Lying about Photo Licensing

What was your annual income from photography last year? What was your average license fee? What kind of terms do you agree to? Do you ever give away work for free, or shoot an event gratis?

If you're like most people, your answers are highly unreliable, and most likely weighted towards the kinds of answers you would like to be true, especially if you believe you can give a "bump" in the right direction for the industry as a whole.

Unreliable answers from survey participants goes with the territory in the data analysis world, but in the photo licensing world, is it enough to distrust the underlying assumptions we have about the photo industry, such as the total market size, or the role of semi-pros and consumers?

The question rises to a new level given a similar awakening within the radio industry, according to this article in the New York Times (Dec 16, 2009). New, provocative and surprising insight about people's actual listening habits, versus what they claimed they were doing, has had dramatic effects on advertising rates, and even the existence of certain kinds of broadcasting.

According to the Times article, what has propelled the industry into a flurry of self-examination was a recent conversion from "measuring ratings through surveys to monitoring listeners electronically using so-called Portable People Meters."

Among the findings, the Classical Music market dropped by 10.7%, Talk Radio by 2.6% (and consists of 80% conservative commentary), and more people listen to "light rock" and "easy listening" than they ever admitted before.

"People tended to look at it almost like an election -- they would vote for the things they liked," said Jaye Albright, an industry consultant with Albright & O'Malley, a radio consultancy.

Classical music, being one of the largest music forms and radio station formats affected by the new data, is probably most closely associated with the photo industry because of the impassioned opinions by its own advocates. According to the Times article, classical music is perceived by its advocates as being an important civilizing force, and an "art form that is extremely related and important to our cultural history," Joseph W. Polisi, president of the Juilliard School, said.

But, as the objective and indifferent truth-telling meters indicates, strong belief in the culture and the importance of the art for does not necessarily translate to people's actual behaviors.

Saying you support a point of view, even though it's not backed up by actions, is one thing. Another is that people actually engage in behaviors they wouldn't admit to.

For example, more people listen to oldies, country and "light rock" than they have admitted in surveys. Especially men. In fact, under the survey format, 34.7% of men volunteered that they listened to soft rock, but when they were using the meters, it turns out that 40.1% did -- a 16% jump. This has a huge impact on the rates advertisers are willing to pay, and what stations are willing to broadcast. And this affects where investment goes, and so on.

Indeed, these discrepancies are consistent with findings within the television industry, when it moved away from volunteers hand-writing their viewing habits to being given electronic monitoring devices. As Arbitron (the ratings company) put it, "people overstate listening to stations they felt reflected better taste."

As an objective photo industry analyst, I immediately see an identical phenomenon in the photo industry. I've long argued that most in the photo sector use unreliable data collection methods, survey models, and sample sizes that have never represented the population at large.

To wit, most pro photographers and trade organizations cite two common sources for their industry data. Cradoc Software, makers of FotoQuote, a software application that helps photographers come up with tools to help price their work based on prior sales figures they collect from the industry. However, their data is collected from pro photographers who volunteer licensing information, which, as we should have learned, is highly unreliable. And it's made worse by the unrepresentative sample size of the population of those who license images.

Other perceived reputable sources include surveys done by trade publications like Photo District News, and those from Jim Pickerell of selling-stock.com. In those cases, data is collected from either traditional stock agencies or self-proclaimed pro photographers (as defined as someone whose income from photography is more than 50% of their total annual income). The fundamental premise here is that they are the prime and statistically viable representatives of the bulk of all licensed images.

This then raises this disturbing question (one that I've been raising for years): what should one make of his analysis if it turns out that agencies only make up 60% of the market? 30%? 15%? Or Less? Would stock agencies start focusing attention on consumers? Would non-photo related media companies start eying photo agencies and social networks as a new, untapped source for potential revenue? Might trade associations and publications shift focus to the consumer market?

Perhaps so, but they can't do it just yet. Knowing that something is wrong with the old data does not draw of map of what the correct data looks like. Real numbers still need to be gathered.

