Interesting feedback to my "Climate Change" post

I had an email exchange (and then a phone call interview) with someone that I found interesting and provocative. Here's the background:

Two postings ago, in Weathering Climate-Change Within the Photo Industry, I wondered what the reaction might be among a group that I call traditionalists (pros, trade organizations, pundits and bloggers) if it was substantiated that most licensed images did not come from pros, but were bought and sold on a peer-to-peer basis between everyday non-professional photographers.

Then, in the post that followed, Lying about Photo Licensing, I said that we are getting closer to actually learning the truth about the pro-to-consumer ratio in photo licensing due to advancing image-recognition technologies. In fact, because Picscout has already fingerprinted and indexed most images from all the major stock agencies, as well as the larger microstock sites, they could examine images on commercial websites and instantly calculate the ratio of images that came from a stock agency versus those that don't.

Remember, I'm not trying to find the number of images that are stolen, or that come from pros vs. non-pros. I'm only talking about the number that come from agencies.

If it turned out that, of all the images found on commercial sites, only 10% were known to come from stock agencies, it would turn the entire industry upside down. It would change everyone's perception of agencies' influence on everything from licensing control to price controls to how people promote themselves, career tracks, and most important of all, future investment. Attention would immediately be diverted to the question of where does that other 90% come from? Sites like Flickr (Yahoo) and other photo-sharing social networks would have representatives from major investment firms and stock analysts looking to buy them lunch and ask a few questions. And of course, execs at Getty would be getting phone calls as well, asking, "where the heck are you?"

So, then I get this email:

...Your suggestion that PicScout could put to rest the provocative question about what proportion of licensed images come from pros is a bit off. First of all, PicScout is hardly an objective source. It's sole source of income is from stock agencies, who themselves would not like to see such information become public if it turned out to be true. It'd be like cigarette companies agreeing to let its medical research data be released back in the 1960s. Second, even if PicScout were to do research, it's not like they're equipped to do objective research. Their list of commercial sites to search are carefully chosen to meet the objectives of their clients, the stock agencies. Are they looking at sites that are known to use agency images so they can be tracked and billed in an automated way? (PicScout's website says they do image tracking, which isn't entirely for the purpose of finding infringements.) Then there's the credibility of their image-recognition itself. There is no published information on false positives and false negatives. There has been no public scrutiny of PicScout's technology, unlike Google, for example, where objective observers can look at search results side by side with Yahoo and Bing.

Be careful of what you wish for: if PicScout were to actually do a survey, their results would be believed, despite these problems, and you would have a very steep, uphill battle, trying to dig your way out of this tainted study because the photo blogosphere would have a field day with you.

After this, the discussion went to the phone. He said that his company has financed research in the same areas I've blogged about: the trends of photo-based ads in magazines, pro-level camera sales, spot interviews with design firms, etc. And they have come to similar conclusions I have about the total size of the photo industry. But tackling it is very hard. It's not like finding a secret gold mine. Once anyone takes a new direction on the internet, all eyes are watching. And since this is only an area where a big player can go, no one wants to move till they know they can be way ahead of the pack when the others notice.

This prompted me to ask, "if you're speaking so bluntly to me about this, aren't you worried about word getting out to the existing stock agencies and other industry players?" To that, he pointed me right back to my own blog post, The Economics of Controversy: "there are just too many players with a vested self-interest in keeping things exactly as they are." He said, "You love talking about behavioral economics, and the stock photo industry is a researcher's dream. No one in the existing industry has either the technical or financial wherewithal to tackle a $25B market, but chances are, they will be quickly swallowed up and made small divisions within much larger companies that know how to scale up."

"Oh really... like the music industry? It's not as though they're dealing with the internet all that well," I replied.

To which he replied, "yeah, that's why everyone's scared to get started until they know they can avoid that problem."

The Economics of Controversy

There’s an old folk tale that tells of Neil Armstrong having sent a letter to the leader of the Flat Earth Society with an enclosed photo of the Earth taken from space. His one-line inscription simply read, “SEE?!” To which Armstrong got a reply saying, “We never said the Earth wasn’t circular!”

