Royalty Free no longer exists

I have always gotten a continuous stream of questions about Royalty Free vs. Rights-Managed images, and I usually just send people to numerous posts I've written in the past.

But a recent email to me concerning Photoshelter's use of the terminology compelled me to post a short blog entry on the subject to try to make it even simpler to understand.

Royalties are payments made to authors (photographers in this case) in exchange for the right to sell works (images). The moment any photographer is ever paid anything by an agency, s/he has received a royalty. Even if it's a one-time payment.

Rights Managed ("RM") means that someone has the right to say how a photo may be published. There's always someone that has the right to manage a work's usage terms. Yes, "unlimited, unrestricted use" is still "managed" if that's what the rights manager wants. Even public domain and creative commons are terms stipulated by someone -- usually the author.

By definition, ALL images are Rights Managed, even if the manager chooses not to assert those rights, or is very liberal about how others may use the photo.

Royalty Free ("RF") refers to a special kind of license agreement that can only take place between two stock photo agencies. Here, the primary stock agency grants another agency the right to resell images, and that second agency is under no obligation to pay royalties back to the photographer.

Why would such a thing happen?

Before the internet (and up till mid-1990s), distribution of images to buyers was difficult. Smaller stock agencies that couldn't sell some supply of images started selling them to OTHER stock agencies with better distribution channels (usually, the early internet adopters). Because these images were usually lower quality, the concern was that these images might not sell. In order for the deal to make financial sense for all parties, the photographer was paid a one-time royalty for the transaction, the primary agency got a single, lump-sum payment from the secondary agency, and that second agency was now on the hook to make some money. Sometimes they did, but often they didn't. But they could only agree to take this risk so long as they were not obligated to pay royalties back to the photographer. These were royalty-free images. 

At the time, photographers were finally making money from images that would have otherwise sat unsold, and the smaller agencies were often seen as tributaries to the main stock agencies, who themselves were taking advantage of a very quickly expanding base of buyers because of the growth of the internet.

As the idea showed profitability, more agencies started selling and reselling the same images in the same way to many stock agencies, creating a huge market for RF images. Each time, the photographers would get royalties from each such sale. And, in each case, the "royalty free license" meant that each (secondary) agency down the distribution channel was not obligated to report sales or pay royalties to the photographer.

The tipping point came when the ease and cost of access to the internet allowed those smaller agencies to sell directly to the buyer. And, for the buyer to find those images through better search engines. The need to feed the primary agency networked collapsed, which coincided with the time when Getty's stock price was plummeting from the mid-$80s to the low $30's, when they were finally taken private. Note: Getty's price didn't plummet because of the rise of RF images. The entire economy of images was falling precipitously because no agency could control (choke) the supply channel any longer. All agencies were hurting and RF was no safer than traditionally-licensed images.

I am currently unaware of any actual Royalty Free Licenses being used in photography. I believe it no longer exists. (The practice is still used for clip art, icons and some other kinds of media (smaller music labels) where channel distribution is still difficult.)

So, why are the terms, "RF" and "RM" still used? 

Remember how those secondary agencies were on the hook to monetize these images or lose money? They did so by enticing buyers with very liberal license terms, such as "unrestricted (use), unlimited (time)."  Thus, photographers (and later, newbie agencies that didn't understand history) misunderstood RF as implying these unrestricted usage terms. For a long time, RF really did mean "unrestricted."

But I rarely see such license terms anymore. Even the license terms used by today's agencies for their so-called RF images are often not as liberal as the original RF terms once were.

Today, the terms "RF" and "RM" are interpreted mostly by PHOTOGRAPHERS to mean that they will make more money with RM images than RF, even though those economics are not as predictable. My personal opinion is that the terms remain simply to attract (and direct) photographers towards certain business terms with the agency. Most buyers have no idea what they mean... nor do they care. They only care about the terms of use, which has nothing to do with RF or RM.

Market Efficiencies and Stock Photo Pricing

In my last blog post, Selling Stock: It's About Search Rank, Not Price, I argued that the price variability in the stock photo industry can be exploited by those who garner high search rankings. The rationale is that the direct and indirect cost (overhead) of finding an image so far exceeds typical license fees, that photo buyers are more indifferent to those license fees than sellers believe. Thus well-ranked photo sites would be able to command higher license fees, simply because they have first access to the buyer.

In fact, well-ranked photo websites are undermining their own profitability by lowering prices unnecessarily, mostly because they are following their perceived competitors, not because the customer is demanding lower prices. Their rationale would follow traditional economic theory under most market conditions, but therein lies the exception. The photo industry does not represent "normal economic conditions." Indeed, the photo industry represents a classic case of an "inefficient market."

Let me explain by starting with the definition of an "efficient market." It can be summarized as a market of buyers and sellers engaging under conditions where all information is available to parties on both sides of a transaction. (See this wikipedia link for extended definitions, examples, and citations.)

Examples of efficient markets are exchange-traded commodities like oil, orange juice and automobiles, among others. Here, producers of commodities make their wares generally available, and market-makers trade on this information. It is exceedingly difficult (if not impossible) to have inventory that the market is unaware of, or to purchase commodities without the broader market's awareness. These are the conditions that lead to the definition of an "efficient market."