And we're getting closer to that all the time. Using image-recognition technologies from PicScout and Idée, the web can be crawled and images can be examined to determine their source. PicScout has the advantage here in two ways. First, they have already fingerprinted and indexed most images from all the major stock agencies, as well as the larger microstock sites. In one fell swoop, they could examine images used commercial websites and calculate this critical piece of information:

What ratio of licensible images can be attributed to a stock agency?

When I say "licensible images," I'm referring to image uses where there is no legal ambiguity. That is, I'm not talking about social networks, photo-sharing sites, personal web pages or other sites that might host images in a manner that could potentially be permitted under Fair Use.

(For the record, using someone else's photo on a photo-sharing site is not easily defined as "infringement" because it depends on how the image is displayed, or other claims made by the individual that put it there. Many such uses are protected under Fair Use, as they involve critique, demonstration, education, or other kinds of factors that may not constitute infringement. our goal here is to examine only sites where images use are not legally ambiguous.)

This quick snapshot of information might also give us a sense of which agencies are taking which slice of the pie. Are Microstocks really eating the mega agencies' lunches? What about the Creative Commons?

Obviously, this is not going to tell us about license fees, or whether the photos are sourced from pro photographers or consumers, or whether images were stolen or licensed. But, we can get a far more reliable picture of what percentage of commercial images are actually from stock agencies.

While PicScout is currently in the best position to do this analysis, and that the data is useful, there are caveats, as it suffers from two major setbacks: 1) it only examines "commercial" sites, and 2) it does not track real-time use of editorial images sufficiently to have a reliable effect on analysis results. These caveats are important because they cannot be used to draw conclusions about the industry as a whole--only about the use of commercial images buy commercial websites.

And while commercial images and uses are very important, it should be noted that the editorial market is far and away much larger than the commercial market for images, largely because more content is used, sites publish more frequently, and in larger volumes. It is also more common to use images from sources other than major stock agencies, since the abundance of such content is higher, license fees are lower, and liability risk for infringement is negligible. Gathering data about image use for editorial uses requires more frequent crawling, more frequent updates of editorial imagery served by both agencies and photographers and underlying technologies that PicScout does not say they perform.

But again, these caveats don't invalidate findings in the commercial sector. In fact, I think it'd be more like the quiet, soothing alarm one uses to wake up than the blaring buzzer of a dime-store clock. But either way you look at it, the industry does need to wake up, and this data can have the most sweeping effects on the general understanding we have about the photo industry like nothing we've seen before.

If so, what happens next?

In my last blog entry, titled, Weathering Climate Change within the Photo Industry, I posed the question, "How would the industry behave if it turned out that their assumptions about the industry was entirely wrong?"

Since it is fast becoming within our technological grasp to actually uncover this information, I strongly suggest that the pundits within the sector consider that question. Take a long, hard introspective look at such beliefs and consider how strategies would change if it turns out that its core understandings and assumptions are misdirected. It won't be long before even more advanced research methods will uncover even more detailed information, such as actual license fees, the role of search engines in the licensing path, effectiveness of keywords and other metadata, and so on.

This will raise the volume of that alarm clock even more. And there's a reason for such a clock: you don't want to miss the plane.

Weathering Climate Change within the Photo Industry

Unless you've been hiding in the smog in LA, or deep inside a coal mining operation in Pennsylvania, or in an oil slick somewhere near Alaska, you've probably heard about the controversy over Global Warming. There's been a lot of bickering on whether it actually exists, but the key sticking point is what role humans have played in the process. Do they have a material effect on climate, and, if so, to what degree? Or is the world simply going through its normal cyclical swings that it's done for billions of years?

The answers to those questions dictate whether, and to what degree, we need to do something about it. But problem isn't so simple for many reasons and many levels. And it's the worst kind of problem to have because all the solutions are not only very expensive, but the consequences for the wrong decision--in either direction--can be dire. If the problem is real and we don't react strongly enough, global warming can have devastating effects on life itself. If the problem is overstated and we overreact by forcing new and expensive technologies and other changes upon world governments, there could be severe economic hardship that itself leads to worse conditions, such as social and political instability, which leads to famine, war, and possibly the end of Facebook.

Then again, we could just weather the storm till mother nature swings back to the kind of normalcy that we've become familiar with.

