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I apologize in advance for the extreme length of
this article. I hardly expect anyone to read it in one sitting, or to even
finish it. Those who do read it may be eligible to win a free pizza. Or
better yet, to improve their understanding of the photo industry.
This article was pieced together from the results of several consulting
contracts I've done for particular clients looking at various investment
options in the photo licensing space, most of it written in the last six
months. I've removed the specific citations of particular companies that I
was asked to research, but in the end, I've manage to maintain cohesion in
the overall message.
| In this article, I will be
- Stock Photo Price Erosion
- Historical Trends of
- Is the Stock Photo Industry Growing or Shrinking?
- The Consumer and The Long Tail
- Market Efficiencies and Effects
- Long-term Industry Prospects (expand, contract, or remain
- Market-Maker Model for Optimizing Prices
- How and Why Pros
Benefit from Consumer Involvement
This coming October, I'll be presenting a talk at the Photo Expo Plus
conference in New York City, called, "Stock Photography and the Consumer".
The abstract of the session presents the premise for this article:
Licensing stock has yielded lower financial returns in recent
years, mostly because the target audience are the companies familiar to
photo industry veterans. While this audience tends to buy in larger
volumes, they represent a small fraction of overall purchasing for photos
online. The largest growth curve for photo buyers is the consumer.
This article is a sort of primer for the session I'll be presenting at the
conference, but it gets into depth on auxiliary information that may not
be covered due to the two-hour time constraint. This article wasn't
written just for those attending my session, but rather, for anyone
interested in understanding the broader economic impact that consumers
have on the stock photo industry.
Current Business Strategies
With a few exceptions, most pro photographers would agree that their
incomes from licensing stock photography has dropped over past ten years.
Finding a way to reverse this trend has been a top goal for photo trade
associations and de facto industry leaders. They have come up with a
variety of proposed strategies, but the one that continually remains at
the top of everyone's list is characterized by the following populist
quote from a discussion forum frequented by stock photographers:
Stock photo industry is on the decline. And the reason is
because microstock agencies are driving prices downwards, and pros and
semi-pros are not being consistent or cohesive in their pricing
structures. The solution is to create a standardized pricing system that
NOTE: A prior edit of this article mentioned that the Stock
Artist's Alliance (SAA) and the PLUS coalition supported a pricing
standard. This was erroneous -- they advocate standardizing certain
terminology to be used in licensing agreements, an aspect of this article
that I had originally included, but later removed.
The rationale for believing this approach will reverse price declines
stems almost entirely on the premise that pro photographers see themselves
as the primary (if not sole) suppliers of images to buyers. In other
words, industry groups believe that, while the consumer's role in stock
sales has been destructive in pricing, they actually contribute very
little in the overall supply of licensed images. Therefore, if at least
the pros cooperate on a price structure, buyers have no choice but to pay
them, because pros really are the market-makers of their own products.
Believing that this strategy will work is rooted from a historical and
cultural bias that dates back to the pre-internet era, when it was true
that the supply of images was controlled by stock agencies and a smaller,
limited set of pro photographers. Indeed, pricing stability was not only
achieved, but optimized. Cohesiveness among agencies and photographers was
not difficult because very few controlled the entire photo channel,
allowing them to regulate how much supply entered the market. The thinking
today is that such a model can be brought back.
Why cooperating on price doesn't work.
"Nash Equilibrium" states that no matter how much competitors agree to
maintain price stability, the ones who benefit the least will betray the
others in order to win business. And this act will force others to follow
suit just to stay competitive, thereby bringing equilibrium to the group.
In other words, "market rates" will ultimately prevail. While there were
few enough players in the industry in the pre-internet days to control the
channel, there are just too many people involved right now to sustain
compliance, as dictated by the Nash Equilibrium. |
For more information
and discussion on this topic, see my article,
The Photographer's Dilemma: to cooperate or not?.
But today, with the internet and digital photography, a huge amount of
inventory has entered the supply chain from a variety of sources, mostly
consumers. Therefore, adopting "price structures" will fail simply due to
supply and demand. Worse, it could actually cause more harm to pros who
vow to adhere to these prices charts because they would price themselves
out of the market, as dictated by the Nash Equilibrium (above).
So, if photographers don't accept that consumers photos are not disrupting
the natural balance of "supply and demand", nor do they accept the
principles of the Nash Equilibrium that voluntary price adherence won't
work, what do they need to see that will help them change their
fundamental business strategies to be more in line with current economic
Perhaps we should start looking at a global picture of what's going on in
the stock photo industry.
