An Interview with Ulf Schmidt-Funke by Stefan Hartmann for PICTORIAL Magazin 04/2016.
It was – actually – a discussion about an entirely different topic. But Ulf Schmidt-Funke was just about to travel to the USA, where he planned to meet with major market players – including Reuters, New York Times and Shutterstock – on behalf of his Hamburg-based agency ddp images. Our conversation then developed into a discussion about American agencies and their customers, and about the trends and market developments on the other side of the pond, which we Europeans often find hard to fathom.
After his return, I asked Ulf Schmidt-Funke to outline his impressions of the trip – and to share his conclusions with us. After all, we often find that what is cooked up in the media and image industry in the USA makes its way over to us and is picked up on by us Europeans.
Or shall we put it more positively? Since we Europeans are not at the cutting edge of developments, by analyzing the US market we can prepare ourselves with the help of findings and strategies for action. Perhaps we can even learn from others‘ mistakes too?
But let’s allow the traveller to speak for himself:
Firstly I’d like to thank Pictorial for their trust in allowing me to present a few theses and thoughts here entirely freely on an abstract level.
The remarks are hypothetical, they are most definitely subjective and are not validated. I’m sure a great deal will occur differently and some elements will be entirely unlike what I describe here, but the idea with this article was to highlight a few developments that could be interesting when it comes to strategic planning for image agencies and image producers.
I believe we find ourselves at a turning point in the relatively short history of the licensing of visual content by agencies. This turning point was triggered, of course back at the end of the nineties with the spread of digitalization, but this initially affected merely production, archiving and sales with the well-known and much-discussed effects on the working conditions of image agencies and, most significantly, the originators.
At the same time, the business models and the profit models in particular continued to follow the principles and possibilities dictated by the analogue age. Even the supposedly „revolutionary“ introduction of the royalty-free and microstock licensing models has ultimately been not much more than an extremely low price for an RM license. It’s therefore a – thoroughly old-school – scaled sales model.
What follows now, I believe, is a radical change, which will only be possible with the ubiquitous presence of high-performance mobile end devices and the compilation of data of all kinds that goes hand in hand with this.
Like so many disruptive technological and commercial changes, this also has its origins in the USA, and it is supported by the current capital market situation and the Chinese companies‘ desire to expand.
Here in Germany we are still only perceiving the initial traces of this transformation – from a distance, limitedly and hesitantly. In order to get more direct input, this spring I spent two weeks with customers, partners, photographers and competitors in the USA. The common goal here was mutual exchange of views on the development of the exploitation and licensing of visual content over the next five years.
With each person I spoke to, very different views emerged, along with quite a number of impulses and ideas. In the following, I have attempted to summarize these in six primary theses:
- Visual content is no longer offered by classic media companies in their own channels, but rather by global technology companies within and as a component of their infrastructure. Everyone – be it companies or individuals – becomes a producer of content. At the same time, the basic principle is no longer „mobile first“, but rather „mobile only“.
- The business model of content producers and agencies is no longer the licensing of specific uses, but rather a monetary or conceptual participation in the benefit that their content (or packages of content) generates in a wide variety of business models and types of use. This ranges from a minimal percentage participation (performance-based), to cross-promotion or the right to make profitable use of the data gathered via the relevant offering. Further, even more indirect models are developed, and increasingly it is necessary to pay for one’s own content being published.
- Through the use of „big data technologies“, the production, preparation and sale of content take place in a way that is largely automated, targeted and, most importantly, very efficient for the user. Access to the technologies and data required for this will be a crucial factor in terms of competition. When I use the heading „big data“, I am referring to developments which, due to their significance, are actually deserving of their own comprehensive article. These include, for example: trend analyzing, machine tagging, visual recognition technologies, semantic content creation, and consumer-focused content delivery.
- The use of media content will draw primarily on user-generated content (UGC) and computer-generated content (CGI).
- The importance of the communication of visual content for the global economy has increased significantly. The market is becoming a highly attractive area for international companies and investors. Thus competitive and innovative pressure has increased significantly.