With some people, there are arguments you just can’t win, no matter how persuasive the evidence. And most of the time, such arguments aren’t worth having anyway.

Other arguments are worth having because you really believe in the cause.

Some arguments go on so long, they seem both endless and senseless. Remember the Monty Python skit about the man who pays another man to have an argument with him? The first thing they start arguing about is whether or not he even paid. “No you didn’t!” “Yes I did!” “No you didn’t!” “Well if I didn’t, why are you arguing with me?” “I could be arguing in my spare time!”

And then there are those arguments that turn into “controversies.” These are special arguments where the issues galvanize core groups of supporters on both sides, tempers flare, and before you know it, it’s no longer a Monty Python skit.

Though it may be odd to see it this way, here is where new economic ecosystems begin to form. As a controversy gains momentum, more and more people benefit in one form or another by keeping it alive. If it garners enough critical mass, real money can be made, social fabrics can be formed, and political affiliations created. All of these represent different goals and objectives for the individuals involved, which make the intertwining of motivations, methodologies and psychological dispositions fascinating for behavioral economists: those who study people’s behaviors as they pertain to market conditions and self-interest.

In the photography world, there is no better place to study behavioral economics than in the controversy surrounding the Orphan Works Act. And from these observations, one can look for known patterns of behavior that themselves help forecast where there may be investment opportunities.

The Controversy: The Orphan Works Act

The OWA happens to be the perfect controversy because its complexity involves both law and economics, each of which are beyond most people’s understanding, even the leadership. This makes it ripe for oversimplification, misinformation, disinformation, and persuasion.

In the case of the OWA, many who preach aspects about it simply aren’t educated enough on the fundamental principles involved to understand what they’re saying, and the “base” followers are not the type to ask questions—just to “believe.” Straw-man arguments are thrown up all over the place. The classic example is one that I mentioned earlier here: "someone can now steal your photo and claim it's an orphan work, and you have to spend $50,000 filing a lawsuit just to prove them wrong. No photographer can do that!" This is the galvanizing argument that's now settled into the mantra in photo discussion groups.

As my blog post points out, it's a senseless argument because someone could steal an image and claim anything, not just that it's an orphan work. The summary of that article is that it's the infringer that has to spend $50,000 in court to defend his claim that he's protected by the Orphan Works Act. The pragmatic reality is that the infringer will pay the photographer a settlement, even if he thinks he's right.

Yet, none of this very basic, standard legal information is disseminated by anyone in the artist community hierarchy, the photographer community in particular. In fact, quite the opposite. But why?

Once again, it's all about behavioral economics: there are benefits to keeping the issue a controversy, and in keeping the controversy alive.

The Players
Several unique sets of conditions converged at once that allowed the OWA to become the nuclear power station within the photographer community. The stock photo industry has been suffering from economic hardship for quite some time, which itself has threatened industry leaders and organizations, who naturally respond by finding galvanizing issues to maintain control and continuity.

At the bottom of the ecosystem are the core (“base”) believers who are told they have a stake in the game: "If the OWA passes, you will lose your rights to protect your images." The base believers buy into this, and reap psychological dividends by being part of an impassioned movement against the OWA. It’s in this ecosystem where there is a rather dogmatic and cohesive community that typically responds well to populist rhetoric, while being derisive of non-conformist views. In fact, the use of populist rhetoric is prototypical among leaders of economically distressed groups.

On the sidelines is a panoply of catalysts, eager to participate as well: reporters who objectively journal the events, investigative reporters who tell the story from behind the scenes, lawyers and media consultants who work on behalf of their clients to effect a certain outcome, analysts who churn the data to assess the likelihood of various outcomes, and the investors who seek opportunity. Everyone has a vested interest in the process. And therefore, such people become participants.

I too am a player in this eco-system. I’m an analyst, and my economic benefit is the clientele who pay me to do objective research so they can make financial decisions (investments or divestments) based on the likely outcomes of certain events. The Orphan Works Act is one such event. Since it also happens to be a hotly controversial one, at least within the photography ecosystem, the question for these investors is not whether the OWA puts the future of image licensing at risk, but where’s the opportunity for investment? Smart money goes to companies and individuals that know how to capitalize on opportunity. In this case, opportunity lies within those organizations that have a solid, realistic understanding of the state of affairs. My job is to find those opportunities.

