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

The photography world -- the business, the culture, the art, the politics, the technology.

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Location: Santa Cruz, California, United States
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Wednesday, March 17, 2010

2009 Year in Review: Content Remains King

In this first segment of my series, "2009: Year in Review," I discuss the role content has played on my business.

As I've preached since the dawn of my writings on the business of photography, the best way to make money on the web is to create as much content as possible. Having more inventory to sell is only a part of the benefit—indeed, a much smaller role than people may think in some cases, as I'll articulate shortly. The main reason content is so important is because it's the nucleus of all other revenue sources and business activity. Content plays an important role for search engines, which not only allow people to find you, but provides other sites with links. As links build, your search rankings increase, which increases traffic, which feed these various revenue streams. I discuss this principle in general in my chapter, Web-based Photography Business, which is part of my series of photo business books. (I discuss 2009's numbers more specifically in the next article in this series.)

As a general business model, I follow my own advice to others: Almost everything you do should ultimately result in new, monetizable content. Once you have it, you can make money with it in perpetuity, with very little (if any) additional overhead or resources. Outside of some initial short-term costs and overhead, your business can scale up to virtually any size by merely adding new content. Whatever short-term income or expense that may be involved in acquiring new content, it should be regarded as part of your investment in the future. (That is, the short term pay or income is less important as the long-term potential.) I'll get back to this subject shortly.

Though people monetize their content in different ways, I happen to choose to be the exclusive licensor of my own content. That is, I do not use stock agencies or other distribution models. I usually recommend this approach to people as a default assumption when considering entering into the photo industry, but one can certainly leverage the sales resources of agencies, if done properly from the outset.

Given that I have over 60,000 images in my online archives now, and the manner in which content can be leveraged so easily, it may come as a big surprise to learn that licensing of still photography only represented 5.8% of my total revenue for 2009, compared to 16.9% in 2008. But don't take this bad news.

First, still photography (the majority of the content on my website) is what I call the "gateway drug" for my clients. People discover my site primarily because of my still images, and end up making more lucrative transactions later. The fact that still imagery licensing has dropped as a percentage of total revenue is more due to the much larger increases in other, more lucrative revenue streams (discussed later). This further underscores the importance of having a robust and diverse business model that can survive (and even benefit from) shifts in the economy. In this context, the recession may have caused some people to spend less, but it also caused others to shift their spending towards me. Those "others" is a much larger population, even though each spends less on a per-transaction basis.

For example, my fine-art sales represented 19.5% of my revenue, up from 12.7% in 2008. This can be entirely explained by the economy and shifting demographics. Buyers on my site in 2008 and prior had been low-end art collectors and enthusiasts (see Selling Photography Prints), whose average purchase was $232 per order. By contrast, 2009 saw the average drop to $188 per order, but I got a lot more orders. Though I may have lost art collectors, they were replaced by high-end consumers were who shifted their spending from more expensive gifts (such as jewelry, etc.) to photography.


In light of my prior blog articles on the principles of economics for photographers, assignments are also extremely critical to the acquisition of content. Many photographers scoff at the notion of accepting "low pay" for assignments, or even doing them for free, but this is extremely short-sighted and self-defeating. Acquisition of extremely valuable imagery is key to long-term revenue generation, and assignments are pivotal to that objective. If you choose your assignments well, then the "fee" you charged—be it a lot or a little—is, and should represent a very small proportion of the revenue you yield from the photos you just took. In other words, if you're only revenue form an assignment is the assignment fee, you have an outdated business model; you simply cannot compete in today's modern internet-based economy, especially when millions of people are taking pictures themselves. That assignment rates go down may be an unfortunate side-effect of this growth, but it is merely a blip on the screen when it comes to a mature photo business model.

