Dan Heller's Photography Business Blog Industry analysis from www.danheller.com

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Thursday, March 15, 2007

Photo-sharing-licensing sites leveling the playing field

In the continuing discussions I've been having with people on the potential fusion of the online photo-sharing and photo-licensing business models, one person requested that I extrapolate further about a nail-biting issue:

How do you know the person who submits photos ACTUALLY TOOK them?

Indeed. But don't stop there. Similarly important issues include the legal usability of photos. If it contains a person, has the photo been released? Was the photo shot illegally (e.g., using hidden cameras, or invasion of privacy)? Might there contain certain private or government institutions that make publication of the image a violation of some statutes? How about trademark or copyright issues involving properties, logos or other marks? And then there's that pesky problem of international law. There are many issues just like the one you mentioned, and it's right to point them out.

It's not that I overlooked these issues in my previous blogs; it's just that these are not germane to the core business function, which is really what the thrust was of those posts. Needless to say, if these were really barriers for the business model to function, I would have given them considerably more attention.

Since you asked, though, let me first point to an article I wrote a while ago called, The Model Release Primer.

While the focus of that article is on the legal issues of model releases--namely, who is ultimately responsible and liable for publishing photos--the legal principles discussed apply to all the issues raised above as well. As for the business of a hybrid photo-sharing-licensing site, these principles are ever more critical, because they shape precisely the legal format for how such a business may exist. It's advisable, but not necessary, to familiarize yourself with that paper to have the proper background for this article.

With all that said, it may (or may not) surprise you to know that stock agencies face this problem today anyway. All the top major stock agency sites accept submissions from photographers with no way to really "vet" any of these issues. From a legal standpoint, the problems have always existed, so in reality, nothing's changed. From a practical matter, the change is more about the rising risk once you open up the business to the general public. This is not unlike insuring your car. If you live in the suburbs, where all your neighbors are college graduates and have high-incomes, your insurance rates are lower because crime happens to be lower. Move to the city, your rates go up. Same with the risks of photo licensing: when you work with traditional career photographers, the less likely you get legally questionable images. Open up to the public, and the risks go up. But, as we all know by simply living in a litigious society, nothing protects you from someone who simply sees deep pockets. Because the same risk has to be managed, no matter how likely that risk is to materialize, a company reduces its risks in two fundamental ways: the first comes in the form of the legal agreements between the person submitting the photos, and the entity buying them; and the second comes in the form of the byproducts of a free-market economic model, where quality (and reduced risk) percolate to the top. First, the legal matters:

How involved or complicated do these legal agreements have to be? Just take a look at ebay: they, too, are merely middleman between buyers and sellers of who-knows-what. You can even sell photos there. And believe it or not, if you stole someone else's photos and put them up for sale, no one is going to sue ebay because they didn't vet the legality of these images. And how many everyday people read ebay's terms and conditions before putting up their ex-spouse's golf clubs for sale before the divorce papers are even signed? Shadiness aside, the practical reality of legal liability is considerably smaller than what most people would think.

Still, it's true that a photo-sharing site that allows users to sell their images will result in an influx of images that aren't owned by the people who submit them, or they'll lie about whether they have model releases, and so on. What's the legal liability for the hosting company? For that, let's look at the current situation with YouTube: the company is facing this problem in a much bigger way because there's copyrighted content from major television networks on their site, and you don't want to mess with Stephen Colbert or Jon Stewart. At the time of this writing, YouTube is being sued by Viacom for this, leading you to think that this chalks up a point on the "too risky" scorecard. But, what meets the eye isn't quite what it looks like.

Turns out, there's a law called the Digital Millennium Copyright Act (a.k.a., the DMCA) which states, among other things, that "web hosts and Internet service providers have a 'safe harbor' from copyright infringement claims if they implement certain notice and take-down procedures." This means that if someone stole a photo and placed it on a website against the real owner's permission, the owner can notify the website, who must then take it down, thereby protecting the site owner from legal action of copyright infringement. It's beyond the scope of this thread to discuss the YouTube legal case, although most analysts acknowledge that there is more posturing by the parties for other reasons than the simple matter of whether content is actually being removed. The point is, if this legal liability were indeed as onerous as it would appear, Google wouldn't have paid $1.5 Billion for a company that hosts mostly user-generated content.

