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Introduction
Back in the late 1990s, the first article I ever wrote about the business
of photography was "penned" as a simple response to someone's assertion
that the only way for photographers to keep prices from falling was
for them to all band together and pledge to one another that they would
not undercut or undersell each other. My article argued that this idea
was naive, and that basic economic principles (established throughout
time) have proven that the best way for photographers to do well is
the way any free-market system worked: to allow healthy competition
between suppliers. This allows the best performers to rise to the top,
and the weakest to die off, keeping the balance of supply and demand
in equilibrium. Prices settle where the market dictates based on this
equilibrium.
That article was named the same as this chapter; I highlighted the five
most misunderstood facts about business and phrased it in terms of the
photography business. Almost the entire content of that article is
contained here, though it's since been updated and expanded to include
references to even more resources to substantiate the case further: that
the photo industry is no different from any other in the free-market
system that isn't protected by legislation: people compete with each other
on price, and there's no way to manipulate the system beyond an extremely
small number of competitors.
As I continued to write, I found myself fighting more false illusions about
the photo industry that so-called "pros" were advocating, such as their
advice not to put your photos on the web, as they'll just be stolen. I was
arguing 180-degrees the other way: put them on the web so you will be
found, and people will buy your pictures. Indeed, if it weren't for the
enormous push-back I was getting from the established pros at the time,
I would have left it at that. But I was forced to prove my theories. So,
I put all that advice I was pontificating to work in a real photo
business. In very short order, I was turning a very healthy profit. And
over time, others who have followed the principles I advocated have
reported similar results. This lead to a wider distribution of my articles
on the web and other publications. By 2004, my reputation had gotten the
attention of two publishers who wished to publish these articles in book
form, which had gone on sale in mid-late 2005.
While I would love to claim ownership of these ideas and responsibility
for making a fundamental change to the history of photography, I can't. I
have simply applied the most basic, fundamental business concepts that you
can read about in any introductory-level economics course in college. In
fact, nothing of what I have ever discussed or applied is "advanced"
by any means. As a business, photography isn't like the stock market,
where you need complex calculus formulas to derive projections for where
market trends may go, or the future prices of commodities. Photography is
one of the most basic, quintessential prototypes for how a "small business"
works. It's the single-celled creature of the business world, making
it the easiest to analyze, experiment with, test, and retest. It's the
perfect model for anyone to put into practice—and see results—of the
application of introductory-level business ideas.
That doesn't mean the photo business (or any other) is "easy." If business
were easy, then everyone would be successful, and no one would ever fail.
The challenge with any business is not the fundamentals, it's the ephemeral
decisions that have to be made given the conditions. Still, you have to
at least start with the right fundamentals. And this is where the bulk of
the traditional photographers got it all wrong. The reason why they got it
wrong is discussed in this chapter. (Briefly: they didn't anticipate the
effects of the Internet.)
In the decade that passed since my first writings, the trend of the photo
market has shown an undeniable preponderance of evidence to bolster
an even more persuasive argument that the free-market system is alive
and kicking in the photo world. "Falling stock photography
prices" and "increased competition" and the vast numbers of people
who are contributing to microstock stock agencies, all point to exactly
the very principles of economics that come into play when the free flow
of product is in full motion, unimpeded by artificial barriers on the
supply side (such as when suppliers choke off distribution channels
in order to maintain market prices), or on the production side (such
as when unions control compensation through collective bargaining and
government support though legislation).
When you remove barriers, you get conditions that give definition to
the the term, "free-market." And in such conditions, one can't depend on
(or expect people to adhere to) behaviors that themselves depend on those
very barriers. That is, without government mandate or other artificial
controls, it's unrealistic to expect workers to "band together," nor can
you expect suppliers to cooperate in price controls (unless the number
of suppliers is very small). The only thing you can expect to have is
precisely what makes a free-market economy work: competition.
Yet, even today, what with all we've learned since the internet has given
rise to all sorts of changes in every industry on the planet, all
professional photography associations and industry trade magazines still
haven't changed their tune about the business models they advocate to
their memberships, or "report" in their news analysis in trade journals.
They still view the business of photography in the usual way: that it's
all about sticking together as a group, or by agreeing not to lower prices
(and cursing at those who do). (Again, this is covered in this chapter.)
As a historical (and sociological) study, the reasons for this are
interesting (and admittedly very understandable), and many lessons can be
drawn from it. The first half of this chapter focuses in great detail
about the history of how it started this way, and why it was once a
good, working model. (Hint: distribution channels were controlled, and
photographers had once been a union.) From a sociological point of view,
I could never quite understand why they would continue to advocate a
model that can't possibly succeed in today's market. Until, that is,
I came across this fine quote:
"The truth does not change according to our ability to stomach it."