I'm not dismissing the potential income from an assignment; I never leave money on the table. If the client is well-endowed and I can negotiate higher fees, I do so. Mind you, negotiation is an entirely different subject, which I discuss in greater length here and here. But negotiation is only about optimizing what you can get, and should not be confused with whether you should take an assignment (regardless of price). In short, in mature business and career planning, assignments should be regarded as one-off payments for opportunities to acquire useful images that last into the future. When you amortize your assignment fees over the course of time, it should be negligible. (There are assignments I shot in 1996 that still generate revenue.)

Assignments represented 12.1% of my 2009 revenue, up from 4% in 2008. This substantial increase is due to both an increase in the number of assignments I took, and the amount I charge per assignment. As I said, I don't leave money on the table, despite the fact that I face the same market conditions as everyone else—namely, attempts by other photographers to under-bid me, even offering to shoot for free.

So, why would my clients pay me a higher rate than they used to, despite the increased competition? Because I provide something that cannot be supplanted by the lowest bidder: a track record. My experience, quality, reliability, and maturity in the industry is important to clients that cannot afford to risk getting a photographer to shoot something for free, yet end up with images they can't use, or other bad side effects of working with an inexperienced photographer.

I also choose clients wisely. I don't seek or need clients who can and should be serviced by emerging photographers. My motto is, "real clients don't need newbies." (Any photographer that complains about being harmed by newbies should have moved up and out long ago into the next tier of their profession.)

People often ask how I come up with my assignment fees. It's actually a very simple calculus of two factors: the client's financial condition, and the "value" of the images I can get. Remember, this doesn't govern whether I take an assignment, just what I charge for it once I deem it worthwhile. I emphatically dismiss all of the fee calculators that you see in books and on blogs. For example, most pros will say you should factor in your "costs" for any given assignment into your fee, whereas I feel costs are entirely irrelevant. I am never concerned with whether I'm making a profit for any given assignment because—remember—the true value of any given job is the longer-term potential with the images. Thinking about purely the fees for an assignment prevents you from focusing on career growth.

While I do generate good revenue from assignments, I will still shoot some for free. Last year I'd done two very important assignments, one was for free, and for another, I spent $3200 of my own money to fulfill the job. In this case, I knew that the imagery itself was invaluable. (And indeed it has already paid for itself in the aftermarket.) Better still, once my clients saw the results of the work, I not only sold them additional content that they didn't anticipate, but I got follow-on work to do exactly the same thing at twice my normal billing rate.

Still Photos

Over the past year, I've added about 30,000-40,000 new images, all
entirely from assignments. These include:

  1. Cambodia (Siem Reap, Cambodia)
  2. Laos (Southeast Asia)
  3. Croatia (Europe)
  4. Puglia (Apuglia) (The 'Heel' of Italy)
  5. Jerusalem (Israel)
  6. Paris, France
  7. Oregon (USA)
  8. The State of Idaho (USA)

Not included in this list are projects that I haven't yet gotten online, plus thousands of images added to existing galleries, mostly in and around California, such as Marin County (California), San Francisco, California, up and down the central valley, the The California Coast (USA) to the The Sierras (California). I've also expanded my topical pages, such as Doors and Windows, Stairs and Steps, Random Black and White Photographs, and other topics.


As noted above, and in keeping with Truism #4 of my treatise, the Photography Business (1998), my latest expansion into new revenue resources includes video. As you know, video online has been increasing, and the technology required to produce quality video has come down. This has given many people an opportunity to expand their licensing potential in ways they never could before. I'm encroaching into the video turf much the same way consumers have encroached on the pro photography turf when digital cameras and the internet became inexpensive and accessible back in the 1990s.

Prior to 2009, I licensed no video footage. Yet it instantly grew to represent 12.2% of my 2009 revenue. Most of it is time-lapse photography, which I'd produced mostly as a curiosity that I stumbled into when I discovered my camera's cable release had an interval timer setting.

Most surprising about my video revenue is the fact that I have never promoted or solicited my videos. In fact, aside from my blog comments, I never even made it known that I had video content. I hadn't upgraded or enhanced my site in any way to host or license video content, and the only access to it is this page, which is merely a collection of links directly to my YouTube channel.

