General Announcements

This is just a general announcement posting about goings-on in my photo business:

My 4-day workshop on the business of photography (May 3-6) is nearly sold out.
Interested parties should see: http://www.danheller.com/workshop

The first of my two 13-day Travel Photography Workshops in Greece is sold out.
The second trip is only half full. It starts Sept 17. Information is here: http://www.wildernesstravel.com/itins/greekisl.html

My next book on Travel Photography has been announced by Lark Books.
However, it's still unknown when it'll be in stores. Please don't email me about it. Once I know, I'll post information about it. You can pre-order it on amazon.com, but I'll be selling it on my site sooner than amazon (or anyone else) gets theirs. (And I sell it for the same price they do, plus I provide Priority Mail shipping with no upcharge.) So, be patient. (I wish *I* could be!)

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.

Yet Another Getty Analysis

I was sent an email with a link to this item on stock photo talk, along with a request to comment on what I thought Getty's was up to.

The entire comment from this person can be summarized in his closing paragraph:

Unless Getty can keep these photographers happy, (some of whom are industry "celebrities" in their own right) the chickens will definitely come home to roost.

The sentiment expressed here makes good business sense when the industry is comprised of many smaller agencies who compete with one another. In that context, the quote above applies: an agency needs to keep its contributors happy, and it needs good content to compete with others.

But the segment of the photo business market that is Getty is moving into is that of the photo commodity market, where few if any of the old rules apply anymore. Here, what makes or breaks a company has little to do with the photographers. The only things that matter are how many other companies are in the field, and which ones control the channel.

The big paradigm leap that many photographers have yet to make is the fact that the commodity market exists, that the rules are different, and that Getty is moving towards it. Its recent activities--specifically, the acquisition of other companies--is clear evidence of the migration. Their need to make a transition of some kind is clear: as one studies the economics of various business models from small (down to the individual) to large (the size of Getty and up), there is a distinction (and delineation) between where the focus of business lies, and beyond a certain size (or as the industry itself grows beyond a certain size), the business models begin to shift. Regardless of success or failure, the outcome has nothing to do with whether it was wise to have migrated. What matters is what they chose to migrate into, and how well they executed on that transition.

For a discussion on why Getty must migrate and what the future of the industry looks like, see my blog entry on why Corbis won't go public soon, and the future of photo agencies. The question for Getty is: is their chosen business model one that can work in tomorrow's photo climate?

The best illustration (and explanation) of Getty's current strategy is Microsoft. During the 1980s, MS achieved a certain critical mass of users because they had finally succeeded in becoming the dominant operating system for the PC. In order to protect this position, they couldn't really depend on their own development staff anymore. It would have been futile to try hiring enough engineers to produce the products they needed in order to maintain market dominance. In fact, this had less to do with what Microsoft could produce, as what was offered by every other company they were competing with. Thus, their strategy was to use their newly found wealth, size and influence to buy up their competition. They went on a shopping spree, gobbling up vast numbers of companies who had very interesting and innovative technologies, much like you see Getty doing today. Often, the companies MS bought were gutted, and their products subsequently "shelved,," despite how beneficial those products might have been to the end-user. In some cases, MS would incorporate the technology into their operating system, but most people never saw the large number of acquisitions that MS did for no other reason than to preserve their industry dominance. And when they couldn't buy a competing company, they would offer a really cheap (usually free) version of the same thing so as to keep the user committed to Microsoft. (That such an act might put that other company out of business was a sad, but real part of business.)

This can lead to outcomes that can work for and against the end-user. On the positive side, the cost allowed the world to adapt to new technologies more quickly than might have been possible if there were many competing products. Similarly, by having a unifying operating system, interoperability among disparate vendors was more easily achieved (though, not without some headaches). On the other hand, by stifling a great deal of innovations from competitors across the supply chain, the best interests of the end-users or other businesses suffered. This is why we have anti-trust laws, to keep companies that achieve a certain size in good standing as corporate citizens. Granted, this isn't perfect--and there's a fine line between when a company is on one side or the other. You don't want to stymie companies that do well simply because other companies find it hard to compete. And market conditions are also such that a company can lose its dominance, simply because it fails to execute properly. IBM was once considered a candidate for forced break-up back in the early 1980s, because they "owned" the computer mainframe market, which was the dominant back-office computer back then. The PC was the answer to that, and the problem took care of itself. Indeed, even Microsoft, with its predatory practices has been subject to anti-trust lawsuits, yet most tech industry analysts agree that they are on the defense now from new emerging businesses models, currently lead by Google. (And now you see Google acquiring companies left and right.)

