The Photo Indigestion

  According to Sellingstock.com, the CFO of A21 just quit. Left his company. Just like that. Not surprising really when you look at A21 recent  numbers. Rising cost of operations, lowering sales, the company is heading straight for a wall, head first. Amusing part is that the only two other public or ex public companies in this business have also posted negative results for the second quarter of 2008.( Jupiter and Getty). None of them have signaled community portals( Alamy or Photoshelter) as the cause of their financial suffering . Some have accused the rising price of oil ( ya, right) and, others more bluntly, the ever shifting move from traditional commercial stock to Microstock.

Even if Getty and Jupiterimages saw Microstock coming, they both underestimated its impact tremendously. It is no longer in the original 8% of existing Getty customers that istock is eating in, but rather 25% and growing. Jupiterimages is struggling to integrate their own microstock offering into photos.com hoping to elevate the price per image. Who will be the first to shut down some of its more traditional divisions in order to save the leaking ship ?

No one knows how Corbis is doing in these hard times. Surely, their Snapvillage is not a player in the microstock field, and if the public  companies revenue are any indication, they must be hurting too. In a Bill Gates kind of way. More layoff before years end ? definitely. But not just at Corbis. expect Jupiter, A21, Getty and others to lay off some weight.

There are no clear solutions for these companies. They were build with very expensive infrastructures that do not work well with lower pricing. Although Getty’s project used to be an Internet company only, they have lost their objective and have fallen  heavy into the overhead trap. When they purchased PhotoDisc, they were going to go all speed ahead in high technology/low headcount. Apparently they got sidetracked, allowing Istock, Dreamstime, Shutterstock to continue and achieve what they only dreamed of achieving. Buying Wireimage was cute but will certainly slow down their growth considerably. They have inherited a mastodon of inefficiency, who was busier to reach high market shares rather than being profitable. Results: lots of personnel, huge operation cost, a big mess and waay too many photographers. Jonathan Klein even said himself at the last Getty shareholders meeting : Mediavast was never profitable.

Everyone knows that Getty purchased Wireimage to get rid of it, not to make it grow.

The next 3 years will see the industry giants engage in any and all enterprise that will help them cut their cost to a minimum while not engaging in significant investments. Not an easy task if they want to also grow at the same time. Certainly less of an easy task when lesser size companies are starting to move on the next step. Mostly European, these companies have grown organically using the more slower pace path of reinvesting their profit. Much more careful on their investments than the big loud 3’s, they have now reach a level of financial strength that they can now start to retaliate.

Some are acquiring, others are merging. While the corporate mend their wounds, alliance are forming  in the back alleys of the industry. Interestingly enough, most have hired ex Getty, Corbis or Jupiter staffers who have learned, from within the beast, what not to do. These agencies are extremely ambitious and battle savvy. They have all they need to succeed : knowledge, relations, expertise, endurance and cash. Most will never publicize their acquisition or mergers because they couldn’t care less about what the rest of industry knows. They have drawn a very precise path and their definition of success is  far from Wall Street . Very far.

The race is far from over : Neither Getty nor Corbis have succeeded  cornering the market. In fact, both have abandon the idea as they realized it is almost impossible. While Corbis is still figuring out how to turn a profit, Getty has spend the last 10 years acquiring companies they felt they could not compete with or create internally. Like pasting dollars bills on their obvious shortcoming.

JupiterImage is surviving only thanks to its internet properties while A21 keeps on borrowing money. Neither have a bright future, not, at least , in the photo licensing world.

A reasonable expectation is that our universe is about to see its giant stars implode. They are about to break apart because, similar to  the laws of the universe, they cannot survive under their own weight. Too much manpower, bureaucracy, equipment, replacement, fiscal obligation are making them crumble.

They ate too much.

This entry was posted on August 19, 2008 at 7:53 pm and is filed under Jupiter, technology, commercial stock, finance, corbis, Royalty free, getty, Microstock. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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