- National copyright is increasingly being harmonized on a global level and adapted to the needs of users and companies.
These six points are merely simplified, generalized theses for trends that manifested themselves in discussions with market players. Here there are many sub-areas and naturally also opposing developments, such as the growing need for professionally produced and authentic media content.
However, these development trends will prompt a transformation which, for photographers and image agencies, will be of such existential importance that they are worthy of examination.
And here as always, it depends what you make of it.
- PICTORIAL: Mr Schmidt-Funke, some of these theses made me gulp! For example because they aim at a broad dissolution of the rules and, to put it in a rather old-fashioned way, the longstanding „commercial practices“ of a thoroughly international industry. For example thesis 2: As a photographer, to have to pay to release one’s content? Like in New York jazz clubs where the band has to pay to perform?
Ulf Schmidt-Funke: In principle, the conditions you mentioned for freelance photographers unfortunately already exist in part today. It is precisely in news, sport or entertainment photography that the offering on the photographer side is so great that for a lot of appointments the costs incurred by the photographer cannot be covered by his income.
Actually though, I deliberately didn’t speak about photographers, but about content producers and agencies. It may of course still be the classic publishing houses that bring their text and image content to the large sales platforms as distributed content, detached from their own touchpoints (e.g. via instant articles on Facebook). Increasingly, however, the traditional players will no longer determine this market, with companies, institutions and other groups playing a bigger role as they attempt to bring their products, services or messages to the consumer more directly. I see no reason why powerful platform companies would not expect to be paid for offering targeted access to millions of users.
But to come back to your question about the photographers and about the effects on originators in general: For these players, entirely new sources of income could theoretically emerge from this. Whether that will be the case and what financial effects this will have on the individual depends on whether the participants succeed in establishing long-term value-generation structures within this market of content producers and agencies, which is only just starting to develop.
- PICTORIAL: Overall, the development doesn’t seem entirely clear to me in structural terms: On the one hand we have corporations – such as Adobe – penetrating the image market, for whom „image“ is almost an additional feature within their packages. Plus: You mentioned the Chinese as new investors in the industry. But haven’t these groups so far just bought up and taken over existing agency businesses?
Ulf Schmidt-Funke: I’m not sure what you mean by „just“ here. Even it if were JUST about takeovers (which I doubt), at the very least it would mean the cutthroat competition of Getty and Corbis would be continued. Certainly the individual commercial success of that strategy can be argued over infinitely with the benefit of hindsight, but the effects on the entire market and thus also on competitors of course were nevertheless structurally revolutionary. The changes before us will probably be even more radical, because for players like Adobe, Shutterstock or VCG – but also Google, Facebook and Apple – it will not be about dominating what is, from their perspective, the relatively small image market. What really matters is creating a communication, information, entertainment and purchasing environment that is so straightforward, effective and convenient for the user, regardless of whether he or she is a professional or a private individual, that he or she no longer wants to go elsewhere. In such business models, which are essentially more strategically oriented, „image“ and content in general represent not merely a feature, but an integral component of the company’s own range of products and a basis for services that are used or developed by third parties. In terms of these conceptual approaches and, most importantly, their consistent implementation, Chinese firms are evidently particularly innovative. I am very excited to see what awaits us in the near future.
- PICTORIAL: As for the Chinese, I see their strengths more in the production of consumer goods and less in the management of intellectual property or „content“. How strongly evident is the Chinese influence in the USA? Is it actually making important US players nervous?
Ulf Schmidt-Funke: In all honesty I can’t really comment on the actual influence of the Chinese in the USA and any fears American players have. Perhaps after the US presidential elections anyway the picture will change completely…
But with regard to your point about the strengths of Chinese companies: I suspect that despite or perhaps because of the quantity of information about the speed and scope of changes in other parts of the world, we are creating something of a blur between our perception and our conclusions. I believe, for example, that none of the players mentioned above would cite competence in the management of intellectual property as a crucial factor for success. It’s much more about recognizing the problems of the customer, developing the best solutions for them and building the most successful business models from that. Here it appears that innovative pioneers are more frequently found in China, as the example of „WeChat“ shows.