So Getty has a very short list of options available to them. And unlike Microsoft who had a much longer period of time in order to gain their market dominance, Getty's window of opportunity is much smaller. High on the list of liabilities is the fact that photographs have many attributes that make it a difficult product for a very lage company to make money (as opposed to a smaller company, which we'll touch upon later). It's a commodity with infinite supply; there are an infinite number of suppliers; and there is a very low barrier to entry by competitors. As such, selling photography as a commodity on a very large scale has less to do with the quality of the product as it does on controlling the channel. This is where Getty sees opportunity: it doesn't need pictures beyond a certain minimum quality to control the channel, nor does it need happy photographers. It just needs to shelve the competition. There are plenty of newbies who shoot "well enough" that are eager to get in, so it's not like they can't continue to produce product. (Just read any photo discussion group on stock photography--the most entries are from those who are wondering how to get into a stock agency.) At Getty's size, "star photographers" aren't needed except for a few token names to parade to the press and to serve as icons and mentors to the up-and-coming armies. (This is an area where photography and technology clearly diverge--poor engineers can ruin a tech company.)

The entire reason why Getty is doing this now is because of that short list of options available to them. First, they still currently have cash and stock valuation that's high enough to use as cash. Yet, more importantly, the window is closing.... or should I say "opening" too quickly. There are many bets as to what the industry will morph into, but Getty's strategy is to be there, whatever it is, and be the one best poised to control it. At the moment, the market is still fragmented enough, and no one else has the money to attempt it.

Whether you believe this strategy may work, this is what they're doing. And when you consider it, many question are answered:

No, Getty does not to improve how they approach their contributors. They are not needed to dominate the market.

No, Getty does not need to view image collections as valuable resources. Microsoft didn't do it with the products they acquired, and they achieved market dominance.

As for celebrity-based image collections with perceived long shelf-lives? Well, you answered the question yourself in your posting: "the images are only timely for so long." Strategy: better to get them out of the way now before they become future liabilities.

Now, for publicity's sake, Getty would never say anything like this. Just as Bill Gates would speak constantly about how "vulnerable" they were to competition, and how that are innovative, and how they are so big because people love them, this sugar-coating didn't hide the reality of their business model. Any company has to put its best PR face forward in the face of mounting criticism. Accordingly, Getty will counter that they do treat their photographers fairly, they will always have at least a facade of name-brand photographers on staff to parade to the press, and that magazines are satisfied.

And this strategy works: Microsoft has plenty of passionate, loyal, and (most of all) vocal fans, who believe they really are doing the industry a lot more good than harm by what they've accomplished.

With all that said, I bet you think I agree with this approach. Or, that I think it'll work. After all, the model that Microsoft used could be done again, right?

Not so fast. While I do believe this is what Getty is up to, I do not believe it will work.

First and foremost, unlike software and business productivity, where MS was able to corner the market because companies were so locked in, both in low prices, and legacy investment, photos are quite different. The list I provided earlier applies: that it's a cheap and easy commodity to produce on a wide scale. The most compelling difference is that photographs can be made by people who didn't graduate with Degrees in Computer Science. Getty's absolutely right in their perception of photography in this way, but they are forgetting the other sharp edge of that same sword: it's too easy to enter the market. And as photo-sharing sites and other social networks have proven, the sources for images is growing faster than Getty can possibly keep up with through acquisitions. They may be racing to control the channel, but that channel is growing too wide, too fast.

This is the main reason why I think Getty will ultimately fail with their current strategy. Also, it's for this reason that the government would never try to pursue any kind of anti-trust claim against them, even if they acquired Jupiter, or even Corbis. Sure, the media would make a circus out of it, and for a short while, it actually would be a controlling monopoly. But in the end, the government will have to do an analysis on the time it takes to bring a case, and how the economics of the industry will change during that timeframe. The quickly shifting direction that the photo industry is taking is such that other players are coming into the market too fast for any one player's dominance to be maintained for long, or that their dominance (even for a short period) would have a materially adverse affect on it. That is, the government would have to somehow claim that buyers are being injured somehow, usually by spiking up prices. But regardless of who the biggest players are, or how large they are, there are so many other sources for photographs, that they can't possibly control prices. And if they can't do that, where's the legal harm in being the monopoly? (Arguing that photographers aren't paid enough is not a legally viable defense.)