Is the Stock Photo Industry Growing or Shrinking?
simple question, one that you wouldn't expect to be asked seriously.
Rather, you more often see it as a rhetorical question used to underscore
a different point, as illustrated by the quote at the top of this article:
The stock photo industry is on the decline. And the reason is because
microstock agencies are driving prices downwards..."
Yet, I seriously ask, Is the stock photo industry on the decline?
Here are the pivotal questions that can help address that problem:
- Do most published images come from pro photographers?
- Are most
photo buyers consumers or traditional media companies?
As I'll illustrate in the following sections, the data I've been
collecting over the years (in particular, the last six months) shows that
even though per-image pricing has dropped, it has been more than offset by
volume, resulting in a net increase in dollars spent industry-wide on
photography. The bulk of that extra money is being spread thinly and
broadly to millions upon millions of suppliers that are not traditional
players in stock. Who are those non-traditional players?
Do Most Images Come From Pros?
To find out, I examine two data points: the rate of growth of the
publishing industry, and that of the stock licensing industry. For
publishing, we examine the rate of growth for print and online mediums
that use photos, where growth is estimated to be between 20-50% per year
since 2000, depending on various metrics used to determine the size of the
internet. (Google ad rates along with other agencies that sell online
advertising that use photos are example reference points.) Even using a
conservative growth estimate of 10% per year, the past 8 years would yield
a compounded increase of more than double the size it was in the year
This kind of information is consistent with other data I've found in prior
analysis I've done on the size of the photo licensing industry. I've
estimated the size to be between $15-20B, which I've published (along with
my analysis) here, here and here.
When more photographers try to stuff into a VW Bug and things get
tight, it doesn't mean the car has shrunk.
By contrast, reports generated by stock photo industry trade associations
and financial analysts who follow publicly traded companies, such as Getty
and Jupitermedia, do not show any growth at all since 2000. It was a $2-3B
industry then and remains so today. Also consider that there are also
10-20x more "traditional pros" as there were 10 years ago, as measured by
the increased number of photo organizations and their aggregate membership
numbers. Distributing the same $2-3B revenue to 20 times more
photographers than before means that pro photographers are not just
earning less per sale from falling image prices, but they have to share
their piece of the pie with more people.
If traditional pros and agencies are only getting $2-3B of a $15-20B
market, are consumers somehow earning and spending the remainder?
To a degree, yes. But not entirely. There is a great deal of money that is
also lost due to "economic evaporation", due to pricing and distribution
inefficiencies discussed later. First, I'm going to address the portion of
the sales pie represented by consumers.
The Long Tail
In a phenomenon coined in 2002 called, "The Long Tail," a reporter for
Wired magazine noted that the huge revenues generated by amazon.com came
from the sales of millions of little-known books to millions of consumers,
who, prior to the internet, were never even aware of such books, nor had
they the means or incentives to find them. In quantities of one's
and two's, these unknown books were sold to random people on the web in a
manner that added up to billions more dollars of unexpected market
potential than industry analysts and economists had anticipated. Though
all eyes tend to look at the mega-blockbuster hits, the real money is in
the really small sales of one's and two's to inconsequential buyers. The
top 100 books that sold in the millions only represented a tiny proportion
of amazon's revenues in comparison to the millions of these tiny sales of
little known books.
Is it the same story with photography? Is the vast proportion of sales
between consumers, not directly with stock agencies and established pros?
If the estimate of the market size is $15-20B, and pros only account for
$2-3B, then the gap must be accounted for. Unfortunately, showing where
those sales are coming from using precise numbers (as can be done with
amazon.com sales) is not as simple; amazon is a monitored sales channel
because it is a public company, so we can examine their financial results.
Ad-hoc sales by consumers is not.
Deriving information about the broader market from a monitored sales
channel like amazon.com is possible using symmetric analysis
because sales figures correlate with the information we seek. That is, we
can look at amazon's reported earnings and derive that most products sold
are not the "big hits" of best-selling books, but rather, millions of
smaller sales in one's and two's. If you were to graph this, these small
sales would represent a very long tail of bumps along the bottom of the X
Photos by consumers, on the other hand, are not sold through monitored
sales channels, making such "peer-to-peer" sales difficult to track. We
don't have direct numbers we can analyze from public companies or trade
groups (because consumers don't join trade groups).
Therefore, to find the information we seek, we need to examine
asymmetric information, or rather, data that doesn't directly
correlate to the information we want. Because of the indirect nature of
this data, we need to find more data sources than just one, and then
extrapolate information from the aggregate. This is similar to how GPS
systems locate you: they get data from a number of satellites, and derive
your position from that aggregate. The more satellites there are, the more
accurate the estimate. So, the more data we collect from "indirect" data
sources that hint at consumer sales potential, the more accurate our
estimates will be.
