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To answer the question, we need to start with a top-down view of the photo-buying market place. Unlike years past, when there was a single, flat marketplace of photo buyers and sellers, like an open flea market, today's market is highly segmented. I liken it to a pyramid, where the top is populated by a very few number of highly sophisticated buyers, and the bottom is the general public. To service any tier in this model, one has to not just have appropriate price points, but have certain skills and expertise to meet the unique demands of that tier. (I'll get into the details of that soon.) As with any business, one wants to find the highest price per widget, but that's putting things in simplistic terms. Part of that equasion is the trade-off between the price and cost-of-business. The time and other non-tangible costs for selling a widget for $X may be more profitable if you could streamline certain business processes that save money. When competing with others, reduction of price is necessary to gain business when selling against others in the same domain. This demands that certain business processes be streamlined. On the other hand, some business models target a smaller, more niche market, where there are fewer players, which means less competition, and hence, less incentive to lower prices. The high-volume/low-price model and the low-volume/high-price model are two different animals, and which model you choose is affected by where your experience, skills and expertise are.
Many, if not most photographers are not really well-equipped to build a sophisticated business model that involves high-volume, streamlined and automated business systems that can serve hundreds or thousands of clients at a time. This means that their cost of doing business is so high, that they cannot afford to charge lower prices. Yet, the very problem that there are so many of these photographers, that the buyer has the upper hand on pricing, leaving photographers with two choices: either make the sale, perhaps at a tiny profit, if any, or simply lose the business to someone who will. The "successful" photographers are those who--you guessed it--have figured out how to bring down those business costs.
But, not all segments of the photo industry are alike--some have high demand, while others are smaller niche areas, as alluded to before. For example, quality images of Mt. Fuji in Japan, or the Golden Gate Bridge, are, as the saying goes, a dime a dozen. Whereas, images of a particular supermodel wearing a particular brand of wristwatch would require paying large sums of money. Using these two extremes as examples, we find that there are thousands of RF images available of many travel destinations, but none of supermodels wearing gold jewelry. The question is, does the fact that the cheaply priced RF images directly or indirectly reduce the perception of value among the RM images that are not so easy to find?
What complicates this analysis is that these extremes are simple cases. Other, more realistic examples might be whether an architectural photographer can get a gig for his usual rate of $1000, or if he has to discount to $100 because the client can get lower-quality (but "good enough") images from an RF source. Here is where market segments overlap. Even in this case, one doesn't need to sell "less than what the market will bear;" instead, the challenge is to find "the range in prices that any given market segment will bear," and then learn to optimize business strategize around that. Since our goal is to establish whether higher-priced rights-managed images are affected by lower-priced royalty-free images, the questions then become:
Do sophisticated buyers buy royalty-free images? If so, how does that affect their perception of value when they aren't buying RF images?
Is there a market for rights-managed images at the bottom (the consumer)? Or, is it possible to convince someone who wants a particular image, but can't seem to find it in their normal RF resources, to pay RM prices?
Where these buyers overlap is illustrated by these questions. Before RF, one could say the analysis was simple: people paid the same price no matter what the image or from where the source. With RF, that's changed, but was it RF itself that changed it? Or did something else happen that caused both the emergence of RF and the lower prices at the same time?
As noted earlier, the photo-buying marketplace used to be a single, flat, unidimensional landscape, where all buyers are largely the same. As long as photographers see it that way, it's easy to see how they feel that RF prices and terms are affecting the RM marketplace. Now, just because the marketplace is not that flat model, but tiered, it doesn't automatically dismiss the premise. It just means that the "single marketplace" argument isn't a sufficient one to establish that RF affects RM pricing. Other data needs to be examined.
The internet and the boom in technology that allowed for everyday people and businesses to produce high-end marketing campaigns has allowed the end-buyer for images to expand from mostly media and corporations to literally every single individual that has a computer and might have a need for a photo. I'm not saying that each of these people will buy images--I'm saying that the characteristics of these individuals are identical, so far as we know. Therefore, one cannot discern which may be buyers and which may not be based on their demographics alone. To have more accurate data would require organizations that survey photo buyers to include the general population in their studies, to see who is buying images, from what sources (including their own photography), for what price ranges, how often, and what their future buying potential might be.
Because no one does this sort of survey, we don't know if 10% of the population participates in image purchases, or 1%, or even .1% (a tenth of a percent). But, any percentage can be extremely interesting. Even if .1% of the US population were to buy one image a year for $100, that's 300,000 people buying $30,000,000 worth of images. That's not small change, and distributed over 10,000 semi-professional photographers with websites, that could be a nice $30,000/year income. Granted, these are all hypothetical figures, and while we don't know the reality of this market, we do know that it "exists," which is significant in and of itself. The question is, who's serving it? And how? Could it be RF that's serving it? How much RM is getting into that space?
