well, and solicit those photographers for them. (Raise your hands if
you've been asked.. I certainly have.)
With the established disassociation between the effects of RF on
RM pricing, photographers can now do several things to improve their
pricing strategies. First and foremost, accept that price erosion is
not a blip in the system that was caused events that can be corrected,
reversed, or avoided. You cannot do anything about prices by changing
external events, short of blowing away the Internet completely. Prices
will not improve by trying to "dissuade photographers from participating
in RF programs." Instead, spend more time focusing on productive ways
to market and solicit your images. You'll make better decisions on what
opportunities are worthwhile, and which aren't. Whether one chooses to
participate in RF has more to do with the specifics of that photographer's
business model. E.g., one who shoots thousands of images a month, and
spends very little time with image management and has no desire to engage
in other revenue-generating activities may find RF a great way to rake
in the pennies by the handful.
Another thing people can do improve their pricing is by
improving their negotiating skills and longer-term business
strategies, but that's beyond the scope of this article. See:
[https://www.danheller.com/biz-sense].
Believe it or not, we're now just about ten years out from the
abrupt change in the photo industry since the internet changed it in
the mid-1990s. The old paradigms no longer apply, and those who follow
them are going to start falling by the wayside soon enough. Those who
are able to adapt to these new paradigms will be successful, and cross
the chasm to the next era of the photography world. My sense is that
those who feel intimidated by RF will not be part of that group.
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