This gave me the epiphany that helped me realize why so many photographers
hold on so tightly to their "three musketeers" mantra. It starts with the
comfort of camaraderie. It's emotionally powerful, and the cohesion keeps
people together emotionally. When it's in your interest (perhaps because
they are your dues-paying membership or subscriber base, or because
you've been a luminary for so long based on your prior ideas), gulping
down a huge dose of "paradigm shift" is hard. Worse, it's dangerous at
multiple levels to suddenly change your tune. Alter your message and
you could lose your own credibility, and with it, your audience (who,
after all, is your financial life blood as well).
Admittedly, this assumes that the leadership of those organizations
actually do know that their messages or teachings are dated, which
may not necessarily be the case. After all, they have been so married to
their ideals for so long, I certainly don't expect the old guard to be
so ready to change their spectacles. In a way, they are seeing only
the truth that comforts them. And to perpetuate this truth, one needs a
villain, which is not hard to find: the unskilled newcomer who's making
money easily in a market that took you years to conquer. There's no
more gut-wrenching emotion stronger than the feeling that you've lost
your income to a less-skilled, junior photographer who (you feel)
only got the job because he was willing to work for less, or (gasp),
for free. When your stock photo sales go down because a micro-stock
agency is selling images for $1/each, there's another party to blame.
When your own agency pays you a smaller and smaller percentage of sales
because their own margins are getting squeezed (and their CEO is taking
in an annual compensation package that can eliminate starvation in a
small African country), there's yet another party to blame.
These common occurrences have been powerful rallying cries for leaders
and followers alike, who together, can find no fault of their own for
their diminishing financial conditions. It's so easy and to blame the
"bad photographer" for breaking code and undermining other photographers,
or the bad company for looking only to their bottom-line by compromising
quality (of images) for simply getting cheaper ones. Leaders and photo
industry media pontificate to groups about these things, and pine for the
old days, when the photo industry was very different indeed, virtually
assuring that their members will hold on and continue to contribute.
Indeed, this is the discomfort of the reality of the free-market system,
and you can't deny this truth simply because it's uncomfortable. To that,
I'm compelled to add another apropos quip:
"For me, it is far better to grasp the universe as it really is
than to persist in delusion, however satisfying and reassuring."
Above all else, the main purpose of all my writing is to get you to
think critically and analytically about business. Critical thinking is
a discipline that challenges you to examine all sides of any issue or
postulate. Business changes so rapidly, that what was true yesterday
may not be true today, and today's lessons may not apply tomorrow.
As conditions change (market place, pricing, technology, economics),
different decisions should be made based on current circumstances.
Anyone who says, "this is the way the photo business has always worked,
and it always will," is viewing the world too simplistically. All too
often, people react to business conditions by applying preprogrammed
mantras, or by blindly following others. To make sound, intelligent
decisions about how and where to spend capital, to predict what people
will buy and when, to effectively price products or services, and most
of all, to know what do when things go wrong, one needs to see how all of
it fits in the bigger picture without prejudice to how things used to be.
Differing Business Models
Anyone wishing to enter the photography business as a serious endeavor
must recognize that there are two polarized views about this
industry's business climate, each offering opposing philosophies
on how to approach your business. We will examine each view closely,
and ascertain from those strategies which may be more pertinent to
today's environment. The two paradigms under consideration are the
historical model that has traditionally been part of the photography
culture, and the free-market model, where most businesses operate in a
capitalist economic system. We'll discuss each in depth, but let's start
by defining them in terms of how they apply to the photography industry.
The Solidarity Model
The solidarity model is based on the presumption that photographers' best
chance at succeeding in business is to join with other photographers as
a cohesive industrial force, similar to a union, where pay and contract
terms are enforced implicitly through a voluntary agreement among all
photographers. Here, photographers agree ahead of time what is deemed to
be fair and equitable on as many terms as possible (pay rates, license fees,
other contractual terms) and won't enter into business agreements with
clients that don't adhere to those terms. The theory is that such
cooperation will force photo buyers and contractors to agree by virtue of
there not being enough viable professional photographers to go to as
alternatives. Since only real unions can legally force buyers to comply
with such terms, and since photographers are not permitted to unionize, the
solidarity among photographers would have to be voluntary. Companies that
do not comply with such terms are deemed to be "bad for the industry,"
and are subject to boycott by those cooperating photographers.
Clearly, since there is no way to force compliance among photographers,
or from clients, for that matter, policing the solidarity is also a shared
responsibility among those who participate. Uncooperative photographers
are "excommunicated" and, on occasion, outed through industry press. The
terms of the solidarity—also called "codes of ethics"—are currently
written by industry trade groups (made up of the participating photographers),
which include subgroups within market segments. Current language for
such codes include, "never underbid other photographers," "never bid
an assignment below cost," "never work for free," and "never consider
your own needs at the expense of the industry."