Needless to say, the natural viral marketing effect of YouTube is self-evident.

One then asks: if my site doesn't support it, and I can't license it through YouTube, how am I conducting transactions? Email! This is exactly how my stock photo business started. From 1996 to 2003, I had never had a shopping cart—buyers simply emailed me and asked to license images, and they'd send me a check.

Of course, that wasn't that unusual back then—few stock photo sites existed, let alone had automated shopping/purchasing systems, so buyers accepted it more readily back then. Times are different now, and so are expectations. All the more reason why I'm as surprised by the degree of video licensing I've done using this archaic model.

That said, I expect to integrate video licensing on my site soon enough.

It should be noted that one reason why my time-lapse footage commands such a high price is because of the way I shoot it. Rather than use a video camera, I use my conventional still cameras and capture each frame in full resolution: 5600 pixels wide. I then string them together into video sequences using either iMovie (for presentation onto YouTube) or Final Cut Express to retain the full ultra-high-resolution. In fact, these clips are so high-res, buyers can pan and zoom within the sequences down to ¼ of the original footage, and still retain enough resolution to achieve 1920 HD. (And even then, most video buyers don't really need 1920 anyway.)

None of this is possible using conventional video cameras, nor is it offered by other video-production service providers. And of course, the quality is much higher than video footage because night-time image detail in a pro-level dSLR far exceeds anything in the video camera category, even the amazing Red One. This strategy anticipates not just every possible buyer, but prepares for the future as well.

One might think that this is a huge shift in my day-to-day shooting. That's where the best news is: shooting time-lapse footage is as easy as setting up a camera for a conventional landscape shot, but instead of pressing the shutter button once, I press the interval timer, and then go away. For all-night images, I just go to bed; for daytime footage, I use my other camera body and shoot stills while the time-lapse body snaps away every 3-5 seconds. This is not to suggest that all time-lapse is easy (or yields successful sequences), it's only to say that it doesn't interfere with my existing shooting patterns.

Note that the videos on my YouTube site do not represent all the footage I've done, either in time-lapse or conventional capture. I've done a number of productions for clients as an addendum to my standard still-photography services. So, I haven't really grown a new business model as much as enhanced my existing assignment services. Also note that my Canon EOS 5D Mark II, the body that I use in standard still photography, also captures HD video, where I do get short segments of conventional video clips. (Always adding to my "content.")

Lastly, don't assume by any of this that I'm moving towards video and abandoning still photography. The kind of video I'm doing is just the low-hanging fruit that happens to be available given my set of conditions (equipment, talent and clients). I am by no means a true videographer that could be hired by a television network to produce content for broadcast. That said, the future of video licensing looks very, very bright, and it would be something I would strongly encourage other photographers to do if they had a propensity for the technology and the clients that would use it.

Consulting and Business Development

2009 saw a big decrease in my consulting revenue largely because I'm shifting away from that business model. I've always used it as a vehicle for conducting research into new and interesting areas of the photo industry. However, my interests are shifting into new directions, and I'm finding that the information many people seek is becoming repetitive, and ultimately fruitless. I'll be posting future articles on some of those initiatives.

Nevertheless, one of the side benefits of all this research is that I produce a lot more content that's not only indexed well by search engines (which brings me traffic, which helps my content sales), but it also leads to publishing revenue. As most of my readers know, I have written a few books on the photo business, which continue to sell quite well on my website. Even though they are "old" by publishing standards, I wrote them with longevity in mind, as they address timeless business principles. In 2009, my book sales and other publishing revenue (see below) represented 12.8% of my income, compared to 14.9% of 2008 revenue. (This aspect of my revenue is and always has been rather constant.)