One such satellite in our search for data is the historical sales trends
of pro-level cameras. Up till the year 2000, there was a direct
correlation between pro-level camera sales and those of stock photo sales,
as compiled by industry trade associations for both cameras and stock
photo trade groups. After 2000, the trends went out of parity: pro-level
camera sales spiked, but official (industry-provided) stock photo sales
figures remained flat.
What caused this breakdown of symmetry? Either one of the data sets is
wrong, or there is another element in the equation that hasn't been
factored in. Since the "official industry figures" on the size of the
stock photo industry does not include peer-to-peer sales, there's a strong
chance that this is the missing data. The traditional industry analysis
failed to recognize non-traditional contributors to stock licensing.
A strong contributor to this is the proliferation of pro-level
digital cameras after 2000, which made pro-quality photos more
easily available online, and for sale in general. In other words, if
consumers were buying pro level cameras prior to 2000, they were mostly
film-based cameras, and consumers never went to the bother of scanning
their images. Digital images, on the other hand, are easily and instantly
made available for distribution, which is the beginning of when consumer's
role in photography licensing began.
Another satellite providing data is the rate of growth for photo-centric
media, such as magazines, web sites, general advertising, to name a few.
According to data mined from those industry trade associations and trade
magazines (such as "Advertising Age"), growth to the year 2000 also
remained symmetric with official industry data for stock photo sales, just
like with data for pro-level camera sales. After 2000, the graphs go out
of parity; media growth continued, but the stock industry numbers remain
flat. Again, this asymmetry suggests that the industry data is erroneous.
When you factor back in the peer-to-peer sales, again, the symmetry
between the graphs returns.
The more data you collect from this asymmetric information, the more it
supports the notion that the size of the stock photo industry is much
larger than what most people had thought. Thus, the unaccounted for sales
must be coming from non-pro photo photographers. The question is, who?
What is a "Pro Photographer?"
Is it the consumer? Perhaps,
but we may have to step back a second to define our terms. What's a
consumer? How do you define a "pro photographer?" What's the difference?
For example, Lifetouch Inc is a private company with over 22,000
employees, and they do one thing: portraits (in many forms). They have an
annual revenue of over $1B. The company provides model releases for
subjects to sign, permitting the company to license the photos to others.
This is classic "stock photography licensing." Whatever revenue the
company may generate from these sales is not calculated into the "size of
the stock photo market" by industry trade organizations. And Lifetouch
(and their competitors) represent a very small niche in the overall
photography business segment.
Are the photographers that work for LifeTouch "pros"? For that matter,
what about others who also shoot portraits? For example, in
this article from The New York Times (April 2007) looks at
stay-at-home moms generating extra income by shooting portraits of their
neighbors' kids. Are they consumers? Or pro photographers? And they aren't
the only "consumer/photographers" doing the same thing. How do we
categorize these people? Some are part time; many happen to be hobbyists
or enthusiasts who don't really earn that much money with photography.
But, the pictures they shoot are ending up in the stock photo supply chain
as potentially licensable pictures.
Imagine if we expanded this research to include photo-based business units
from all possible sectors, not just portraits, like LifeTouch is. We'd see
a great deal of additional photos (and money) going into the "stock
photography pie" that has traditionally been dismissed as irrelevant
numbers by the stock photo industry. To them, they were consumers. But
You can't have it both ways -- if you call them pros, you have to factor
in their contribution to the stock photo industry. And since photo trade
organizations don't, nor do people who calculate financial data (such as
"the overall size of the stock photo industry"), then we have no choice
but to call them "consumers."
No matter what you call them in the end, the size of the stock licensing
market is enormous, and the suppliers of images clearly include millions
more people than had been counted before. And those new members represent
a much larger percentage of the economic activity than the
traditionally-defined "pro photographers" and stock agencies. By failing
to recognize this group, photo industry trade groups and companies that
profit from stock photo sales are mis-managing their businesses and
missing out on a great deal of opportunity.
Do Consumers Buy Stock Photography?
To answer this, we're
faced with a similar question just posed above: How do you define a
"consumer?" When someone licenses an image, how do we characterize the
sale? By the use of the licensed image? That is, whether it is used
for business purposes or personal use? Are the two so easily separated?
The IRS reports that 80% of employed people work for a "small business."
If you sell an image to a handyman making a small brochure where he
advertises fixing people's plumbing and light fixtures, is this a
consumer-sale? Or a traditional stock license that would be included by
photo industry trade groups in their analysis?