The goal of the codes to is to enforce behaviors that are intended to
keep market rates higher and to preserve the jobs and livelihoods of its
members. The assumption is that if enough higher-end professional
photographers participate in the solidarity, buyers will have no choice
but to adhere to the terms, or suffer with lower-quality shooters and
their images.
In the end, the theory goes, photographers only need to compete with
one another on one aspect: their craft. All other business terms would
have been negotiated in good faith in advance by "the industry" and the
majority of the photo-buying clientele. This would reduce incidences of
workers being unfairly exploited by the bigger and richer employers
or licensees.
The Free-Market Model
The free-market paradigm presumes that photographers compete head to
head on everything from price to contract terms to all other aspects of
business at every level. As individuals focus on promoting their career
as best they can, those who are most successful rise to the top, while
the lesser successful photographers drop off (change careers, etc.).
In the free-market model, the survival of the fittest strengthens the
industry as a whole, and the de-facto leaders become the trend-setters
for how business is done. As the business climate changes, as technology or
other aspects of the environment change, so too do the photographers, or
they drop off, making way for others who are more adept at the new climate.
This model needs no oversight or policing, because the free-market system
is self-sustaining. Buyers who desire valuable photographers and their
assets pay based on demonstrated value at whatever tier of proficiency
they desire for their project, since photographers at all tiers are
available by design. As better and more qualified photographers rise
through merit and strong business acumen, a more stable foundation is
established to secure industry terms. Best of all, the system is flexible
due to changing technological or economic conditions: when such changes
occur, emerging photographers who succeed in the new environment naturally
set the stage for those who follow.
Determining which economic theory can be more advantageous for photographers
is highly dependent on outside factors: the supply-demand ratio, and the
ability for the photographers to most effectively maintain solidarity
among its membership. Simply put, the more limited the number of suppliers,
the easier it is to equalize the supply-demand ratio and to police
solidarity among members. The greater the number of suppliers, the
greater the increase in the supply of images, and the more difficult it
is to maintain solidarity among the members.
Neither model is new or unique: the solidarity model is used by unions all
over the country today, as well as many European countries with strong
socialist governments. The "free-market" model is used throughout most
non-manufacturing industries in the United States, ranging from technology
to medical care. The predicate question in determining which model
is more appropriate for photographers in today's market is based on this
question:
"Is the number of pro photographers large enough, and is their unification
centralized enough, so that mass cooperation can be achieved to a sufficient
level to sustain market rates and employment terms?"
This begs the corollary question:
"How many uncooperative members are required before solidarity has eroded
to the point where those who "cooperate" are worse off than those who don't?"
An example of this risk analysis is found today with oil producers.
Because there are only a few countries that produce and supply oil
to the world, they can control pricing by simply cooperating with one
another and agreeing not to sell below a certain price. While this form
of organized price control is largely effective, it is also brittle,
as evidenced by this example: In 1999, the "agreed" price among OPEC
members was $28/barrel, but Venezuela was having several economic troubles
internally, and the only way they could get out of it was by secretly
and quietly dropping its prices to $20/barrel, thereby cornering the
market. The lower price was offset by the disproportionate amount of oil
they sold (relative to their competitors), hence, yielding a net profit.
By the time the news got out, they had already realized the revenue
boost they were seeking, whereby they returned to "compliance prices"
before getting penalized by the consortium.
The point: Venezuela's undercutting the market for their own financial gain
caused the other members to suffer. This very practice is the basis for
one of the "codes of ethics" described earlier.
If one were to believe that sufficient cooperation can be obtained
from the photo industry, then it not only makes sense to participate
in this solidarity, but you should be able to build a business strategy
that confidently relies on such cooperation. If one does not believe
that solidarity is sustainable, one has no choice but to default to a
free-market model of competitive strategies against competition because,
well, everyone else is.
What makes this question so important—and why so much attention is
given to it in this chapter—is that virtually all professional
photo organizations (commercial and educational) base their entire
business foundations on the Solidarity Model. Their influence on the photo
community is strong, and dissenting views are not widely heard (so you're
not going to see this material in their curricula), so most people who
go through traditional educational programs are going to hear that model,
and no other. This is what is called a "captive audience," where the
members usually don't have other business experiences on which to base
their analysis. That is, emerging photographers look to professionals
for guidance, and there is no other source of information they can
rely on. Moreover, most professionals today evolved from an era when
the Solidarity Model was not only the prevailing one, but it worked. In
order to study the topic objectively, one has to do independent analysis.
We'll start that here by looking first at the historical context.