Another noteworthy fact is that my site outsells ever other book retailer on the net by many orders of magnitude. And I negotiated the contracts with my publishers with this in mind—I don't mind taking less royalty advances on my books in exchange for very advantageous discounts for direct purchasing from them. Though my contemporaries in the photo business publishing world may sell more books on amazon than I do, I sell far more total books because of the volume on my site. There's also the fact that I get $10-15/book, whereas my counterparts get maybe 10-15% royalties on those amazon sales. (I'm guessing these royalties translate to about $1.50 to $2 per book.)

Then there's the revenue I get from publishers who reprint some of these blog entries (condensed down to 1500 words—yuck!) in their columns and newsletters. Interestingly, most are from non-US publishers. (One was translated into Russian. I got a copy. It was weird to see.)

The next article in the series will cover Web Traffic and Visitors, Search Engine Optimization, and advertising revenue. Stay tuned.

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Tuesday, March 16, 2010

Understanding Economics (for photographers)

Of the emails I got from people in response to my article on the Prisoner's Dilemma (explaining how human behavior affects economics), two warrant public comment. One person said:

Photographers that take $200 assignments hurt themselves, disproving your thesis that people act in their own self-interest.

Ummm... How is it that we've established that they are hurting themselves? I personally have done assignments for $200 that involved spending 15 minutes photographing an individual for some personal use of their images. That's $800/hr., much better than most high-profile lawyers get. I've also done assignments for $200/day, but allowed me to get images that I was able to license for tens of thousands of dollars.

The truth is, such vague and open-ended propositions are, frankly, silly. Even entertaining the proposition of such singular and simplistic truisms about economics hardly warrants serious discussion. Therefore, those who do engage in these discussions are usually those who have the dual tendency of (1) believing the premise, and (2) of using it for political motivations. This creates a feedback mechanism where you do more of it... repeatedly and more passionately. The most immediate dividend is bolstering one's own image among the faithful. (See my article, The Economics of Controversy.)

It's not that people who dispel inaccurate economic theories are always intentionally deceptive. But there is a point where their own mental model of how things work becomes the filter by which all actions and statements are interpreted. If their basic premise is faulty, then this skews their perception of reality. Most importantly, it affects their ability to extrapolate simpler ideas into more complex ones, which would otherwise allow them to come up with effective economic forecasting tools. Is it really true that accepting $200 hurts yourself and the rest of the photo industry? Or does your intuition tell you that this is probably a bit simplistic? How does it strike you that most pro photographers believe this statement to be true?

And this leads to the other email I referred to:

Are there any important essays or textbooks that you think is worthwhile which distills a lot of what you have learned [about economics]?

I'd ruminated about this continually since I got it, and I'd even started (and discarded) several lists. Every time I come up with a list of great resources that help establish fundamentals, I then put myself into the mindset of an average reader (esp in the photo community), and I realize that it's not quite right.

For example, one of the items on the lits that I keep adding (and then removing) is PBS Newshour's Paul Solman. He is a "behavioral economist", and his continuing series on the Newshour program ("Making Sense" [of Financial News]) is must-see TV for anyone that wants to digest complex subjects down to the basics. To me, this is the easiest and most effective way to learn the fundamentals of economics, whether of a financial nature, or a personal nature. Yet, every time I send someone a clip from the show to explain things they don't understand, I usually get a response that their eyes glazed-over.

So, how do you teach economics to people who are predisposed not to understand it?

And that's when it finally dawned on me: There are two barriers to understanding economics. The first is to dispense with preconceived conclusions. Yet, this is often a paradox in itself. If your livelihood and financial future is at stake, there's a huge emotional hurdle that needs to be overcome to make sound decisions. It's like trying to teach good farming techniques to someone about to die of hunger: they don't have time or patience to wait a whole season or more for the next crop. They need to act now. They'll run towards the mirage on the horizon simply because it appears there's water there, despite the objective rational observation that mirages are well-known illusions.

The need for immediate results doesn't change the reality of economics. This is why I've always taught that photographers should never, ever enter into the business as their sole source of income. They should evolve into it gradually, until the income is more stable, reliable, and predictable. Anyone that complains that they aren't making enough money in photography has only themselves to blame for having dived into it before they were ready. There is no economic truism that others' actions or behaviors (such as taking $200 assignments) have hurt their careers.