What does this have to do with the photo industry? Unless you've been hiding inside a darkroom since the 1980s, you've probably noticed that there's been a dramatic change in every aspect of the business, ranging from photo license fees, to distribution (the internet), to the legal and social sea changes. At the heart of this debate is what role--if any, and to what degree--has the "consumer" played in this climate change? And, how do we react to that? If consumers' role is real, do we alter our "best practices" recommendations as professionals, what technologies we use, how we deploy our imagery, who should represent us as an industry, set new strategies for pricing models? Do we actually embrace consumers as our partners as both producers and consumers of imagery within our business climate? Or, if the consumer's role is minimal, then how do we react to the deteriorating conditions we see?

Then again, we could just weather the storm till mother nature swings back to the kind of normalcy that we've become familiar with.

What the photography industry and global warming and climate change have in common is that they are excellent scenarios for those who study behavioral economics, the field of research that examines how cognitive and emotional factors affect people's decision-making. What people choose to do about global warming--or about the effects being felt in the photo industry--is based in large part by the backgrounds (and biases) of the participants. Odd though it may sound, the "hunches" that people use to make business decisions, stem from predispositions and prejudices shaped by formative events early in people's lives. They establish certain philosophical principles, which serve as one's compass in their business decisions. You don't see medical doctors successfully running cigarette companies, or vegetarians successfully running beef factories, or war pacifists successfully leading infantry platoons into combat.

The question for photographers facing the climate-change conditions within the photo industry is whether their predispositions would allow for taking those actions necessary to survive, unpalatable though they may be to their historical traditions.

We can forecast this in some way by examining how they handle discussions on key points germane to the fundamental issues being discussed. Do they hone in on these major points, or do they get mired in nit-picking unimportant details that don't affect the final analysis? What we find is that most disagreements are not really about details, but in the philosophical positions of the opposing side.

The true test of this can be seen when you ask people how their own views would change if they were faced with the hypothetical premise that their own position has been disproved. For example, how would climate-change skeptics propose we solve the global warming problem if we could wave the magic wand and say, "yes, humans are responsible for this, and the world is coming to an end quickly." Would they turn into born-again converts? Would they say, "You've convinced me. Now, let's put caps on emissions and force companies and countries world-wide to migrate over to clean-energy alternatives."

That won't happen. Of the discussions I've read in a variety of media, their response can be summed up this way: "How are we going to pay for changes that doesn't create a worse situation? We're already in a recessive economy, and this kind of investment will make it worse. Companies and third-world countries would harm the global economy worse than the housing bubble did in 2008, causing global economic collapse and massive unemployment, forcing companies and countries alike to swing in the opposite direction: migrating back towards the cheapest possible energy alternatives, which are more wasteful and harmful than today."

Then there's the other side of the argument: What would the climate-change advocates say if their premise was disproved? That the world's climate is doing whatever it will do, irrespective of human activity, and nothing we do will alter it. Do you think they would swing over and say, "Well, Ok then, let's just keep going on the track we're on."

That won't happen either. They'll say, "It's got more to do than just climate. All sorts of human ailments ranging from cancers to other diseases are the result of waste byproducts in the air, water and land. There are unsafe working and living conditions in every country in the world, not to mention the huge costs in clean-up efforts. There are lost economic opportunities in producing new clean-energy production, not to mention the future technologies developed as a byproduct of research and development. And then there's just the plain aesthetic toll on the environment. Waste is ugly, which itself affects social growth, initiatives and investment."

The truth is, there's legitimacy on both sides of the argument, but it's gotten so heated and partisan--as has our culture--that people feel compelled to simply dismiss the other side's ideas out of hand, and just argue minute details instead of substance.

This is why I try to avoid point-by-point arguments with people who have fundamentally different philosophical foundations. It's not that I disrespect their positions or philosophies--reasonable people can disagree. But discussing such things in an open forum can be fruitless because, even if there were hypothetical agreement on certain facts, opposing sides will simply argue any and all points.

For example, in a recent blog entry I wrote entitled, Why there's no one-stop shop for photo buyers, I postulated that the photo industry is "immature" because it has not yet achieved certain kinds of efficiencies that other, more "mature" industries have, such as electronics.