Analyzing the Ecosystem
To understand how I do this, I talk to people. For example, I had a conversation with a lawyer who has been rather outspoken against the OWA on behalf of a trade association for a different industry. I asked, “If the OWA passes, and if a case came up that you had to prosecute an infringer who tried to hide behind it, what would your strategy be for dealing with this?” Essentially, I was given a more balanced legal analysis on why the OWA isn’t a threat to artists. The response I got was used as the basis for this blog entry, modified to address the photo space:
http://www.danheller.com/blog/posts/orphan-works-act-courts-and-law.html

So, I then asked, “Why don’t you say anything like this publicly?” The response: “Because my client doesn’t want me to. I’m paid to make these statements and support the objectives of my client.” To which I replied, “Why aren’t you telling your client to soften up on the OWA?” And then came the unsurprising answer, “Because it galvanizes their membership. Renewal rates are up, and they haven’t seen as many new members join in years.” One can only surmise the additional social and political dividends the leadership receives as a result. Short-term economic benefits clouds longer-term judgment. Text-book Behavioral Economics at its finest.

Needless to say, the companies and individuals that hired this lawyer would not be considered “worthy investments” by my clients. (There’s nothing wrong with the lawyer, of course; but that’s not who the investors are interested in.)

To illustrate a more tangible, but more complex example, recall the time when Getty was looking for a buyer to take it private. The company was public, but its share price was dropping quickly, revenue and profits were evaporating, and the nature of stock photography itself was going through a major transition.

One particular suitor asked me to look into an element they believed to be a vulnerability of the company: the economic effect of being “responsive to photographer demands.” Because the investor believed that Getty made key strategic decisions based what its photographers wanted, the question was whether photographers' demands were economically sound. That is, if Getty appeased photographers, would they make more or less money as a result?

A hint that gave them concern was Getty’s acquisition of iStockPhoto. It wasn’t the acquisition that bothered them, of course. It was a good investment. The concern was: why did it take them so long? If Getty was an innovator in the stock photo industry, they should have done this years earlier--not late in the game. The critical question was: what slowed them down? The answer is photographer objections. Because Getty defers to photographers too much, they have a record of failing to make wise, profitable and economically sound business decisions.

What might the long-term risks be? Are photographers always so wrong? Or is this just an isolated case? What does this say about the future? Would Getty lead forward, or will photographers hold the company back, causing the company to miss or delay other key strategic moves as well?

What I was asked to research had nothing to do with Getty, per se, but the effectiveness of pro photographers’ influence on their own industry. Specifically: at key turning points in the economics of the photography world, what were the “photographers’ positions” on those events, and were their forecasts right? Did they fare better or worse as a result of their collective recommendations to their community membership?

Without getting into the details of my report, the data was rather bleak for photographers. In the 1970s, after the supreme court ruled that the ASMP violated “restraint of trade” rules by publishing price lists, the union was disbanded, and a power vacuum resulted. A variety of disparate trade groups started forming, each of which differing only slightly from the others. Yet, at no time did the socio-political strategy change; the culture of the photographer community remained strongly union-oriented. The message remained “all for one” with a strong discouragement of individuality in building a career. Conformity was and always has been the social rule, which itself runs counter to open-market economic conditions.

At no time did I find any key recommendations by the pro photographer community that resulted in positive economic returns. At one point, they discouraged photographers from shooting “stock imagery” because it would “ruin the careers of assignment photographers.” They also discouraged using the internet as a place to sell photos because “people will only steal them.” They also said it would “compete with traditional stock agencies” (who themselves resisted using the internet till royalty-free images moved from CD-ROMs to internet sites). Their poor analysis and responses to matters such as royalty-free, microstock, social-networks, consumers, semi-pros and other industry trends have all been entirely off base. I’ve written extensively about each of these phenomenon at great depth on my blog.