I never like to use anecdotal data to support or argue in favor of a case. Instead, it can be used merely to illustrate a point, which must later be supported by a wider and larger data set. That said: in my business, 90% of my licensing is from the general population that has no idea what a stock-photography business is. Very few have ever heard of RF licensing, and of those familiar with more standard RM license agreements, none actually read them any more than any of you read the license agreement dialog boxes that come up when we purchase software. Just click the "Agree" button and move on. (There are a small few who give me license agreements to sign before they'll accept my images, but that's another discussion entirely.) The point is, my business clearly shows that buyers exist who are indifferent to, if even affected by, the difference between RF and RM. This illustrates the point, although not necessarily proving it. Now, what can we learn from it?
Pricing is directly associated with perception of value, of course. But value is not necessarily (or often) a simple comparison of price between any two photos. No, the biggest variable in determining a photo's value is how it factors into the larger project into which it will be incorporated. That is, if a small church in the middle of Nebraska just wants to use an image as part of their monthly newsletter, the house-wife volunteer who works in the office every other Sunday that is responsible for laying out this newsletter on the old PC will start by doing an image search on some search engine, and upon finding one she likes, will look at the price. She ignores "terms and conditions" and bypasses all the bios, resumes, and other self-aggrandizing blurbs photographers say about themselves. She isn't likely to go to a stock photo agency because they're too complicated for consumer-like users, and those sites don't come up as results from search engines anyway, so they aren't likely to find those stock agencies. For example, type "photos of Buenos Aires" in Google and see how many stock agencies appear on the first page. You may get some agencies now and then, but for the most part, you get specific pages that have pictures (and of those, they may not even be from pro photographers). Pick your topic and your results vary. Here's the part that must be understood: This is how the vast majority of the photo-buying public finds images (whether consumers or sophisticated buyers).
How people find images is one thing, and getting seen by them is another ball of yarn. But the next challenge that's pertinent to this discussion is: price. The one part of this business that frustrates everyone is knowing the buyer's budget. Obviously, it varies--and there's neither a science to it, nor even an art. To what degree you can alter someone's willingness to pay a tad more or a tad less for any widget is just as fickle as the customer himself. The more often people buy, they do see more patterns in prices among various photo sources, and in this context, one can argue that higher prices across the board would influence such buyers' price-break point.
But as you get into such buying patterns, you're also moving UP the pyramid to more sophisticated buyers, which lends more credence to the argument that higher, more consistent pricing policies across the board will yield higher per-photo prices. Here is where people worry that RF pricing and unlimited terms can affect the broader perception of price. But, that doesn't take into account how the very business model for higher-tiered photo buyers transforms from a volume-sales/automated process one, to a more consultive, individualistic model, which is not one that is easily managed by just any photographer, as illustrated earlier in this article. One can't necessarily expect to just raise prices and get the higher-end buyers who pay them consistently. It takes a cross-section of skills, knowledge and expertise in areas beyond just photography for a photographer to get a highly-sophisticated photo buyer to pony up bigger bucks for images. At the same time, the existence of lower-priced RF images doesn't affect the higher-end buyer's perception of value. (It may affect their negotiating tactics, but that is a skill that is part of the package of skills and expertise of the photographer in question.)
Since high-priced images are often part of high-priced marketing campaigns, the value isn't so much in the image itself, but in conveying how that image is an effective marketing tool for the product being marketed.
This brings us to another big misconception about the photo buying market: Photographers hope and expect that the marketing organization has people to do that, and will therefore find the value in their images. That is, they feel that all they have to do is make the images available, and someone else will determine its (higher) value. This may happen, but it's a simplistic assumption that will not be true often enough to fuel a profitable photo business. More often is the case that, for the photographer to satisfy the demands of this tier of buyer, he or she has to be the one that communicates a dedicated and customized message (a "pitch") that sells not just the image, but the ideas behind it. In other words, the successful photographer at this tier is one that knows the client's business.
For example, say a bank is interested in licensing an image for a new brochure about opening up a new form of checking account. The ways the bank will acquire the image will fall along the spectrum of the degree of sophistication held by the marketing person responsible for acquiring the images. Most photographers would like for the marketing organization to have the expertise that wouldn't require any consultation on the photographers part. Instead, they hope, that marketing person will have done all that work, and over considerable search and deliberation, would just license the image they want from the photographer.