For purposes of the data we seek in this article, I consider a buyer to be
a consumer if he is not familiar with the stock photo industry, does not
go through normal channels, and most importantly, makes purchasing
decisions as a consumer would, not as a business typically does.
Consumer purchasing decisions differ from businesses in stock photography
because they don't understand traditional license rates, are unfamiliar
with license terms, don't know what model releases are for (or how they
apply), or even that photos need to be "licensed" in the first place. In
fact, many who license photos from me usually start the process with an
email that says, "I'd like to use a photo of yours, but I can't download
the high-res version (because it's not there to download). How can I get
I then have to explain what photo licensing is, and why they need to pay
Example uses of recent photo licenses I've sold to consumers:
- Self-employed handyman's business card
- Wallpaper for a
- Wedding invitation
- Set of place mats for a large family
- Cover image for a local musician's self-produced CD
Most of these uses are clearly for non-commercial, personal uses. Others
could be considered in the middle. Either way, the people buying
the images are not part of what most photo industry trade associations
consider the traditional photo buyer. Thus, they do not consider this
demographic a group with strong purchasing power. Hence, it's not a viable
I disagree with this. Given that I'm one person, and I license photos
almost entirely to consumers on a regular basis, it's clear that there's a
market out there. Furthermore, I do not consider my experiences to be
merely anecdotal. They represent viable market conditions for these
reasons: First, my traffic statistics are not insignificant, ranging from
12,000 to 28,000 visitors a day (summer and winter traffic on my site
varies in parallel with industry averages). This in itself is considered
to be a viable sampling of the general population at large. And since my
web traffic runs in parity with my sales figures, it's fair to say that
the general population acts consistently over time, given the same
conditions. I've spoken to other independent photographers who sell on
their own websites in the same manner, and they report similar patterns as
well, though their ratios of traffic-to-sales differ from mine. (See here for my web
Speaking of traffic-to-sales ratios, most people "stumble" onto my site,
rather than go there specifically for the purpose of acquiring images. My
ratios would be much higher if I were a more commonly known resource. (I
do no advertising of any sort.)
Yet, even with my statistics, if the same traffic-to-sales ratios were to
scale up to the broader market, sites like Flickr.com could be generating
revenues in the $3-6B range annually. I would venture to say they'd earn
even more because the site is a destination for people to look for
photos. Flickr would also attract more of the traditional media buyers as
well, a target audience I don't attract (because I'm not a known entity
for traditional media buyers). People who license my photos never heard of
me before they landed on my site--they got there by happenstance, the
result of search engine results (for which I tend to rank highly). That
wouldn't be the case for Flickr.
And therein lies the magic hen for laying the golden eggs: search engines.
That's how most consumers find photos, whether it was their intention to
license them or not. Traffic to google's image search far exceeds the
traffic on every other photo-related website (by huge orders of
magnitude), that even if only .1% of those searches results in a sale of
any kind, this would generate revenues that far exceed the combined
revenue of all stock agencies combined. And the use of search engines for
photos is growing as the need for those them increases, while the photo
industry continues to ignore the consumer by not promoting themselves in
the mainstream as a consumer-oriented resource.
So, now we get to the most obvious of questions: If Flickr "could" get
that revenue, but isn't (because they don't offer users the option to
license photos), nor are there many other sources where consumers are
aware of licensing, how does that affect the total dollars consumers spend
on stock photography? That is, if they never heard of stock licensing, and
if there aren't enough sites that service the consumer's need to license
images, how do we know consumers are generating economic activity?
Inefficiency and Evaporating Money
This brings me to a critical component of the stock photo industry:
unrealized revenue. That is, much of the money spent on acquiring
images is actually not going to anyone at all due to inefficiencies in the
system itself. Think of it as energy lost when you're driving with one
foot on the brake. You waste a lot of gas because the brake is siphoning
potential speed from the car. You've spent the money to buy the gas, but
that investment isn't being used.
Similar inefficiencies in the stock photo industry creates a condition I
call economic evaporation. The money is spent, but it doesn't go to
anyone. I think of the stock photo industry as being more like a gas
guzzling 1975 Buick than a Toyota Prius of today. It's outdated and
Analogies aside, what are these inefficiencies in the stock licensing
system? The greatest of them all is the one I cited in the prior section:
people search for images using non-licensing search mechanisms (like
google). As a result, they either don't find the images they want, or they
have no way to (legitimately) acquire the images from the supplier
(because the site they landed on doesn't license images). This often leads
to either intentional or inadvertent copyright infringement. (I say
"inadvertent" because most consumers are unaware that using photos in
certain ways violates copyright. A condition which I'm finding more and
more frequently of my own photos.)