In photography, the historical business model was such that individuals
couldn't easily represent themselves directly to buyers because of
two major barriers: cost and time. First, the cost of production,
marketing, sales, and delivery of images were such that individuals
couldn't make enough money by manually dealing with each and every client.
This was especially true in the days when film was the only medium
available to photographers. The infrastructure alone can be daunting:
duping and sending film, making prints, producing portfolios, tracking
clients, billing and customer service, not to mention the other costs
of maintaining business, required considerable capital investment. To
be profitable, one had to move enough product to offset those expenses,
and do so expeditiously; the speed of business in days before there was
such thing as "overnight delivery service" (let alone email and faxes)
meant profits were subject to the capacity of resources and time.
All that, while meeting price points established by industry rates.
At the same time, photo agencies, media companies and other conglomerates
were able to build a scalable infrastructure, where they could streamline
processes, keep costs down, and increase volume, all of which boosts
profitability. This profit margin was enhanced by the time factor, since
they could deal with hundreds or thousands of clients at a time, making
the aggregate turnaround time considerably better for all involved.
There were enough of agencies to enable competition, but not enough
to lose control of the distribution channel. For this reason alone,
most photographers had to either work for a full-time employer, or had
to have full-time representation by one or more agencies.
In their course of business, photographers really didn't compete directly
with each other for clients; they mostly just tried to get accepted into
newspapers, magazines, and photo and ad agencies (which cumulatively
accounted for just about the entire photo industry). Getting a job with
one of these organizations had never been considered something that
fostered a sense of "competition" among photographers. Once in an agency,
they just "worked." In fact, the spirit of competition never really took
hold in the industry. The problems facing photographers most was not
other photographers or even buyers, it was their own employers.
Because magazines and agencies controlled what images to use and
where to use them, photographers really had few creative outlets, much
less flexibility in their own futures. This caused a backlash among a
select group of now-famous luminaries, lead by Henri Cartier-Bresson
and Robert Capa. Together, with two other photographers, they founded
Magnum in 1947, as the first photographer-owned and operated
"co-operative" (agency). The founding principle of this organization
was that photographers had their own vision of what they could shoot,
and given the latest technology (small cameras), they could go out into
the world and capture it in photos. Their assumption—and they were
right—was that every magazine would clamor over them. Magnum's success
attracted top photographers from all major magazines, which put the agency
in control of business terms and other negotiations. This is the critical
point here, and is the foundation for how the photo industry views itself
today. Magnum became the main go-to repository for news and other life
images that were used by newspapers and magazines worldwide for years
to come, and they trail blazed the model where the collective had more
power than the individual. They proved that by working together as a whole,
all photographers could rise higher than they could if they all worked
independently.
Indeed, this model persisted for many years. As long as the distribution
channel was in the hands of the few, and as long as the photographers
remained cohesive in their business dealings, there was never a need
to change from this model.
 
Digital Photography and The Internet
But change did occur when two fundamental technologies came to the fore:
digital imaging and the internet. Digital photography finally had
its impact when it surpassed that threshold where high-quality pictures
could be obtained affordably by enough people to affect the supply
chain. This removed the first barrier for photographers: they were now
able to produce a lot of good, quality images to meet demand. But,
supply isn't enough—one needs a distribution channel to get that supply
to buyers. This is where the internet came in.
Today, the internet allows high quality pictures to be distributed
directly, instantly, and inexpensively between buyers and sellers
all over the world. As the flood gates opened, the supply of images
skyrocketed, causing swift downward pressure on prices. This immediately
increased the supply of photographers by several orders of magnitude. The
entire market ballooned, but it was the individual photographer who was
quicker and nimbler than his agency counterparts to meet and conform to
the demands of buyers. Furthermore, individuals could do so at lower
prices because of lower overhead. Photographers found it more profitable
to sell directly to buyers at lower prices than what their agencies were
charging. That is, if a magazine used to buy an image from an agency
for $100, the photographer got $40 after "expenses and
commissions." However, on his own, the photographer could charge $50 for
the same image, and end up with more money. The rate for the image in the
open market dropped from $100 to $50. This proves an interesting data
point: In 1990, 90 percent of images were obtained from photo agencies,
compared with 35 percent in 2000. And the trend is continuing. (Keep
this point in mind; it'll come up again later.)
It would follow that today's economic model is simple enough: the supply
and demand are high. But what does that tell us about which business
model is more appropriate for the photographer? One could say that the
photographer could have still sold direct to the magazine for the $100
rate—because that was the market rate—and still by-passed the agency.
True, but to do so would have required an implicit agreement among all
the photographers to do so. Then, there are the market pressures from
the buyers who also put downward pressure on prices. Why would they buy
from the photographer if they can get the same image from the agency for
the same price? If the photographer wants to make the sale, or if the
buyer wanted to negotiate for a lower price, there will be a discussion
to "cut out the middle man," so that everyone wins. So, he drops his
price. How far? As low as he needs to in order to compete with not
just the agency, but all the other photographers who are also willing
to drop their prices. If none drop their price in solidarity, the prices
remain high. So, the predicate question arises again: is the number of
photographers sufficient to sustain this level of cooperation?