- PICTORIAL: In all honesty, I personally find it hard to understand this „business with data“ you mentioned, which is supposed to replace the traditional deal with content, such as images. I understand that it involves personal data. Or images. But the cross-over? How are these worlds connected? How can extensive data be generated from images? And why? Images clicked on as an initial spark to prompt the display of advertisements?
Ulf Schmidt-Funke: Put simply, who consumes what content when and where, and with whom do they share it? Raw data like this or evaluations and forecasts using behavioral patterns can be marketed – they offer a pecuniary advantage.
Images as isolated content are suitable for this only in very particular circumstances. In order to be able to win over users (and their data) for brands, companies or themes, you need to deliver relevant media content of all kinds and create an overall experience that best appeals to the relevant target group. In this context, content marketing and data mining are some of the current buzzwords. The income flows resulting from this are complicated and are becoming ever more complex and compartmentalized. Consequently the single image fee can hardly bring sufficient motivation.
- PICTORIAL: Shall we switch to the customer side? What about the development on the side of the image customer in the USA? You spoke to magazine staff and representatives of renowned publishing houses. How will the side of the market participants change under the maxim of „mobile only“ (thesis 1)? If „big data“ becomes the business, is that not then another business for medium-sized or small publishing businesses? (Thesis 3)
Ulf Schmidt-Funke: I didn’t have a meeting with any classic magazine publishing houses in the USA. As far as I could discern from my discussions, everyone is aware of the fact that among young people having their first contact with media today, an overwhelming proportion do so via mobile end devices.
On the offer side of course, this dissemination route initially opens up many more possibilities for making content more exciting, entertaining and personalized. The mobile offerings of the NYT are a good example of this. On the income side, however, so far there have been few successful publishing concepts. Here, providers from the areas of content marketing and corporate publishing appear to be one step ahead.In my third thesis I perhaps expressed something ambiguously. „Big data“ is not the business in itself. With this expression I am initially referring simply to technologies that automate manual processes in the area of the creation and sale of media content and make them much more effective.
The content providers who develop these technologies themselves can of course act more with more innovation, but certainly the services can also be acquired at a price by medium-sized publishing companies, perhaps even in cooperation with competitors. Both models therefore offer ample opportunities.
- PICTORIAL: Now I’d like to hear your assessment. The image market – like all creative markets based on the exploitation of intellectual property – has always been subject to the same tensions: the inequality of the weapons of producers and users. If I read between the lines of your theses, they suggest that this relationship is shifting further towards favouring users over producers. What’s your view on that?
Ulf Schmidt-Funke: I take a completely different view. Most importantly, the idea of a battle is inappropriate in my opinion. It implies that, as an agency, we must direct our weapons both at our authors and at our customers – that’s not a very nice image.
I believe that the future in the area of visual communication and the creation of visual content offers many new opportunities both for creatives and for profit generation from creative services. To be able to prevail in the competition with other producers of visual content, however, photographers too have to keep developing their ways of working and their skills.
- PICTORIAL: Aside from your theses, I’d like to ask a question relating more to atmosphere: How are you actually received when you, as someone from an independent agency in „Old Germany“, meet American customers or competitors? The Americans are indeed known for a different way of doing business.
Ulf Schmidt-Funke: Most of the people I talked to come from a journalistic background and we have worked together for many years and know each other quite well – so here the divide is small.
When I met people in more technologically oriented companies, however, there are notable differences, for example in the rhythm of the meetings, in the willingness to delegate, the depth of the discussion and the „smoothie“ affinity. There you can sometimes find yourself feeling a bit „analogue“. Whether that’s down to differences in mentality or simply the often substantial age difference I cannot impartially judge.
This article was first published in Pictorial Magazine and is republished here with full permission.
Photo by Moyan_Brenn