Photography trade associations’ economic advice has also been similarly off target. Membership levels in most all groups have seen very little (if any) growth, despite the fact that hundreds of millions of more people own high-end digital camera gear and contribute larger and larger proportions of images to the stock photo base. The outright rejection of the consumer and weekend photo enthusiast has been one of the primary factors associated with their inability to grow financially, which has also weakened their political influence. (At one time, I recommended that PDN and trade associations charge a maximum of $25/year for subscription and/or membership fees and start running programs that appeal to non-pro photographers that somehow engage in monetizing their images, even at lower levels.)

An incident in my report that summarized it all was when the SAA sent a letter to Getty images strenuously objecting to their having lowered photographers’ royalty rates, seemingly unaware that the company’s sales and profits were plummeting. (This would be like auto worker unions asking General Motors for raises just before they go into bankruptcy.)

Of course, the responses from trade associations have always been akin to “we are giving advice, but no one is taking it; if photographers did what we advised, then we wouldn’t be in this mess.” The reality is, they are taking the advice, but it isn’t working. At some point, one just has to realize the Earth really isn’t flat, and it’s not worth having that argument anymore. There simply needs to be new blood. There’s too much homogeneity. There’s no tolerance for dissent. Perhaps the best quote that encapsulates this situation is one from the 9/11 Commission Report about the errors in judgment that lead up to invasion of Iraq: “When everyone around the table agrees, someone’s got it wrong.”

In general, photographers have had no true economic leadership, and this has lead to a vacuum of economic opportunity. And the evidence is as overwhelming as the Earth is spherical: extremely few stock photo agencies are profitable, and of those that are, the margins are slim and getting slimmer; “publicly traded” stock agencies have had to take themselves off the market (well before the economy turned downward); most stock photographers have reported declining incomes steadily for years; and the per-image license fees have been dropping since records were kept.

When I collect data and do analysis to generate these reports, I have no personal objective, vendetta, or an argument to settle; I don’t care. I just want to be accurate so my clients can make fiscally responsible decisions. And I’m not the only one to come to these conclusions. With the exception of a few very speculative investors, the “smart money” stays away from anything in the stock photo sector. As one of my clients put it, “so long as a company is reactive to the pro photographer community, it’s a losing investment proposition.”

The problem is, there are too few companies that deal with stock photography that don’t worry about the political fallout from discontent raised by the photographer outcry.

If this is the case, why doesn’t the photographer community leadership recognize this and adjust their message to the base? Here’s where we come full circle to behavioral economics: there’s money, politics and reputations involved. Different people seek different objectives, and without centralized leadership, you hold onto what you’ve got. As one executive at a trade association told me, “It’s the perfect controversy for us because we win whether it [the OWA] passes or fails. If it fails, we can say we won; and if it passes, then our members will benefit, and we can say it’s because of what we did. Taking a stand against it is the only position that makes sense for us. Besides, it brings everyone together.”

What Investors Look For
Smart money, smart lawyers, and smart legislators all know that there are no risks to either artists or licensors with the OWA. So, the political theater from the blogosphere is uninteresting to investors, other than to know where not to invest. Investment money looks for signs of intelligence. Any company or investor making business decisions based on photographers’ outcries would be considered a poor investment.

But don’t confuse this with an anti-photographer sentiment. Investors are not anti-anyone. They just don’t want those who don’t understand economics interfering with business. If a company were to exist that keeps photographers happy, while also pursing business goals that show profitability, then that’s great. But the catch-22 in this economic climate is the challenge: the internet and digital photography changed the game from how photographers once viewed themselves, and unless and until they change their cultural disposition, they’re not going to be part of the solution. The stock photo industry has already shifted to be a high-volume/low-margin model, which runs antithetical to how photographers want it. For so long as they don’t accept that, they will be at odds with any company that attempts it. At which point, the company has to choose which path to take: upset the pro photographer and succeed, or acquiesce and fail.