What this boils down to is that Getty is making the same miscalculations on their market analysis that MS did about the tech world. Bill Gates was recently quoted as saying, "We had no idea that an advertising model had such huge revenue potential." In fact, Bill Gates has a long history of miscalculations. His earliest faux pas is his famous saying that "the PC will never need more than 640K of RAM." (That was in defense of DOS's limit that it couldn't access more memory on a chip than 640K.) Today, you give away gigabyte chips for halloween to giggling toddlers (who actually know what to do with them! Later, gates discounted the viability of the internet: back in the early 1990s, MS was pushing its own "Microsoft Network" and had a white paper they gave out at tradeshows titled, "Why the Internet Won't Work." In those days, however, MS was still big enough--and the internet still small enough as a business model--that it was able to jump tracks quickly enough to maintain desktop dominance once it became clear that MS had erred. Some say that MS is now too big to change direction quickly enough or efficiently enough to correct their latest miscalculations of the market, let alone recognize them. But, this remains to be seen.


And this brings us back to Getty: they are still small enough, and the burgeoning photo market young enough, that they could achieve market dominance if they chose the right direction. As I pointed out in recent blog posts, there are two main opportunities in the photo space that no company of substantial size is taking advantage of: pricing intelligence and efficiencies for one, and the mass-market model of photo sharing/licensing sites as another. There are companies doing that, but they are currently not large enough to control the market.

What does all this mean for photographers? Well, first and foremost, stop thinking it's all about you. Large companies really don't need you the way you think. The more you believe you're a chicken coming home to roost, the most likely you'll be the one on the chopping block.

There are two ways to deal with this.

First, change your perception of how you view the business side of your job. For example, in all the years I've been in the tech world, I have never heard a software engineer say, "don't make FREE software or shareware! You're hurting the market for everyone else!" In fact, the very objective of most start-up tech companies is to get a footing by competing in any and every way they possibly can to get visibility and users. The makers of the popular video game Doom! became mega-millionaires because they allowed the first few versions of the game to be distributed for free over the internet. Then they charged money for it, resulting in billions of dollars of sales. Myself, I made a free version of my internet-based email software for five years (1985 to 1990) before I started to sell it for money (and then selling out to a public company, where I got my real lessons about financial analysis in the business world).

Next, don't look at price as the beginning and ending of the photo business. (See my previous blog entry for more on this, as well as this article.) Building your career is about a lot more than just submitting your images to a stock agency and being expected to get (what you believe to be) fair compensation.

Lastly, see the photo business world for the reality that it is, not as it used to be. Accept that business models change, and that the industry does too. Today, it's industry bifurcating into two distinct groups, creating opportunities at both ends. The mega-large distributors, and the smaller end businesses, usually individuals or small-scale specialty shops. At the big end, we'll see community-based photo-sharing and networking sites (once they get around to building the economics into their back-end web infrastructures). Sure, they'll be the large megastores, but that doesn't mean that smaller-scale operations won't work.

Indeed, the very nature of this bifurcation means that good individual photographers and small-scale photo shops will regain much of the businesses they lost to the larger agencies as they grew up. Here is where the name-brand recognition ("celebrity star power") really can work for you. This domain will be sufficiently large to garner a substantial group, and is probably where all the "seasoned professionals" who are currently writing comments like the one above will end up. The home that the chickens will come home to will be the new nest they build outside of the farm--presume they bother to leave the farm before they get to the chopping block. Unlike the mass distributors, success as an individual is merit-based, either through good photography itself, or good marketing, or good PR, or whatever. You only have to be good at one or more of those items, not necessarily all of them. An individual who charges more for the photos that clients "really" want, doesn't have to corner the market, or worry about price competition from microstocks or even the megasites. It doesn't even require huge sales volume. Just enough to take care of oneself. This is precisely how my business is done.

In summary, next time you think about Getty, don't get your undies up in a bunch. As the saying goes, "you'll see who's naked when the tide goes out." I suspect Getty's large acquisitions is causing them to strip a lot of clothes off in hopes of changing into a new suit under water while the tide's up. Whether they succeed is really not the concern of most photographers. My best advice is to adopt a new perception of self. Tech people had no illusion about what Microsoft was up to, but they didn't pacify themselves with feelings that MS would go out of business simply because their software wasn't as good as it could be, or as the competition. Nor did they dig their feet into the ground and complain that there were no jobs or opportunities. Tech people rise to challenges, and pioneer new ways of doing things and new business models. Photographers' day will have arrived when we never hear a peep out of anyone because Microsoft got an image from an average guy's Flickr stream, or because microstock agencies sell images for $1, or because Getty is having fire sale on its images in order to raise money again.