This prompted a response by John Harrington in his post entitled, One-Stop Shopping for Photo Buyers - Too Complex and Fractured. His post took exception to many of the individual details of my article. The argument strategy is a common one where the real goal is to undermine the underlying premise by discrediting the facts that lead to it. But the details he chose were not germane to the larger point.

For example, John says, ...photography has been in the marketplace for far and away longer than electronics; and later, the photo industry is mature, but fractured. He concludes by saying that photography is a different media than electronics, and that accounts for the differences.

All fine points, but individually unimportant to the larger argument. In fact, I would propose that we don't really disagree on the main truism: pricing inefficiencies exists, and that is due to in some part to a fractured market. Posturing a position of disagreement and discredit for the purpose of undermining a more fundamental principle that he disagrees with is one thing, but the net effect of his post is counter productive: it perpetuates the partisan divide. His readers will be even further convinced that I am off my rocker, and my readers will continue to nod their heads in disbelief that the pundits in the photo industry still have their heads in the sand.

This doesn't lead to addressing the real problems that our industry faces.

Thought we may disagree on the terminology we used to describe the conditions that we both see and agree on, what he didn't address was my larger thesis: why is the market is "fractured" in the first place? (I called it an "immature industry" to be in keeping with more conventional economic terminology.)

So, how do we get the discussion back on track? We can begin by addressing one fundamental disagreement that has fathered all the other disagreements:

What role does the consumer play in the global economic effects we're seeing in the photo industry?

Here are the opposing positions:

1. I'd been arguing since the 1990s that the internet and digital technologies created an environment where consumers would be playing an ever-growing role in the economics of the industry, and that if photographers don't accept this premise early on, and change certain fundamental business practices, perceptions, and other strategic relationships, they would lose control over their own domain. There would be a time when all economic, social and legal matters important to pro photographers would lie outside their sphere of influence.
   
   
2. The counter-argument has been (and continues to be) that pro photographers still account for the bulk of licensed images, and stock agencies for the bulk of image sales. Therefore, economic, social and legal conditions are all manageable within the pro photographer community at large. The challenge has rather been that it's a large and decentralized group of mostly independents, each of whom represent a large swath of disciplines. Getting consensus on how to address certain things may be logistically hard, but doable, and outreach is expensive and education difficult.

These diametrically opposing views of the industry is the source of many, if not every, disagreement I've had with those in the photo industry.

For example, On the topic of price inefficiencies and erosion, I contend that it's due to the huge and disproportionate number of consumers who've entered the market as both suppliers and buyers of image content.

The opposing view holds that it's because too many microstock agencies came online and pros and other agencies were forced to drop their prices.

(My retort to that argument can be found here.)

Depending on which of these two premises you buy into will govern decision-making for your own economic future (if you intend to make money as a photographer). And which of these two premises you choose can be predicted by behavioral economists: cognitive and emotional factors govern decision-making, and those decisions are based on philosophical foundations. My philosophical foundation rests in a belief in open markets, strong competition, and no reliance on peers or "all for one" cooperation to succeed. Therefore, I responded to pricing pressures early on in my career by altering my business model to focus on higher volume, rather than higher per-unit pricing.

The traditional industry professional has philosophical foundations that holds that pros still control the market--not the consumers--so to maintain price stability, cooperation must be maintained through solidarity, which implies not undercutting other pros, never give anything away for free, and acting as a collective in all matters.

You name the "event", and I personally will behave diametrically differently than the traditional pro: Creative Commons, Orphan Works, copyright protection, marketing methods, use of "free" in sales and/or promotion, the use of portfolios, and so on. Every single aspect of the photo industry will be perceived differently between me and most photo industry pundits simply because of this sole, root disagreement about the role of the consumer.

Yet, the elephant in the middle of the room is still a common climate-changing event: pricing, copyright compliance, and distribution have changed. Our greatest challenge is akin to that facing those in the global warming dispute: it's not whether we can come to agreement on basic, core points, it's whether we can move forward with proposed solutions.