Some economists would call copyright infringement a form of unaccounted
economic activity because it really does represent value, even though it's
harder to value it, or know how to mark it on a spreadsheet. This "mark"
has to have a value, and there is no "market rate" to assign it. This is
called "mark-to-market", and is something like the mortgage crisis we're
dealing with in the US today: there are mortgages tied to homes, but it's
impossible to place a value on them because there's no market (or credit)
to actually buy them. The lack of liquidity means that there is an
enormous amount of dead capital that's keeping the economy from moving
The difference is that with homes, the problem is lack of
confidence in the market. With photos, however, the problem is more
lack of knowledge. People just don't know that photos are
licensable assets. Because there is no market-maker for photos in the
general public, the general public doesn't participate in the economics of
it. At least, not to their greater potential.
That's not to say that everyone is unaware of licensing, as
evidenced by my business and website. People are made aware when they try
to acquire an image from an informed source who knows that the asset has
value. The fact that they are willing to buy is evidence enough that the
market is viable. But the amount of "dead capital" in the form of illiquid
photo assets is what's keeping the photo licensing industry from moving
So, while the first problem to tackle is that of public awareness, we are
still faced with the problem of sales inefficiency. Just because a buyer
may now know that the photo is to be licensed and is a willing payor, it
doesn't itself create efficiency. In fact, the buyer licensing directly
from the seller (a "peer-to-peer" transaction) is the most inefficient of
all. While one would assume that the lack of a middleman should create
efficiency, the problem is that most people are not business savvy;
neither the buyer nor seller do this very much, and hence, they either
don't care, or price their products randomly or arbitrarily. Not to say
that pricing is easy -- finding the right price points for licenses is
hard for everyone. There is no pro out there today that can come up with a
confident price quote for every photo usage he's presented with by a
prospective client. I get email from pros all the time asking for advice
on this subject. (I send them to this page.)
Imagine that if pricing is hard for pros, consumers must be entirely in
the dark, as are the buyers! So, the economics of their exchange, whatever
it is, will be very unlikely in realizing its potential value.
What's missing in the photography sector is an efficient sales
channel like an auction-based model like EBay or the stock exchange. The
photo industry needs market-makers.
To understand how this inefficient exchange can be turned around to an
efficient one, consider trying to sell an old microwave oven you no longer
need. Ten years ago, you'd have either thrown it away, given it away, or
placed an ad in the local newspaper. Any of these choices would have
resulted in an arbitrary valuation for the oven. Randomness would
dictate whether you'd get more or less than its genuine worth; the mere
inefficiency of the system meant that such things were grossly
undervalued. People just didn't want to spend the time or money trying to
optimize their oven's net worth.
Today, you'd just snap a few digital photos and put an ad up on EBay or
craigslist. Regardless of the price you got, the market is
efficient because such sites are well-known entry points for
acquiring such things. Better still, the auction-style exchange means that
the "best" price is obtained, even if it's not the one you were hoping
for. The net result, however, is that the sheer efficiency of EBay and
craigslist has infused more money into the economy by permitting the
buying and selling of "stuff" that would otherwise not have a market at
all (or, a poor one).
Similar economic observations have been made by economists who study the
consumer's affect on other economic trends: trading stocks and bonds,
auction websites, telephone calling rates, music, and publishing, to name
a few. In each industry, the "traditional suppliers" for these commodities
has been displaced by wider choices and less expensive options, largely
because the consumer has gotten involved in one way or another, and their
numbers are enormous. Everyone has seen per-unit prices drop in
their respective industries, but companies that remained efficient have
benefited from overall economic growth. Examples would be Ebay and
securities trading websites. As the consumer started to trade stocks,
commission rates dropped from $300 to $7. Many firms
sprouted up, while the larger stalwarts suffered. Those who accepted and
embraced the consumer ultimately did very well.
Industries that didn't adopt became inefficient and have since been
harmed. Examples include the music industry (by resisting adopting of the
internet in its early days, and trying to maintain sales of physical CDs
through traditional retail stores), and the telephone companies (who tried
to hold onto lucrative land-line fees rather than adopt VOIP telephony and
other more efficient calling methods). In these industries, consumers
choices moved in new directions. Successful industries (and companies
within them) are those that moved with the consumer.
This model is precisely what is missing from the stock photo industry.