To answer that question, we must look at economic data to examine how
many people are selling images, to whom, for how much, and what those
trends are. If the only people selling images are pros who are in
complete agreement on pricing structures, this may work. However, if
the pool of photo sellers includes non-pros who do not cooperate, this
can erode the pricing structure. The more non-pros there are, the less
stability the structure has.
Collecting data isn't hard, but it is quite laborious. It begins by
knowing what data to collect, and then analyzing it properly. The first
question is, "what data is relevant to our question?" Historically,
the data researched used only included that which was created from
surveys of photo agencies, photographers, studios, schools, and any other
source that had established business relationships traditional photo
buyers. At one time, these were the only ones taking part in the supply
chain and the distribution channel, so no other data was relevant.
But, do those surveys reflect current economic activity? If they are
based on older models, one might suspect the validity of the data may no
longer apply. So, one must examine two factors: who's doing the survey
data? And, does that data meet with statistically viable sampling sizes
and methods that reflect today's conditions?
If stock photo agencies are doing this research, they are not likely going
to survey people who are buying and selling from non-agency sources. Why
should they, if the results might suggest that their own business models
may not be sustainable? Who else is there? Trade associations? Well, they
are there to represent traditional pro photographers, who not only pay
membership dues, but also sit on the boards of these associations. Another
potential source is trade press. Of all photo-related magazines, only one,
Photo Disctrict News, actually talks about the business of photography, and
this very small publication is entirely financed and run by the trade
associations and camera manufacturers. There's no incentive for them to
conduct economic surveys outside of this group. Lastly, there are economists
who have some financial reason to study the photo industry, and there are
none. Since I've been doing research in the photo industry, I have yet to
come across any bona fide economist who's studied the photo licensing
industry. In fact, part of my business as a photo industry analyst includes
advising investors on such matters, because they are also unable to find
other economists or industry analysts (that don't have a clear biased
towards the well-being of existing, established players).
For all practical purposes, the only public data available is from
photo industry surveys, and because they have a vested interested in
a certain outcome (here, serving the interests of its constituents),
their data is largely invalid.
So, what we're really looking for is determining what that "representative
population size" is of photo buyers and sellers. My specific hypothesis
is that the majority of buyers and sellers are no longer associated
with the industry as it has been traditionally defined, leaving the
traditional photo agencies, and even pro photographers themselves, minor
players in the overall economic activity of photo sales. (That doesn't
mean they don't have business opportunity; it just means the methods of
achieving it are different than they used to be.)
We can test whether this hypothesis has legs by looking
at other industry data. For example, a report on the
sales of digital cameras from Digital Photography Review,
(http://www.dpreview.com/news/0407/04073002camerasales.asp) indicates
that 22.8 million digital cameras will be sold in between 2005 and 2006,
a 42 percent jump from 2003. If one of those non-professional amateurs
(who isn't currently part of "industry survey data") sells an image to
someone, he may not be counted in the survey. But if a million of
these people do it only once a year, that could account of hundreds of
millions of dollars of economic activity that traditional surveys don't
take into account. Taken a step even further, a report on CNBC states
that over the course of five years, over 100 million digital cameras of
at least eight megapixels or higher will be sold. If only one percent
of those buyers sells $1000 worth of photography per year, that's $1
BILLION of sales that isn't accounted for in current survey data. This,
because "the industry" doesn't recognize amateurs in their surveying
methodologies.
While the market may be considerably larger than what survey data
currently claims, we don't know by how much. It's sort of like how
physicists know that there is more matter in the universe than what
we can see by traditional means: measuring light. They can look at
how much light galaxies produce and estimate the number of stars they
have, but this measurement doesn't represent the entire size of the galaxy.
How do we know? If you look at the rate in which a galaxy spins,
it should be flying apart. Every galaxy studied shows this anomaly.
So, why don't galaxies fly apart? The only possible explanation is that
there must be some additional source of gravity (other than stars)
that isn't being accounted for. In other words, dust gas and planets,
to name a few, account for a lot more gravity because there is more
of them than people thought. And even then, these objects are still not
enough. There is even more stuff that can't be measured because they do
not produce light (i.e., "dark matter") that's keeping the galaxy in tact.
In short, there's a lot more in the universe than once thought. What
percent of the universe is full of this material? Estimates are that
over seventy percent is full of this stuff.