I agree that disassociating the two is counter-intuitive. How can you come to agreement unless you agree on the points that lead to particular proposals? Well, the first thing to realize is that one's one philosophical biases may not yield the same perceptions on such points. The different use of terminology between me and John Harrington when referring to price inefficiencies, for example: an "immature industry", or "too fractured?" Does it matter? Yes, points are important, but focusing too much on them can stall forward movement. Sometimes, solving these issues is more like solving a maze: start at the finish line and move backwards.

The way to test that theory is to probe what the either side would say if the underlying premise (the role of the consumer) is or isn't true. I'll start:

1. Let's say that my premise is false: that the role of the consumer has not been substantial enough to affect pricing or other issues facing the industry, and that photographers have a direct and strong influence on shaping the future of the industry. In such a case, I would say that the basic philosophies of the trade associations and recommendations by pro photographers are well-considered and actually spot on. The real problems are political: there's lack of unity among the trade associations (they should be merged into one or two), there's too much homogeneity (dissent and differing views are not well-accepted), and there's a deficit of intelligentsia. (No one does true research or recognized economic modeling; most studies I've seen wouldn't pass muster in basic college statistics classes, mostly because of the sample sizes of surveys aren't representative enough of the population being studied.)
   
   I've written longer manifestos detailing all these ideas, most of which were published in the 1990s, back when I did believe that the photo industry still had such control. (I was warning that, unless these changes were adopted, then the industry would lose control, which I believe happened in the early 2000s.)
   
   
2. I now put the question to the other side: "If you believed that pro photographers were so outnumbered by consumers as both buyers and sellers of photography, that pro photographers and trade associations has absolutely no material influence on all aspects of the industry--economic, legal, social and legislative--how would you alter your approach to addressing the "climate" problems in the photography environment?"
   
   You have 30 minutes. Use a #2 pencil. Go.

If your answer to that is, "If we're entirely powerless, what point is there to answering the question. There's nothing we can do!"

Au contraire, mon frere. There's plenty you can and should do, and these come in two forms: inward and outward.

Looking inward, assistance to photographers should include helping them better compete under conditions where their main competition is no longer other pros who will recognize traditional professional courtesy. Marketing, pricing, promotion, assignments, contract negotiation, and everything else necessary to succeed at photography is different when you're dealing with a base of photographers that don't recognize past professional principles. I won't get into the details of that here; my books and articles from my blog index already discuss these in depth.

Then there's external outreach. I'd recommend pro photographers and trade groups try to recruit consumers, to get them into the fold, to be more and stronger advocates for the cause. Initial tasks would include lowering membership fees to $25/year, advertising and promoting photo trade organizations in consumer trade publications, having photo trade publications highlight and profile consumer-photographers who themselves can serve as role models for others, contracting with mass consumer marketing and PR organizations to help re-educate traditional pros and trade groups to better understand consumer behaviors (as buyers and sellers of photo content), and so on.

In short, one must appeal to non-professional photographers en masse, and you do that by understanding their personal goals and desires, not by trying to change and mold them into the old world.

And it's this very premise that will alienate most pros and trade organizations. Their visceral and palpable response is rooted in the core philosophical rub--a disagreement of gargantuan proportions. Pros and trade groups will not be happy that consumers will not accept the traditional pro photographer mantra. Consumers and non-professional photographers are not opposed to "free" to promote themselves--because it works. They are not opposed to "undercutting competition"--because that's how the open market works. They are not worried about entering photo contests that ask for "rights grab" terms because this is what gets them visibility. They are not opposed to "work-for-hire" contracts, because those pay the bills. They are not going to sign up for a "solidarity" mindset, because a successful market is one that advocates strong competition. Photographers must dispense with the "union" mindset.

Now, I fully appreciate that all this is a hard pill to swallow. But, the climate is changing--the question is, "what are you going to do about it?" If one does not accept that the consumer's role is significant, there's not a whole lot of discussion to be had. But, if one does accept the premise, the industry's philosophical paradigm must shift.

The behavioral economist in me predicts that most pros would simply bow out of the business all together. Their "cognitive and emotional faculties" would not accept such a premise easily, and the cognitive dissonance would compromise their philosophical foundations.

Then again, we could just weather the storm till mother nature swings back to the kind of normalcy that we've become familiar with.