The DMCA and other statutes protect hosting companies from most legal quandaries. For the left-overs, the solution is to have all participants--from the photographer to the licensee--be bound by reciprocal conditions that that are already part of how stock agencies work today. Specifically, these three things:

  1. The photographer warrants that the photos submitted are his and that they were taken legally (and to disclose whether photo releases were obtained for identifiable people)
  2. The licensee warrants that it bears full responsibility for using photos within the limits of the law. (Here, they are simply acknowledging what is already established by law anyway.)
  3. Both parties recognize that the company does not and cannot vet for the usability of any given photo or photographer, whether it's a matter of copyright ownership or usability by the licensee.

(All three of these points are discussed thoroughly in the Model Release Primer link noted above.)

With the legal problems ironed out, this brings us to the second way the risks are reduced by hosting user-generated photos and licensing them: the pure and simple economic reality that people follow where the money is.

We begin by examining broader industry trends. Search for stories on the burgeoning industry of user-generated video to get a sense for how hot this market is, and the amount of financial backing going into companies entering the space. It's not a far stretch to see the opportunities associated with still photography.

But the glaring question remains: who would buy images from a site where you'll get "who-knows-what?" Excellent question, but this is not cause for too much concern. No one ever thought ebay would work, or YouTube for that matter. Indeed, who expected Microsoft to buy images from members of the flickr community? (And hire them for assignments, too!)

Thus, the proverbial brass tacks: I'm sure that Microsoft vetted the photographers and the images, and that's precisely what I would expect any other high-end buyer to do when they go to other sources for images. But more importantly, the ability to monetize user-generated photo content goes so far and away beyond high-profile buyers like Microsoft or any of the fortune 500 companies that a company like Getty may claim in its portfolio. The billion (with a 'b') people who use the internet everyday searching sites like images.google.com for content land somewhere. And wherever they land in volumes is a cash cow waiting to be milked. It's already happening at the grass-roots level--the success of flickr speaks sufficiently to this argument, and they don't even license images... yet. It's just waiting for one of the major agencies to go this direction, or one of the major photo-sharing sites to do so. (Note: there are some photo-sharing sites that do, but so far, none are getting the attention of Wall Street, nor are they spreading their wings and encroaching on other companies turf, either by mere growth, or by acquisitions. Of course, if you know something I don't know, be sure to contact me. :-)

As more companies engage in the business of licensing images, photographers with credibility will gravitate to the sites that offer a better return on their money. Naturally, these will be sites who have good traffic, good policies, good user-interfaces, etc. In fact, I've seen rather high-end pro photographers with their images on Flickr (including yours truly), even though there are currently no image sales opportunities. Imagine what would happen if there were. In effect, the free-market system gives incentive for companies to attract the quality photographers with good reputations because it's a win-win. So much so, that it's most likely to be the case that photographers will place their images in all websites that can potentially return a good yield, and wait for the dust to settle on which ones yield the best returns. In a way, this is how photo agencies started in the very beginning, only better: because photographers don't have to be "accepted," and because the internet allows them to cast a wider net, the playing field is much more level, and the market forces can be more free to let the money flow to those who really do merit the higher earnings (rather than at the whim of photo editors). The buyer, it turns out, is the best photo editor, and it will be pretty clear in short order which sites are hosting good, honest content.

As a closing statement, I will give yet another nod to why I think Getty's acquisitions of so many companies may prove to be for naught. With the exception of perhaps a few niche players, the most basic, fundamental truism about photography remains: there are more people who have it as a hobby than as a profession, and the barrier to entry is low. There is no way you can eat up all the Doritos in the world because, as their ads on TV used to say, "Go ahead, we'll make more!" It's true that Getty's objective is less about controlling the images as it is about controlling the places that sell them. And while they may achieve a short-term monopoly on certain distribution outlets, which may result in higher prices for some small specialty markets, that short honeymoon period for Getty will end once photo-sharing sites become new outlets for photographers where the open market can decide their rates. A photographer that may be working exclusively with an agency now will eventually find those greener pastures. Entities that currently have "exclusive" arrangements with agencies may also find those relationships aren't as valuable. It is for these reasons (and only these) that will naturally force the larger agencies to follow suit to at least offer a similar business model. They don't have to "make their photographers happy," they just need to meet market rates. And this is what will ultimately level the playing field.