Could there be a similar phenomenon in the photo industry that current
statistical data doesn't account for? We see economic activity that the
current photo market surveys can't explain. To wit, the revenues agencies
report is rising at a much slower rate than the number of magazines,
and even less by the rate of ad revenues from those magazines. Consider
this report
(http://www.bpaww.com/about_bpa/industry_news/WorldOverview3.05.htm)
by BPA, which audits media companies. Here, the topic is an overview of
the changing world markets for media and advertising as a result of the
Internet. Given those numbers, let's ask the question: if the magazines
and their advertisers were obtaining images from photo agencies at (at
least) the same proportion they always have been, these agencies would
be seeing such astronomical growth, that it would dwarf the entire US
Technology sector. Why? Because, unlike media companies, ad agencies, and
magazine pages, where there are over thousands of competing companies,
there are a precious few photo agencies. And if those agencies were
getting the same proportion of business from those companies that they
used to, all that revenue would ad up to a huge sum of money.
So, where's the money? Photo agencies report incremental revenue growth,
but only in the hundreds of thousands of dollars, to the low millions.
They should be getting billions, if not hundreds of billions of
dollars—three to six orders of magnitude more than what they're actually
getting. This real number, while still yet unclear, is considerably
large; we just don't know how large it is. Just like the total mass of
a galaxy. And, like the galaxy, what we do know is that its mass is
much greater than just the data (stars or industry survey numbers) that
we see. For the photo industry, this size is, ultimately, the "potential
market" for photographers. If the size of the market is what it is, and
the photo agencies had the percentage of it they claim they do, the proverbial
photo agency galaxy would be spinning apart. But, it's not. So, where's
all that other revenue—or potential revenue—going to? What's out
there that we can't see? All that advertising and editorial photography
must be coming from someone. Whom? It can't be just independent pro
photographers, because there aren't enough of them either—at least,
the number isn't growing if you look at the membership numbers released
by industry associations. So, again I pound my fist, who's selling (or
providing in some fashion) these pictures?! :-)
Could it be that "non-pro photographers" are somehow involved? That is,
the one-off sale (or give-away) here and there by each of millions of
people, found randomly by chance from a pot of hundreds of millions
of people (you know, the ones who are buying all those high-res digital
cameras being reported by camera companies)? Could it be that these
people are filling this gap between what photo industry reports as sales,
and what we can extrapolate the total potential market size actually is?
There is no hard data to prove this, since no one surveys the general
population with questions like, "have you ever sold a photograph?" But
the empirical data clearly suggests something is going on, and only if
the industry acknowledges this possibility and revises its survey methods
to find out will we ever have a better, more accurate picture. Sadly,
no one but the trade associations has any financial incentive to do
these studies, so indirect data like this is all we have. But then,
Copernicus had the same argument when he tried to convince the Church
that the Earth wasn't in the center of the universe, and that it revolved
around the Sun, not the other way around. Did we really need to fly up in
a spaceship and see it for our own eyes to believe the other compelling
data to support this theory?
Despite the evidence, industry trade associations claim that the
traditional model (solidarity) still applies today. If that were the
case, there are two questions that need to be analyzed. Can solidarity
be achieved? And, does it matter? If it doesn't matter, there's no point
in asking whether it can be achieved. For a discussion on that, see
my article titled, To Cooperate or Not? (Wednesday, May 16, 2007).
(Note that since this article was written, I've conducted significantly
more research for clients, the most relevant is discussed
here.)
Let's apply this model to a hotly-debated subject in the industry and
view how each of the strategies approach the subject. The issue is
a type of contract called, work-for-hire. Here, a photographer shoots
an assignment as an agent for the client, which means that, in exchange
for his fixed shooting fee, he retains no ownership of the images he
shoots, and is entitled to no royalty commissions. Unstated are the
potential advantages and disadvantages of such a relationship. We have
two scenarios that illustrate each.
Scenario 1
A stock photographer usually derives a large percentage of his income
from sales of pictures he's already shot throughout his career. Therefore,
he depends on retaining ownership and copyright to the photos he shoots
for his future income. If he enters into a work-for-hire agreement,
he may get a fixed fee, but he has no future for his business.
Scenario 2
A photographer has no interest in getting into the stock photo business,
but wants to use the fixed-fee cash payment from a work-for-hire contract
to finance his own studio that he'll use for his portraiture business.
Where does the traditional model stand on this? The industry makes
several observations. First, if the photo agency hires the non-stock
photographer, then it harms the veteran stock photographer who'd been
employed for years. Over time, the veterans see their incomes dwindle
because their images are replaced by the newer, non-royalty images from
the uncooperative photographers. Secondly, the original photographer
might have gotten a better deal if he hadn't capitulated so easily; that
all he had to do was "stick to the code" and he would have gotten his
own objectives accomplished without hurting anyone else. Third, most
work-for-hire contracts are unnecessary, because most clients
don't really need to own copyright or restrain the photographer from
using his images for non-competitive uses. In summary, the industry
calls work-for-hire contracts "bad for the industry."
