Image Catalogs In Peril

Two weeks ago, Digital Railroad (a private digital photo aggregator, funded by Venrock and Morgenthaler) announced it was restructuring, cutting half of its employees and repositioning the company into a photo marketplace.

Today Getty Images (GYI) is said to be looking for a buyer at around $1.5B after its stock price is unable to recover for more than two years. And Corbis, well — Corbis is being kept afloat by Bill Gates. Swallowing stock photography companies as fast as it can is Jupiter Images’ attempt to boost its potential acquisition price, a strategy that didn’t work so well for Getty Images. So, why are these companies not growing organically while the dSLR market that produces those images is growing 60% YTY and GMV of the image market are north of $22B.

Here is my take: the imaging markets consist of demi-cartels that produce a “premium” supply that does not meet the requirements of an ever-growing and changing market of buyers. No longer is the size of the buyer’s market dictated by agencies, nor is the new seller’s market defined by the old definition of pro-photographers. As a result, sell-side content does not find enough buyers and the only way to make money is to make sellers believe that if their work is good enough, it will sell…..nice promise. Out of desperation, most photographers post their images on multiple websites to get maximum visibility, a true testament of an inefficient market.

Getty Images is really a hybrid business, it has about 3,000 photographers on staff and does editorial projects for its main customers and in armored trucks if it needs to, providing newsworthy photography on location. The side-business of Getty is the stock photography business, which yields ever declining average sales prices for royalty-free and rights-managed photography. So, in essence, Getty Images was trying to become a “record” company with its own supply while on the side playing the independent party with a transparent image store; i.e., the “free-market” supply is competing with Getty’s core business model. Over the years, many photographers have complained of unfair practices that give better treatment to Getty’s images than to the supply from individual photographers.

The Digital Photography market is in the same state as the music industry (albeit condensed in time), premium supply doesn’t turn out to be premium, demand has changed, and the “record” companies in this space have no other option but to erode their premium business model. I was right three years ago, let that be noted.

As for Digital Railroad, I doubt that they’ll develop the macro-economic strategies that determine the success of any real “free-market” marketplace at this point. It would take a sizable investment in technology to turn a super-store into a “free-market”. Adobe is rumored to be working on an image marketplace, but here too, the devil is in the details.

We don’t need another of the photography business but a real free-market in which YOU the photographer and buyer make decisions on what transactions you want to engage in.

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