Somewhere beyond the sea

May 16, 2007 by pmelcher.

One of the best kept secret of this industry is how agencies work in foreign markets. In the prints days, an agency would work with a sub agent in a specific country. Photographers would send process or unprocessed film and the agency would take it from there, paying for processing, editing, captioning and duping. The more agents, the more the duping and big fed ex boxes where send out to fly across the world. Commission rate worked like this. The main agency would take 50% commission on sales in its territory, and about 60% of sales outside its own country. Therefore, a photographer would see 50% of 60 %. The reason for this are explained above. The agency was taking all the financial burden of sending those images across the world, leaving the photographer with 30% of the total license fee.

And then came digital. Slowly, the work load on photographers increased. They now do the editing, captioning and sending. Agencies now set up automated ftp server that automatically forward these images to the network of sub agents. What is really interesting is that the commission rates have not changed. They are still mostly at 50%. Some agencies, like Getty, in an effort to raise their profits, have even pushed royalties down to 40 %.

But the most frightening part is that most, if not all agencies, have left their international sub agent agreement at the same level. No need for dupes, no need for heavy packages, no need for lengthy editing, so what justifies this rate ? If anything, the cost has gone down. The role of a subagent has merely become that of a local representative that guarantees follow up on payment and can sometimes offer a better market penetration that if one had to do the sells from far away.

So why have commission rates not changed? How come an agency still take 50% of all sales ? While in their territory, they could argue that they have overhead :sales and marketing, digital storage, electricity, etc, it is much harder to justify on international sales through sub agents. 50% on all international sales, when all they did was either burn CD or auto forward via ftp ?
One extremely fascinating breakthrough that no one has seemed to noticed about microstock agencies, is that they do not use any sub agents, nor distributors as they are called in the royalty free world. They have completely eliminated the need for third party distribution, thus cutting cost even more. And not at the expense of the photographers.

At a time when editorial space rates are going doing, when all publicly held photo agencies have posted a deficit for the first quarter of this year ( besides Getty), when microstock penetration in traditional market is rising, where footage is threatening to take over the internet space, it would be nice to see RM and Editorial photo agency revisit their agreements to better reflect the new realities and form a real partnership instead of a mere representation.

It would also be the time for some to revisit their international partnership and see if some countries would not be better off handled directly. Finally, it would also be a good time for photographers to have a nice long chat with their agencies.

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