In the case where the marketing group has done the work, and the resourceful photo-buyer has found many sources for the type of image desired, it's just a matter of choosing one. Here, an RF disk or that of the photographer's website doesn't matter. They don't care about anything but price. It is this case where photographers feel that RF prices impact the price of RM sales. But it's also this case where you run into the most amount of competition from everyone in the photo world, whether it's photographers, or agencies, or someone's accidental positioning in the search results from google. This may (and does) happen, but it's the over-saturation of images in the pipeline that causes prices to drop here.
But, the other scenario for our bank example is that the person making that brochure is usually working alone--and this person needs guidance. The photographer that has background in consumer marketing for financial services is going to use much more compelling and convincing language to promote whatever image he feels may be suitable for that brochure. At this point, the client has placed trust in the knowledge and expertise of the photographer, and the "photo's value" is greatly affected by that expertise. In other words, the value is less in the "photo" than in how photographer communicates and entrusts himself to the client. Take a look at any of these brochures in banks, and you'll notice how mundane the pictures are--any moderately proficient photographer could take them. But, chances are that the photo was bought by a marketing person (or department) who spoke to a sophisticated provider (agency or directly to a photographer) who communicated a vision.
As a photographer, the more expertise you have outside of photography and into the market segment you are selling into, the more consultive time you'll need to spend with your clients on forming the broader message that your imagery provides. This is why advertising photographers tend to make $50,000 for a photo shoot. But, most only get one a month (and their expenses are high). On the other end of the spectrum, most stock photographers try to sell hundreds of images a month, most of them not being consultive sales.
Moving back down the spectrum to the mass market, "impulse purchases" for a simple use like the church's newsletter are great, but to make a profit catering to the mass public, you have to be good at "business processes." Here, the successful photographer would have skills in developing a quick, simple and streamlined website, or at least a good assembly-line process for production of CDs and marketing himself. Good internal business management helps considerably, but the key to it all coming together is understanding the nature of how distribution systems work. This is not something one has to have before entering the business--it's more of an intuitive thing. You have to have a general perception that price points are the result of trial and error, not by solidarity among photographers as a group. Smart business people watch buying patterns and behaviors of their clients, and make adjustments accordingly. If you're the type that just copies a price list from another photo website, or feel that you shouldn't drop prices because you think it'll erode the market, you don't have a sense for business. Those simplistic views don't apply in a market of this size and erratic nature. Finding client purchasing patterns and behavior analysis is often an ongoing challenge--what used to work before may not work next month. Constant refinement in one form or another is to be expected.
I've always recommended that emerging photographers think of their foray into the photo business more as an extension of the previous business they were in. Whatever your expertise you bring with you into photography will give you a huge advantage when trying to sell into that same market segment. It also helps when competing against other photographers, should the occasion arise. Sports photographers, fashion, travel, food, or whatever: most people came from somewhere before they got into photography. If you know the business of that industry, that's your best place to start. If you are just trying to get into photography because you love the art, you're going to face much bigger challenges than whatever RF pricing may seem like.
So, in closure, the whole issue of rights-managed images and royalty-free images is skirting a much more important discussion: how to identify which business model is the best fit for your type of experience and expertise. My feeling is that 90% of the buying public doesn't know or care what RF or RM means--they just want to buy what they need and get it out of the way. Unless you're selling to a very small niche, then the issue shouldn't concern you.
What's more, there's a "much-ado-about-nothing" effect going on here as well. Most RF images don't need to be RF--it wouldn't affect sales one bit if the "terms" happened to state "one time use," instead of the "unlimited use" they currently state. Also, selling huge volumes of images on a single CD for a small price is not really flooding the market with thousands of images at a tiny price point as it appears. Most people who buy those disks do so to get access to one or two images on average. The rest (including the CD) is often discarded before too long. The buyer would just as likely pay the same price for those few images they DO use as opposed to the entire set they get on the CD. (This would be an RM license model.) However, it just so happens that it's easier for the distributor to get those individual images to the licensee in this "many images per CD" method that is typical for the RF license model. This, especially compared to dealing with each client and each image on a case-by-case basis as RM would dictate.
Hence, we've answered our questions:
Do sophisticated top-tier buyers buy royalty-free images?
Yes, but not enough to affect their perception of value of the images sold on a per-item basis due to the added consultive attention they need and desire.
Is there a market for rights-managed images at the bottom (the consumer)?
Yes, because most consumers don't really care about RF or RM; they just want an image at a price that meets their budget. Optimizing how one meets those needs while not overburdening oneself with overhead in distribution raises the question on whether an RF-type model can be employed effectively.
At the end of the day, RF and RM don't really affect pricing--it's what blend of business paradigms you adopt that will ultimately govern how you run your business, and thus, the optimal price points you end up with.
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