The Fall

October 23, 2009 by pmelcher.

Getty Images’s decision to close it’s wholly-owned production division is a clear signal to the commercial stock industry that the market has shifted forever. If producing  images that correspond to a market demand without having to pay any commissions and licensing them via the biggest distribution channel worldwide is not profitable anymore, than nothing is. Producing market research wholly-owned content was to be the new El Dorado of the commercial stock photo industry. It is now a ghost town.

Coupled with the announcement from Jonathan Klein that Istock has made $850,000 in sales in one day, then it  all becomes very clear. Even after paying commission, Istock, and thus microstock, is more profitable than traditional stock. No production fees, no market research, no  high end editing and post production generates more hard cash than all the talent of the world combined. If I had a traditional RM or RF operation right now, I would be very, very worried. If not desperate.

There not even a comfortable exit strategy for thousand of RM and RF companies worldwide. It is doubtful that any will be purchased anymore and its even too late to dump all their production into microstock. Even that is getting heavily saturated.

Getty also has a huge advantage by being able to safely mine both Istock and Flickr for new content for its traditional RM and RF offering at almost no cost. While anyone could source Flickr, no one has the time nor manpower.

From a recent internal memo released by John Harrington, Getty Images will also heavily invest in on-line automated sales in the upcoming years, taking a cue from Istock and trimming down on its operational cost. It is obvious that if RM and RF sales are going to decline both in volume and in price, it will be too expensive to have a full size sales force.

Once again here, smaller operation will not have that opportunity. They already function at minimum staff and have no room for downsizing with also losing revenue. They certainly do not have the extra cash to invest in automated sales.

From the same memo, we were told that Getty has made no overall revenue growth in 2008 and 2009 doesn’t look much better. Probably mostly because the fall in traditional RM sales was not compensated by Istock 35% growth. That is a huge statement, isn’t it ?

As for Corbis, they seem to continue their cutting cost approach to profitability. Every year now, for as far as the memory goes back, this has been their time to hit the headlines with another round of layoff. This year, London was apparently the most hit. Still no sign of profitability for the (very rich)  ugly duckling of the commercial stock industry. But as long as they are having fun, right ?

The recent melding of minds at the PACA conference in Miami should have been a funeral announcement. Most talks were oriented at escaping the commercial stock market for the hopefully more lucrative commercial footage. However, it’s more like choosing which cliff to jump from.

Finally, for those who really want to understand the current state of the industry, they HAVE to read Allen Murabayashi entry on the Photoshelter blog, it’s brilliant and right to the point.

Posted in flickr, license, commercial stock, PACA, finance, Royalty free, getty, corbis, Microstock | Print | 3 Comments »