There are many issues raised here, and clearly, some of them have
merit. First, work-for-hire contracts are found in many areas of the
industry, not just stock photography, and many of the hiring agents
do not need the copyright ownership they ask for. The industry says
to combat this, photographers need to unite and agree not to agree
to such terms. The free-market model recognizes that not all photographers
can be simplistically bundled together like that, and that many would
find it more beneficial to agree to work-for-hire terms, because the
nature of their business model accounts for them. Instead of preaching
that everyone should agree to collectively reject such terms, the
alternative is to better educate photographers on better negotiation
techniques that may apply to individualized business objectives.
Whether it is appropriate to claim that veteran photographers deserve
to be "protected" from emerging photographers is more of a cultural and
social question. In a heavily competitive environment, seniority has
less clout than it does in a more socialist culture. But, market
conditions can become indifferent to cultural biases. The industry is
big enough that there will always be a supply of photographers willing
to unseat a veteran, so the issue becomes somewhat moot. (The only way
to truly protect veterans is to have legal protections through law. This
would require photographers to unionize, which they haven't been allowed
to do since the 1970s.)
Given this, to what degree is it possible, let alone effective, to try
to convince members of industry groups to cooperate on a condition like
work-for-hire contracts, that isn't universally accepted as being good
or bad? It's good for some, bad for others. The market-based model says
that veteran photographers who feel their royalties may be vulnerable
to dilution should leverage the intangible value of their seniority
(reliability, skills, etc.) and accept those contracts ahead of the new
photographers who will assuredly take them. Smart veterans will also find
ways to sweeten the deal too. Some might say this is capitulating to
the agencies, but if the trend is inevitable, it's incumbent upon those
who have the most to lose to work harder to retain what they've got.
Five Truisms of the Photography Business
Whether you believe the Solidarity Model or the Free-market Model
is the more effective for building your career, there are certain
realities about the industry today that you will have to contend
with. I have categorized these realities into a series of axioms
called The Five Truisms of the Photography Business. These are not
proposals, nor are they subject to broad agreement or voluntary consensus,
nor are they terms that you can accept or reject based on your own
business models. They are simply factual statements about how the industry
works. To what degree you incorporate them in your career-planning is
up to you.
More people practice photography as a hobby than as a profession.
In years past, many hobbyists and serious amateurs rarely sold images
into the photo market. Because of the internet, millions of people
from all over the world are selling images. Although most are not selling
images for a lot of money, their sheer numbers dwarf the total number
of "professionals" by orders of magnitude, thereby making the non-pro
photographer the main driving force on what happens in the marketplace.
One cannot re-educate the amateur or the hobbyist, so it is futile to
attempt to shape the nature of the industry by advocating that pros
"stick together."
Amateurs notwithstanding, consider the number of semi-pros that have tried
to get into the industry, but couldn't because their portfolios were
rejected by agencies, or because they had no other representation that
could move their images. These people are now rushing in, and selling
more than the amateurs who don't even care. In fact, many semi-pros
sell more than pros because they're playing catch-up, and, unlike the
hobbyist, they are serious about the business. So, instead of just selling
images, they are accepting assignments under terms that the old pros
would never have taken. Both the hobbyist and the semi-professional
unambiguously imply this truism:
"There will always be someone willing to work under
lesser-favorable terms than you."
Whether it's out of ignorance, or because it is a good deal for them,
or because they simply have an interest in photography, this is a
fact that you cannot change; the law of supply and demand dictates it.
Prices are Based on Market Factors, not Clients' Pockets
Historically, assignments and license fees for images were based on "the
media buy." That is, an ad campaign may budget for ad space in magazines,
billboards, modeling fees, and so on. The price for the photography used
to be about fifteen percent of the "media buy" (less production costs).
As photo buying and selling matured, it eventually got to the point
where you might not even need to ask what the media buy was, you'd just
know based on the nature of the client. If the client had lots of money,
you charged X amount, smaller companies charged Y amount, and so on.
Photographers just got used to pricing product based solely on the size of
the company; the deeper the pockets, the more they charged. (The "media
buy" calculation is still used in some cases, such as when the "supply"
of images is tighter, or the client's needs are more narrowly defined.
Again, this is differently defined in some sub-markets.)
Because of Truism #1, the market has shifted in favor of the buyer, and
one cannot assume that because the client is wealthy, that pay is higher.
How much clients pay is now based more on market rates, not necessarily
their ability to pay. "Market rates" do vary, and finding an appropriate
fee to charge for any given assignment or license fee is admittedly far
more difficult because of the flux in the industry. Clearly, some rates
are higher than others, depending on the specialty of the shoot, or the
specificity of the need. That means that you and I have to do it the hard
way: by negotiating.