Existing mechanisms for buying and selling photos are so inefficient, that
prices are essentially random, therefore making the photos grossly
undervalued. It's so bad that many people shoot their own photos, not
necessarily because they want to, but because the "costs" (real or
perceived) of acquiring images online (if such photos can even be found,
let alone licensed) makes self-production a less-expensive option.
Here, the problem isn't dead capital (photos that can't sell due to
consumer unawareness) so much as it is "dormant economic activity." That
is, a willing buyer doesn't buy because he has neither the means nor the
mechanisms to buy. He needs a mechanism to find the desired images faster
and easier, and to license them as easily as purchasing a song from
iTunes. Until then, this economic opportunity remains dormant, and the
consumer self-produces the photos he needs.
Mining that dormant revenue requires understanding the psychology of the
consumer. If that person starts doing general photo searches on the net,
and within ten minutes starts thinking, "Aw, forget it; I'll just shoot it
myself," the photo industry is inefficient. It's a "brake" working against
the gas pedal.
Odd as it sounds, this inefficiency is costing the consumer money, too.
The wasted time in fruitless internet searches, plus the having to
self-produce a photo, both cost the consumer more than if he were able to
easily find and acquire the desired image for a market-rate price.
The Future of the Stock Photography Universe
Can the photo industry evolve from the inefficient media and large-company
focused niche market it is now, to a more streamlined consumer-oriented
industry? As I'll address later, it's not a matter of technological
barriers--that part's easy (and already underway). The challenge is
effecting political change among industry leadership. Historical and
cultural biases have prevented them from recognizing that economic truisms
of an open-market system apply to the photo industry today, and they
should shed the "protectionist" posturing of yesteryear.
Such change may or may not come about, leaving the future open to three
- Expansion model: They get it!
The number of
licensing agencies and other photo sources shed their inefficiencies and
optimize pricing models that grease the wheels of financial growth,
benefiting everyone in the supply chain.
- Contraction model: They don' get it.
and agencies don't change their business models, allowing the existing
inefficiencies to force prices even lower still, eroding profitability,
and ultimately collapsing the prospects for an economically viable
licensing industry. Photos become penny commodities, further perpetuating
informal peer-to-peer ad-hoc licensing. Most sales are done by consumers
and hobbyists who don't depend on (or care about) minimal financial
compensation. Specialized photography for news and advertising remains in
the hands of a few select groups of photographers and agencies that have
shielded themselves from the broader effects by the nature of their
- Flat model: Some get it, but not enough.
demand is offset by market-correcting lower prices, allowing most
companies to sustain only minimal life-supporting profitability. But, not
enough players participate in the new model, causing a revolving door
effect, where new companies enter and exit the industry, yielding no
fundamental economic growth or contraction.
As will be addressed in the next section, it's impossible to predict with
enough clarity which of these three outcomes will likely result. As more
stock agencies find it difficult to compete, and the inefficiencies in the
system prevent prices from rising, the sheer need to survive may
eventually push analysts to look more closely at the consumer, thereby
forcing the hand of industry leaders to change their outlook.
Another distinct possibility is that the industry is merely absorbed by
other more successful industries that license creative content as a
sub-component of much larger business objectives. In this case, it could
be that enough business savvy consumers start their own organizations that
react to economic realities more adeptly, which attract far more
photographers than current organizations are able to do.
Market-Marker, Market-Maker, Make Me a Price!
If there is
ever going to be evolution in the stock licensing industry, the first
order of business is to shed the inefficiencies discussed here. And that
can only happen when the system allows for uniform access to all buyers
and sellers, and when the system is agnostic to who is buying or
selling. This may seem obvious, but such a system is antithetical to the
stock photo industry as we know it. There are currently stock agencies
vying to be the central access point for licensing, and that model
prevents industry-wide growth. If the market remained as small as it used
to be prior to the internet, that would be fine. But, such a model can't
possibly scale up to meet the needs of the global consumer population.
Unless and until the industry recognizes the consumer's role, the systems
they try to build will not work. And we're seeing it today in the form of
poor price performance.
The easiest way to understand how an efficient system works is to think
about the New York Stock Exchange: the exchange itself doesn't buy or sell
securities; rather, it provides an open mechanism by which others trade.
As such, everyone has incentive to be a part of it, because it's where the
best opportunities are: buyers go because there's efficiency in pricing
and safety in the process, and sellers go because that's where the buyers
are. As more people join, the pricing mechanisms for the assets themselves
become more efficient -- valuable products are priced higher, and less
valuable ones are priced lower.