It is for this reason that I’ve predicted for several years that, barring any new disruptive innovation we haven’t seen yet, or a shift in photography-industry culture, the future of stock photography is likely to be inherited by much larger media companies that already deal with massive media distribution and licensing. They have no qualms about playing “Borg” and assimilating the photographer community into the flying cube, all the while chanting, “Resistance is futile.” Once such media behemoths realize there’s money to be made in photography, they will likely start acquiring agencies and photo-sharing sites, and building out the high-volume licensing model that is the only option left for stock anyway.

As for the controversy about the OWA, it’s just a theatrical venue for people to gain their individual advantage. Sure, there may be fine-tuning of language that industry leaders will take credit for to great fanfare, but that’s also part of the game. The Earth is not flat. But as long as there’s some benefit to people arguing about it, the controversy will continue.

Getty: circling the drain?

Today's news that Getty's stock price dropped 8.70 to 36.14 -- nearly 20% in one day -- struck me in two ways. First, it's no secret that I have been a strong critic of the company's management and strategy, so in many ways, this was par for the course in my mind. So, that it dropped didn't surprise me. Instead, it was the reason why it did that got my attention.

Readers of my blog may have noticed that my antennas perked up in the past few weeks on various news items surrounding Getty, which prompted me to write Getty's "stay the course" stock price, a thinly veiled attempt to show that the emperor is wearing no clothes.

That article on July 9 prompted an investor group to hire me to do a more in-depth private analysis for them. The portions of the research that the client allowed me to post publicly on my blog can be found in my subsequent follow-up, titled, The Solution to Getty's Woes.

(There was a coincidental email exchange I had with someone else about Getty's 10-K, which actually helped lead me to yet other resources I hadn't considered.)

Lessons Learned
The real lessons learned about Getty was two-fold. The first was a more of a reminder that CEOs have tunnel vision--they see what they want to see, and nothing else matters. As outsiders, people (investors) often overlook this subtle, but important, characteristic, and are usually forgiving to a point. The psychology of the investor involves faith that poor decisions are merely short-term miscalculations that can be remedied.

But, the pattern of decision-making by Getty has been consistent. All of my previous blog postings about Getty illustrate that they don't fundamentally appreciate the total size of the market, and how the internet itself plays a much, much larger role in the industry. More importantly, the internet will play an even more pivotal in the future of stock.

Getty views the fundamental photo market as a smaller universe in which they are the largest entity. This ill-perceived view--that the universe is small, not that they are the largest entity (which they currently still happen to be)--is what leads to other poor decisions, like what companies to absorb, what markets the penetrate, what markets to avoid, and other strategic directions.

Again: this is a pattern. And management of larger companies tend to stick to their patterns. So, to expect Getty to suddenly realize a new direction would be uncharacteristic. Yet, this is important because it leads to the second lesson I learned about Getty, and this one I didn't anticipate: that the company was going to continue drastic cost-cutting measures to assure that their EPS (earnings per share) doesn't erode.

Why would I be surprised by this? After all, it's not that this is inherently a bad idea. Cutting costs is very good, especially in businesses that have inefficiencies and wasteful spending. But this is more typical in industries with high labor costs, huge capital equipment expenditures, and bureaucratic processes that become top-heavy. But, Getty doesn't have any of these problems. What costs are they going to cut that won't cut into the core business functions it performs?

To choose to "cut costs" at this point has one of two possible explanations, both of which are pretty dim: 1) if the company really did have wasteful spending (on what, I have no idea), then it suggests the management is in worse shape than I anticipated before; Or 2), they could be making a similarly bad decision by cutting off future business opportunities just to meet the desires of short-term investors.

To explain what I mean by that second part, one needs to understand how investors think, and why Getty management may have capitulated to their whims.

The Problem with Investors
Public companies are at the beckon call of their shareholders because of "fiduciary responsibility." That is, if they don't make money, or worse, are thought to be squandering it, the shareholders can take action, ranging from having management replaced, to filing a class-action claim to recover tons upon tons of money for the shareholders' lawyers. (The shareholders themselves will get pennies on the dollar, but they usually don't know this going into it.)

Anyway, the CEO is under pressure to show growth and performance, or he's out.