The second reason people have these faulty notions about economics is more due to a primal human emotion: you're more powerful as part of a group than as an individual.

Since most photographers work for themselves, it's natural to assume that the best way to fight common adversaries is to unify: "all for one, and one for all". Once this mental model is in place, it becomes the sole and primary paradigm by which all observations are interpreted. Whenever anything comes up for discussion, it's no longer a question of whether the action itself makes sense, but whether it serves the larger goal of "unification." If someone accepts the $200 assignment, it's not whether or not it's a good idea, it's whether it supports the notion of unification.

Another common example is the question of "free." Studies continually show that "free" is the most effective marketing term ever. If you want to attract new business, use free somewhere in your marketing materials. Yet, most everyone in the photo community froths at the mouth whenever they see or hear about photographers taking assignments (or doing anything) for free. Naturally! As it runs counter to both the premise of "I'm hungry!", and "unification." Nowhere is the concept of "free" ever thoughtfully examined as a single element in a broader marketing campaign--an element used by literally every other business in the entire world.

Learning economic principles is one of the keys to developing good business techniques, including negotiating contracts, pricing products, marketing yourself, and other career-building practices. The good news is that the basic concepts of economics is really very simple -- almost intuitive. Indeed, the whole Prisoner's Dilemma experiment illustrates a truism about human behavior that should in itself not have to be explained--the lessons it illustrates should not only be self-evident, but one should be able to naturally extrapolate them to other models, such as the question about whether expecting photographers to stop accepting $200 assignments is actually achievable. One should not have to have an education in economics to intuitively realize that such a premise is impossible. Expecting masses of people to voluntarily resist accepting paid assignments is an unrealistic expectation of human nature. (The "genius" of the experiment is not so much the facts that were revealed, but that it could be explained so quickly and succinctly.)

For photographers to improve their own careers, and by extension, the health of the industry at large, they need to shift away from the notion that photography is governed by the same economic rules that apply to unions. Photographers cannot be expected to act in unison, and anyone that builds their business models on that expectation will be the first to fail. Secondly, understanding economics, requires an understanding human nature. The better you are at that, the easier and more intuitive economics naturally becomes.

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Sunday, March 14, 2010

Reminder: Cooperation is an Illusion

Before I get to my series on 2009 (Year in Review), I feel compelled to repost an article I published in May 2007 titled, The Photographer's Dilemma: To Cooperate or Not?

I feel compelled to post this now because of a new swell of populist rhetoric in some blogs and discussion forums that preaches that photographers should stick together, and not take low-fee jobs (or work for free), because such actions bring down the collective value of the photo industry and encourage clients to expect more for less.

This very idea is pleasing to believe, and always goes over well with pro photographers, but it runs counter to many proven economic principles. One of the pinnacle truisms of economics is called The Prisoner's Dilemma, which not only shows that such cooperation never helps, but it actually harms those who cooperate more than those who don't. This famous experiment demonstrates the basic principle:

You and a friend have robbed a bank. You almost get off scott-free, except for an old lady who "thinks" she saw you, but isn't quite sure. The police round you two up, but because the witness is uncertain, you and your friend agree that the best thing to do is not confess anything. That is, by cooperating, you can each assure that you will both be protected. But, the twist is that the police place you into separate cells, and interview you separately:

"If one of you testifies against the other, and the other remains silent, the betrayer goes free, and the other gets 10 years in prison. If you both stay silent, we can't convict you on the bigger sentence, but we can get you on lesser charges, giving you six months in jail. If you both betray each other, then you both serve two years."