To those who think this is impossible for the photo industry, think about
the history of online advertising. Prior to Google, online advertising was
as chaotic and inefficient as the photo industry is today. Finding highly
trafficked and particularly targeted sites was not only difficult, but
they would change rapidly. It didn't make sense to invest dollars in an ad
campaign for a website that may not remain well-indexed for the same
keywords over time. In fact, most industry followers thought the internet
would never be able to support a viable online advertising infrastructure
neither buyers or publishers of ads were happy with results, and many
predicted online ads would eventually just go away.
Google's novel approach was to use the same sort of auction-based system
to redefine the advertising market. The "search" technology was the
vehicle necessary to quantify the value of any given internet-based
property; the business model underneath is to sell advertising based on
the value of that real estate. Google also made a smart decision by not
setting advertising rates, as was the custom back then; they merely
provide a mechanism by which participants set market rates through
auction. Different websites are valued differently based on their rankings
for certain keywords, which can change a moment's notice. Rather than have
advertisers pay to be on a particular page, they instead paid to be on
whatever page was the most popular for a given keyword. As long as
google's ranking is considered useful by both visitors and advertisers,
market rates set by auction are deemed uniformly acceptable. And as long
as the distribution of those advertising fees are considered equitable and
competitive by the publishers who host the ads on their websites, the
market is "efficient" and business is done.
By contrast, Yahoo's attempt at the same thing was inefficient, thereby
less profitable. The lesson here is not just to create and participate in
an efficient system, but to implement its various components properly.
How does this translate to stock photography? Can the same sort of model
be replicated for photo licensing? It's not unrealistic, but it will
require certain technological developments that, to date, no photo-centric
company is willing to tackle. This is largely because the parameters that
matter for photo licensing don't correlate directly to advertising, or to
trading financial instruments like stocks. New parameters need to be
established, and photo assets then need to be categorized automatically
into those parameters. For example, "lifestyle", "sports", "travel",
"artistic", "porn", "wildlife" and thousands of other top-level categories
need to be devised.
I envision a sort of genome sequence tuned to photography
attributes that can be applied to any photograph. Characteristics such as
"black and white" and "empty space" and "vertical/horizontal" would be
another set of parameters. And then there's a matter of a universal
keyword architecture, which is another technology that doesn't have enough
attention. (I've addressed that in the past, and will continue to do so in
And then once these parameters are defined, an automated auction system
can take them into account, and combine existing site ranking mechanisms
to produce an infrastructure capable of supporting a market-maker system.
Will the photography world get around to these? Not unless anyone realizes
the financial opportunity for it. But it is possible. After all, the fact
that Google, being a heavily driven technology company, would build a
business around advertising, a traditionally non-technical business (in
fact, a culturally anti-tech industry), suggests that anything is
The good news is that the need for an auction-based licensing system can
be applied to other creative assets as well. There are already
developments currently underway in some of the more basic levels. The
first is a set of public registries that users can sign up for to store
information about themselves, for example. The "iNames" project allows
people to look up information about individuals, products or services,
where you can make certain information about yourself public or private,
depending on who's asking, and what's the use. Facebook and MySpace both
employ similar-but-proprietary servers that allow developers to build
applications build new businesses and websites that draw upon these
information using data feeds.
In fact, the Orphan Works Act calls for the Copyright Office to create an
openly accessible registry of registered works. Once the database is live,
it's easy and quick to glue together a few simple protocols that exist
today to create a mini stock-photo licensing system:
- tineye.com, picscout.com, or xcavator.com can be fed a photo,
either by upload or by reference from a URL.
- The photo is then
matched against images in the copyright database registry to determine who
the owner is.
- The owner's information is accessed through an iNames
registry, where the user's preferences point to a license server for photo
- The photo is then licensed through whatever agent is
authorized to sell it to the buyer.
- Payment is made and the user's
commissions are wired to his account.
This all would take place as quickly as it currently takes to download a
song from iTunes. If such a system were available, anyone and everyone
would want to participate because it doesn't require any additional work.
The only thing missing from this becoming a reality is the copyright
database coming online. But that doesn't mean that other photo databases
couldn't do the same sort of thing -- Flickr, for example.
Web 3.0: crowd-sourcing intelligence, not just content
the above example, I assumed the person who wanted to license the photo
already knew which one he wanted -- it was just a matter of licensing it
properly. But a more challenging problem is finding the photo in the first
place. This is where the Web 3.0 will be useful. To explain how that fits
into this, I need to step back and review Web 2.0.
People associated the "Web 2.0" buzzword with "crowd-sourcing." That is,
sites like Flickr, Facebook and MySpace are all social networks where
people generate their own content and put them online. Revenue was
generated because of the existence of this content; it attracts
traffic, and traffic increases online advertising revenue.