Fair enough, but then comes the question of what is actually in the best interests of the company? If the long-term solution to a problem requires lack of income in the short term, the company has to have a pretty credible CEO to persuade shareholders to wait. That's a tall order, as most shareholders are short-sighted, often understanding little, if anything, of the business or market the company does business in. Indeed, a good example of this is illustrated in this article on the Motley Fool website.

The "fool" in this case, is writer Brian Pacampara, who pumps up stocks that he believes has good cash flow as a ratio of their stock prices. In Pacampara's view, he sees Getty's profit as a sign that the company is poised to deliver well into the future. What Pacampara doesn't realize (despite my email attempts warning him otherwise) is that when PE's are high like that, it can also mean the company's stock is overpriced, and a correction is around the corner.

But, Pacampara is a stock analyst only, and like many others like him, he has absolutely no idea what the stock photo licensing industry is like. He only looks at simple financial data, like the PE ratio. "You earn money? Great, we'll buy/recommend your stock." He isn't going to listen to people like me.

What that means is that CEOs of such companies are subject to the ill-considered analysis of people like Pacampara, and therefore have to make them happy. For if not, Pacampara pans the stock, people get out, and shareholders left with the bag get upset and take the CEO out to the backyard shed where the shotgun is.

The problem for a troubled public company faced with adversity is finding a solution that both works and is palatable to investors who don't fundamentally understand your underlying business. I have strong empathy for the CEOs of public companies because of this. But, my tears for Getty are of the crocodile brand for the sole reason that they simply don't get the market in the first place. Nothing I have ever seen Getty do or say in any of their public statements, actions, or investments has given me confidence that the company knows its way out of this mess.

So, there's nothing else for Getty to do other than to say, "We will continue to make money provided we spend less money." And it is for this reasons that Getty is circling the drain even faster than I had expected before.

Final Thoughts
While my previous posting said that I wouldn't short the stock because I didn't think it had much downside, I failed to anticipate that the company would react to investor pressure the way that they did. This is the type of event that could not possibly be anticipated through financial analysis, industry research, or anything else. It's the human element that throws all the numbers off, and human behavior can't be predicted.

Getty's strategic misjudgments about the industry have been evident for a long time, but it's important to note that they are "just" misjudgments. It is my opinion that there has never been any evidence that the company has intentionally misled anyone.

Getty has great images, they have great photographers, they have great clients, and they have great pricing models. They have a great fundamentals in the areas they cover. That's not the problem. The problem is that they don't cover all the areas they should, and they don't know how to leverage the power and culture of the Internet to maximize their potential.

Worse, the management is caught in a vicious cycle with their investors and stock analysts who also misunderstand the market. To wit: every stock analyst notes I've read who cover Getty (there are about eight of them at major investment banks) say that their primary concern is pricing pressure from competitors. This is only a problem if they continue to compete with those same competitors in the small, limited, overcrowded space in which they reside. If Getty were to break out into the broader universe that is open to still photo licensing (and their IP assets in motion video and music), then those specific competitive pressures would have less impact.

Getty's "stay the course" stock price

I was sent a link to this blog posting, where John Harrington gives his reasons why he's shorting GYI, Getty's symbol on the New York Stock Exchange. In other words, he's going to make money by selling shares he doesn't yet own now, wait for the price to drop, and then buy those shares back later, thereby making a profit.

Good idea, but he's too late, and is doing so for the wrong reasons. I had actually written my analysis of Getty back in January of this year, when I revealed I had shorted GYI in the mid-80s and covered the position in the mid-40s, thereby doubling my money. See this posting (towards the end).

The difference between my analysis and Harrington's is that what I knew of the industry and of Getty's management was not yet reflected in the share price. Harrington's analysis, on the other hand, is not only old news, but it's already been reflected in the price.

While Harrington's post may be an interesting tutorial for the photographer to understand how Getty's price got to where it is now, it is decidedly a poor tool for guessing where it'll go next. To read his advice now is like the stranger who just walked into town to inform the townsfolk that the boy crying wolf is "probably lying," even though the townsfolk have already known it for quite some time and had already stopped going to rescue him.