It is not Anyone's Responsibility to do Right by You.
Photographers often get upset when clients' contracts are clearly one-sided.
Yes, publishers try to "grab rights," or claim copyright ownership,
or don't compensate the way they used to. Many respond by blaming the
offending client, often refusing to work with them, or even attempting
to "spread the word" to impose a boycott of some sort.
It's true that there is a real problem with compensation and other
"benefits" eroding from photo contracts; it does need to be addressed.
However, there are constructive and destructive ways to go about it.
The kinds of reactions noted above are the wrong way to go, and
are responsible for more misfortunes than just lost opportunities.
Photographers also lose face because their collective efforts fail more
often than not to achieve the results they desire. (This is because
of Truism #1.) When things don't go well—or not as well as they used
to—no one is responsible for this other than yourself.
The more constructive solution is to first recognize that you are an
independent entity, responsible for your own business interests, and on
one else's. One can't succeed in negotiation by simply chanting the
mantra, "Just say no," and hoping others fall in line.
You may have heard the expression, "business is business." Like any other
industry, successful professionals have a way of justifying their
worth to a potential client, no matter how ugly and competitive the
market gets. Most boiler-plate contracts that photographers receive
are written favoring the client, and are intended to be negotiated
(despite what the client might say). The nature of negotiation is to
find grounds for mutual benefit: identify those things that you need
and those you don't, and counter-propose terms where each party can
get what's important to them. The more you understand the basics of
business, the more you can understand the other party's objectives,
making it easier for you to express terms that should work for both sides.
If negotiation fails, as will happen from time to time, you move on.
If this happens to you so often that you can't get work or income,
then you've got other concerns beyond whether the industry is
"fair." You either need to improve your negotiation skills, or reset
your expectations for your terms.
Diversify Your Business
It used to be that a photographer's income was derived from one or two
sources, where a "source" was considered either a single client, or a
class of client. For example, a wedding photographer was considered to
have one source of income: couples who get married. News photographers
tended to have a single source, whether it was the newspaper they worked
for, or the market segment they sold to. Unless they sold to a
cross-section of buyers, they were considered to have a single source
of income.
As the market has gotten more competitive, photographers who are not salaried
staff employees and have to earn money on their own have found it problematic
to earn a living from a single client, or class thereof. Therefore, it's
imperative to diversify revenue sources, branching into unrelated areas.
For example, wedding photographers have a plethora of "people" images
that can not only sell into the wedding niche of the magazine sector,
but also in any outlet that needs people pictures. (So be sure to get
those model releases signed.) Architectural photographers often find
themselves on location with stunning scenery because of the nature of
the client's property. So, in addition to shooting the gig, they pick up
more pictures, and use those images in other business contexts. Sports
photographers, car photographers, just about anyone who has a camera can
shoot things that aren't part of the "assignment" or even part of their
specialty. When you're doing this, you can pick up a lot of new assets,
while the paying client has already footed the bill.
Not all Photographers are Equal.
The photo industry does not consist of an unskilled labor force, where
all members have equal status, get equal pay, or do similar work. They
cannot be clumped together as a "class" of worker for collective bargaining.
This ties in with Truism #1. When you see more experienced photographers
doing better than you, it's usually just that: they're more experienced.
This has value, and clients know it.
Now consider how the opposite can happen. Many new photographers come
into the scene by working for less (or for free) to get their foot in
the door, sometimes displacing the previous shooter who used to do
that job. I've displaced other photographers this way, and others have
done it to me. Those that I've replaced should have moved on with their
careers before I got there; and those who've replaced me usually did so
with my blessing: It was time for me to move on. (Many times, I just
recommend someone to take my place even though the client doesn't want
me to leave.) If your career develops properly, you won't get displaced.
Your name, reputation, portfolio and general experience will be
justification enough for you to choose which jobs you want, and when you
want them.
If you aren't moving fast enough, you'll be nudged—or pushed—sooner
or later. If you're that vulnerable to the younger crowd, your career
is already in a precarious position anyway, and you should be looking
for ways to broaden your horizons. As I get more experience and
solidify my reputation, I lose less and less business to others because
of who I am, and my clients are willing to pay for that. Just about any
pro worth his salt will say the same. Sure, we're all vulnerable, but
it's impossible to impose artificial protection schemes to keep our jobs.
Conclusion
The business world is harsh, and it's part of the package when you choose
to become an independent, working photographer. Recognition of these
realities will not only help you consider your business objectives more
realistically, but should help you think about how you should react
to any given situation. I apply these truisms to Photography and Business Sense,
after which, it all comes together in Marketing your Photography Business.
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