Off-topic: Gift Cards

[ Update: The New York Times wrote this column several days after I posted this entry. It's full of detailed industry data. ]

Though I never talk about it, I had a consulting contract a very long ago with a company that wanted to do something in the credit card business. I was involved for about a year, and the while the idea itself was great, it never got off the ground because of a critical "last puzzle piece" that couldn't be solved. I eventually did (and filed a patent), but it was after the company fizzled, and I had no desire to enter into the "payment" business. So, there it stays in my history pages.

But just today, I was talking with someone that said the following:

"I've heard that prepaid debit cards are really bad gift ideas..."

This prompted me to vent a long-standing issue I've had with credit card companies.

The main reason people don't like gift cards is because when the card gets down to about $10 or less, they become virtually unusable. Although you can go to a store and say, "charge the first $7.43 on this gift card and the rest on this regular credit card," it's very rare that people do this. And you certainly can't do that online. So, your $50 gift turns out to only be worth $42.67, and Visa/MC makes a handsome15% profit.

In this sense, gift cards to visa are the victim of their own success. People see the lack of value in the cards, and don't adopt them nearly as much as the card companies would like (or had expected).

The question is, what can card companies do to raise the rate of adoption while not giving up too much on the margins? Remember, the card companies *don't* want you to use up all your credit--otherwise, they give up the margins that makes them worthwhile (to the card company). And they don't suddenly gain new customers just because someone uses a gift card.

Now, one could argue that, as long as they make the same 1-3% margins on the gift cards as they do with regular cards (this 1-3% is the rate that the merchant pays on the total cost of your order), that should be good enough. Well, administration of the gift card program is a bit more expensive, and besides, there's plenty of room to optimize margins anyway. So, don't get me wrong: I don't fault the companies for using gift cards for profit motive at much higher rates. I fault them for not being more intelligent about this in ways to service both themselves and us, the consumers who could benefit from them. Their challenge is to increase overall revenue by finding the sweet spot in the increased adoption vs. the decrease in margins.

The way to do that is by making it easier to use that unused credit in high margin products or services, such as a visa-run online store where they sell products from co-marketing partners (where the co-marketing effort yields more revenue). This would be especially useful for non-physical goods, such as downloadable products, like music, games, movies, etc.

Or, allow gift card holders to apply unused dollars to their Visa Rewards program, which is pretty good, albeit under-appreciated, largely because most people opt for other programs with their visa cards, like airline miles (see below). This would do more to raise adoption rate of the program and potentially convert users to their "real" card. (That should ultimately be one of their prime motivations, yet it's not effectively promoted that way.)

Card companies should also consider developing helpful payment services that make it easier for online retailers to accept multiple card payments, or partner with paypal or google to allow users to register these cards in exchange for a portion of the margins.

Industry research shows that most "reward" programs usually yield the consumer about 1% of his money back, but getting that value is not entirely easy, nor is it immediate. It takes time. A research study I read in the NYTimes some years ago showed that the best programs are those that simply pay you cash back--even at 1%, this was best for consumers. Ironically, airline miles yield the least return, but people opt for them because having more unused miles gives other benefits like premier status that allows access to airline clubs at airports, and advanced positions when upgrading and other things -- all these require high mileage values creating a disincentive to ever "spend" your miles. This makes the "statistic" that credit card airline programs yield low rates of return a bit murky.

The point about reward programs as anyone in the consumer business knows, it garners much more revenue and profit than the 1% you give up to attract the users. Yet, gift card programs don't even attempt to tie into this. Such programs and co-marketing efforts could be more profitable if the card company was willing to make only 5-6% margins (instead of 15%) and offset that with a 10% increase in the rate of adoption, if they were only kinder to the consumer.

Ok, that's my vent. This is not a topic (or field) I will be watching at all, unless it happens to come across the mainstream press. I'm more than happy staying out of this business.

Time-Lapse of the Sky over Puglia, Italy

Once again, I have new time-lapse videos up on YouTube, and the latest is this series of scenes from Puglia, Italy (the southern "heel" of the boot):



If you don't see the video displayed above, see this link.

On a separate note, I'm also offering a 50% discount on print orders, and an additional 10% off on book orders through Christmas. Use the discount code "xmas" when placing an order.