But, I'm not here just to harp on Harrington. (I don't even know him.) Indeed, predicting when a stock price can move is a tricky business, and anyone pretending to have a crystal ball should be regarded with extreme skepticism. (In fact 75% of professional money managers under-perform the major stock index funds. hence, my free professional investment advice: buy iShares in the top 5 indexes, and stop thinking about the stock market for a long time.))

But the reason why I think Getty's stock price is worth mentioning again (six months after I mentioned it last) is not so much to predict where things are going, but to talk about what we might expect to see from the broader industry as a byproduct of the stock's eventual movement. That is, because they are the largest planet in our little solar system, we can gauge how the little asteroids move if the one with the largest gravity moves.

For the moment, FYI is in a holding pattern: the current PE of 22-ish, and a forward-looking PE(2008) of 16 suggests that investors have already discounted all the bad news that analysts have projected. It's "book value" (the value of its assets, such as cash, real estate, and other hard assets) is literally half of its current stock price, further supporting the notion that today's price is close to the bottom. By comparison to many other stocks with their PE and book value, the likelihood of further erosion is less than a spike upwards. In other words, the stock can't go down much further before investors will just start taking the computers out of the offices.

As for short sales, 6% of outstanding shares already short right now, which suggests that people are already looking to cover those short positions (buy the shares back) at any glimmer of opportunity. To that, note that any sudden upward spike of Getty shares is probably due to people buying back their short positions rather than buying into the stock because they think it's a good value. If anything, the upside is more likely because it's not a dead carcass yet, and those with real money in the game don't really want to see the animal eaten by vultures. Yet. So, short selling Getty further into this would only be warranted if some unknown catastrophic event were to happen, such as a stock option scandal, or a scandal of any sort.

True, if the management continues to "stay the course" in the face of a market and industry that is no longer playing by the rules of the pre-internet era (where Getty's mind is), then yes, the stock could erode a little more. Yet, there are forces pulling the other way as well, short-covering notwithstanding. The most important of which is the news several months ago that a big chunk of stock was purchased by some investors who said that it was their objective to "shuffle out the management." It was enough to give the stock a boost from the mid 40s to the low 50s. That kind of premium means that someone that 'real investors' respect is going to effect some sort of change. Just like a country that's unhappy with its executive branch for "staying the course" may vote them out, the same is expected to happen (in one form or another) of Getty's management. (Or, that's the word on the street, and the current expectation.)

The other potential reversal of fortunes could come from Getty's (and Corbis') recent announcements of a serious push into other business models besides photography--namely, licensing of all sorts of media, such as music. I actually consider this to be a good move from a business perspective. But again, the fly in the ointment whether the current management team can execute on the plan very effectively given their previous track record (which is reflective of a poor mindset).

Again, drawing the comparison to our country's administration, how much can one trust a management team with a steadfast refusal to "change course" if they were to suddenly announce that they are going to try something new. "New" is great and needed, but it also has to come with "new management" with a better track record and faith by the shareholders (and electorate). In fact, I'd rather the new team be the ones that tell me about a new plan--that way, it won't be tainted before it can be tried. (Getty or our own administration.)

True to form, Corbis actually replaced their CEO with someone with the task of doing just this (expanding into other media licensing), and we didn't know about it till after the fact. Who knows--they may have a good chance at a "successful" IPO after all.

I've written extensively over the course of time about each of Getty's individual errs, and have given my prescription for a new, better direction. You can read all about them in my blog archives, but the point is, my prescriptions for Getty were more in the form of inevitabilities for the stock photo industry anyway. Things like a migration (and fusion) of the social-networking model with the microstock model; the inevitable rise in microstock prices from $1 to $10 (or, $9.99) for the basic buy-in; and the general embrace of the consumer as a target buyer, as well as supplier, of common images.

Once Getty has new management, then it'll be the day that someone will adopt a new vision for how this can be accomplished, which will have a trickle-down effect on all the other players in this industry. My sense is that Getty's stock price is the barometer that will offer the first sign of changes in the weather...

That, or if Corbis manages an IPO that earns a respectable multiple. (Note: just going public isn't enough--it has to do really well for the company to be regarded as a bellweather for future forecasting.)