Each of you has two options: stay quiet, resulting in a lighter sentence for each of you. Or, defect from the pact. The table below illustrates your options:

Prisoner B Stays Silent Prisoner B Betrays
Prisoner A Stays Silent Each serves six months Prisoner A serves ten years
Prisoner B goes free
Prisoner A Betrays Prisoner A goes free
Prisoner B serves ten years
Each serves two years

Because you're in separate cells, you have no idea what your friend is going to do. But here's where your mind plays logic games. If you knew your friend would stay silent, your best move is to betray, because you then walk free instead of receiving the minor sentence. If you knew your friend would betray you, again your best move is still to betray him, as you receive a lesser sentence than by remaining silent. Of course, your friend will think the same thing and therefore also betray you. Yet by both betraying the other, you both get a worse sentence than if you both stayed silent. So rational, self-interest plays into each of your decisions, making you both worse off than if you'd "cooperated" on the agreement by staying silent.

This experiment illustrates the most fundamental cornerstones of economic theory and has been tested in many different contexts, conditions, and demographics. It was originally conceived in 1950 by Merrill Flood and Melvin Dresher working at the RAND corporation, and became the basis from which John Forbes Nash derived his famed "Nash Equilibrium", which earned him a Nobel Prize for Economics. It has since served as the foundation for most businesses, governments, social policies, and many other aspects of everyday life because it reflects innate human decision-making. So long as there is no interfering body, policing of behaviors, enforcement of compliance, or any other factor to deter this natural human instinct, it is "natural" to serve one's own interests, and also to protect against harm from others by "betraying" them first.

If this is the case, why doesn't society collapse? Because we have an intricate and complex system of checks and balances. We have laws that keep people from stealing or harming each other, police to enforce them, social stigmas, and religious dogma, just to name a few. There's also the fact that society isn't necessarily a zero-sum game: people don't kill each other unless there's some gain in it. In fact, there's a great deal of self-protection in maintaining order and keeping peace.

What does this have to do with the photography business? Because there are more photographers than there is a demand for them. Therefore, it's a buyer's market: people will offer less and less, and there will always be photographers that will take it. Attempting to get photographers to "cooperate" is literally impossible. In fact, those who do cooperate will find themselves harmed worse, leaving an even greater proportion of those remaining unwilling to cooperate.

Unless there is a plausible, accepted, and recognized enforcement of compliance -- such as how laws protect worker's unions from both defectors within the union, and from companies to hire people outside ethe union -- it is literally impossible to effect change through mass cooperation. In fact, this is why union laws were created.

So why don't photographers form a union, or why doesn't the government set up some sort of pricing protection policy? The first answer is that photographers did have a union, but it was broken up in the 1970s for restraint of trade, which was triggered by two events: buyers were harmed because there was no competition in pricing. They had to buy photos only from union members, who, by law, were required to sell their photos at a set price. Secondly, photographers complained that they couldn't work because the union wouldn't let them in. So, too many people weren't working. A photographer's union caused far more harm than good.

As for the government setting up pricing protection, that's not its role or responsibility in society. It has never done such a thing, nor would anyone ever accept it.

Then there are those who feel that you just need most photographers to cooperate. But the Prison's Dilemma game has proven that the core, self-interest behavior has not only been established in small groups of people, but it has been shown that the greater the number of players, a smaller and smaller ratio of defectors is necessary to dilute the effects of the group. In any business model, whether it's a sole photographer, or a larger agency selling the work of thousands, this is this fundamental principle that instantly discounts all arguments made by photography interest groups that "sticking together" works. (That photo interest groups and educational systems continue to advocate this approach does more harm to those in the photo industry than anything else.)

In summary, photographers of today cannot possibly expect to achieve anything by attempting to cooperate with one another. Doing so will only cause more harm to those who try. Making money in photography is about developing a career, not by stringing together one paid gig after another. If you develop yourself as a professional, money comes, and you're paid on many qualities and skills well beyond "photography." If someone isn't willing to pay you more than the competition, you're either not worth it, or the gig is too simplistic to expect it. Real success is having a skill or quality that cannot be provided by the lowest bidder.

For a discussion on that, see Photography and Business Sense.

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