What people aren't aware of, however, is that there is information being
annotated to that content. Valuable information. People are doing things
like rating songs, voting their tastes for things, and providing
information on wiki websites. Currently, no one is leveraging that
information for financial gain; they're just relying on its existence to
attract visitors, which bolsters online ad pricing.
Web 3.0 is where that information's untapped value is released.
Crowd-sourced content then becomes crowd-sourced intelligence. That
is, information about information can be used to quantify value for
that information to be monetized. For example, photos can be keyworded,
classified, annotated, modified and otherwise "prepped" for a new form of
monetization. As long as these user-driven behaviors are done within
open-system protocols and development platforms -- and they will be, or
people won't bother to use them -- then automated web robots can crawl
these websites and begin to build hierarchies of this information that can
be utilized by others in countless ways.
As for the photos in this system, they too can be found, filtered, and
analyzed, which makes it perfect for a system that helps people find what
they need and sell it to them. This then paves the way for market-makers
to create an independent platform by which buyers and sellers of photo
assets (or any other kind) can trade. By combining existing technological
developments with search/query protocols, one can envision a
search-ranking mechanism akin to google, but specifically engineered for
licensed content (such as photos and video).
This may seem far-fetched, but there are billions of images online that
have already been viewed, ranked, keyworded, and otherwise "prepped" for
sale, yet are lying dormant because no one is laying the last mile of wire
to connect it all up to a trading system.
Why and How Does the Pro Photographer Benefit?
Most pro photographers see the consumer as a threat, partly because they
are large in numbers, but more because they are "cheap" in what they are
willing to accept in pay. So, how and why would the pro benefit if there
was an open system that embraced the consumer, rather than kept him out?
Simply put, the more level the playing field to everyone, the more likely
it is that the better players will win. This is because like search
engines that find the "best" matches for peoples' search queries, a future
image-search-and-license environment will also feed photos that are
considered "highest ranking" by data derived from millions of sources. In
that environment, pros will invariably win over consumers.
By contrast, in today's environment, stock photo agencies either pick what
a few individuals think are "the best results", or provide arbitrary
search results. This is inefficient, wasting visitor's time, and
benefiting no one -- especially the pro. Moreover, pricing is similarly
arbitrary, which is also inefficient. In short, today's online stock
industry does not provide a level playing field, meaning pros have an
uphill battle to fight against the consumer, whose photos are "found" more
often than pro's photos are. There are billions upon billions of them and
no one is automating a ranking system, so the pro's photos lose due to
overpopulation, chaos and randomness.
If an intelligent market-making ranking system were in place, pros are
more likely to benefit not just because they are more likely to produce
better content, but because they will go to extra efforts to include more
useful/appropriate metadata and keyword info, and to position their images
at properly targeted websites (whose ranking affects photo placement).
Sure, consumers may do this, too, and some of those who do it well will be
the "pros" of the next generation. Either way, buyers will invariably find
and buy images produced by those who do better in this system, and pros
are currently better equipped to get that running start.
Lastly, a market-maker model for selling images would expand the buyer
base to include millions of more people than it does now, allowing pros to
leverage the above benefits to an even greater degree. They would sell
volumes more images not only to existing markets, but to new markets that
never licensed photos before.
What should pro photographers do today?
The best thing for pros to do to prepare for the emerging landscape is to
establish themselves using the same "search engine optimization" (SEO)
techniques everyone else uses today. Create a domain name and populate the
site with photos, and follow the well-accepted guidelines I discuss in an
article I originally wrote back in 1999, here.
It is also important that photographers employ efficient workflow methods
for how they manage their images and their metadata. I discuss this in the
Pro photographers' futures in stock photography will be highly dependent
on how well they promote themselves today, not tomorrow. This is true,
even if they join other stock agencies. Agencies don't promote
photographers, photographers do. So photographers need to treat
their photo businesses as if they weren't in a stock agency at all. (If
the agency produces any revenue, think of it as a lucky bonus, not as a
primary source of income.)
As photo suppliers, pro photographers are outnumbered by consumers by many
orders of magnitude. As photo buyers, traditional media companies and
others who buy stock photography are outnumbered by consumers, even though
these sales are harder to see because they occur in such small per-unit
sales. Either way you look at it, consumers are affecting everything about
the photo business, especially at the pocketbook.
The best way for pros to strategize their future is to stop fighting the
trends and to start adopting business practices that reflect modern
economic principles. The first step in that direction is to always have
the awareness that the consumer is there, both as a buyer and as a
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