While there will always be price volatility, it is almost entirely governed by predictions of how supply and demand might be affected by external events. The weather affects the price of Orange Juice; war and instability affects the price of oil; and a litany of factors affect the auto industry.

When it comes to image-licensing, most buyers and sellers do not have that much information about the "global" market of buyers or sellers, let alone access to conditions that can affect future supply and demand. This results in "market inefficiency," which results in price inconsistencies, precisely as predicted by economists. Therefore, prices vary from high to low across the spectrum, depending on the perception of the buyers in any given time/place. This is because they have limited and incomplete information about the global supply chain.

This also explains why people objected to my proposition from my prior article. They do not have access to "all information," and worse, they are unaware that their worldview is limited. That is, most pro photographers are under the illusion that the entire market of stock photos is monopolized by a small number of stock agencies.

Ironically, the other markets (non-agency buyers/sellers) don't see the other side either. These discrete and separate markets will, by definition, find different prices than buyers in other markets. Stock agencies will view one another as competitors and lower their prices, whereas websites that are unaware of stock agencies (or don't attempt to compete with them) will command higher prices.

To optimize prices and create an efficient market, the following would have to take place:

• Stock agencies would have to expand to cover a larger proportion of the image-buying market. As my prior article advised, the way to do this is to partner (or merge) with photo-centric websites, whose proportion of global internet traffic is very high. This will allow "more information to be more universally available to a greater proportion of the buyers and sellers." This now leads to market efficiency.
  
• Once the market became efficient, it could then be automated through predictive pricing algorithms, precisely the way Google automated online ad prices using an auction-based mechanism. No doubt this is not a simple algorithm, and it took years to evolve, requiring considerable data mining to determine optimal market pricing. But it was achieved to a point where it is now a highly viable (and mutually beneficial) economic model for buyers and sellers. The market of photo buying is similarly large, and there's enough economic activity that appropriate data-mining efforts could lead to similar algorithms for auction-based image license pricing.

The question is whether anyone is willing to invest enough into this untapped market.

Busting Myths about Model Releases

The internet is a virtual echo-chamber of facts and myths of all sorts. When something goes viral, there's no stopping it. Even the most blatant falsehoods can perpetuate for years if they cause no harm in believing them. An example is the myth that the different regions of the tongue tastes different types of things: sweet in the front, sour in the back, etc.. In fact, all taste buds are identical, but the myth started from a single, faulty study in the 1800s that was published in a school text book, and it's been repeated ever since.

In the photo business, the greatest myths are those involving model releases. If you have ever considered selling (or licensing) photos on your own, or through a stock agency, you've probably been told that photographers need "model releases" to sell photos of people, and "property releases" to sell photos of buildings and the like. Some stock agencies actually reject images unless these photos have releases.

While it's true that model release are necessary for certain situations, the actual laws about these issues are deep and complex. As rumors and hearsay perpetuate on the net, the over-simplification has resulted in virtually all the "advice" and conventional wisdom about model releases to be entirely wrong. And the reason why these myths perpetuate is because they cause no harm. No one ever got sued for having a model release. So, people follow the advice because they (and others) seem to be safe, perpetuating the myths.

So, why address the myths about model releases? Because photographers are losing enormous opportunity by not trying to sell the images they don't have releases for, and by going to great lengths to get releases they don't need. Despite the rumors, most publications of photos are not the type that need releases anyway, resulting in an enormous market of buyers. Most photographers could continue to have very successful businesses without ever getting model releases, all while doing exactly what they are doing today. Sure, releases are important for many types of publishers, so if you do get releases for their benefit, you can expand your buyer base by getting them. But it's a proportionally smaller market than people think, and the time, effort and resources necessary to properly obtain, manage and catalog releases is rather substantial. This investment will rarely be offset by the incremental income from sales of images that actually do require releases.

This article attempts to help the photographer looking to make money by setting the record straight on the most common myths about model releases.

Fact #1: You do not need a model release to take pictures.

Nuff said. Don't let anyone tell you otherwise. Everyone in the world has a camera on their phones, and photos are taken constantly. You don't need someone's permission to take their pictures. Now, just because you might eventually intend to sell your photos has nothing to do with the ability to take pictures in the first place.

Fact #2 You do not need a model release to sell pictures. And "profit" has no effect on whether a release is required.

First, newspapers buy photos, and their use of the photo is unlikely to need a release. So, selling a photo (and making a profit doing so) to a newspaper also does not require a release. And because the law does not require you to have any knowledge of the buyer or their intended use of a photo, you are always allowed to sell photos without a release.

Fact #3 You do not need a model release to make photos available for sale, either on your own website, or through a stock agency.

If one can sell a photo without a release, one must also be able to "make photos available for sale" without a release. This includes the publication of such photos in a manner that would allow potential buyers to find them.

The legal case that established precedent for this was Corbis vs. James Brown, where the judge called the depiction of a photo as being for sale a "vehicle of information". Here, consent from a subject is not required.

Therefore, one can make photos available for sale in any manner of publication and media, whether it's traditional print or online formats, including personal web pages, photo-sharing sites, social media sites, stock photo sites, or mostly anywhere.

For detailed information, see the article, Model Release Primer.

Fact #4: A "property release" is NOT required to sell or buy photos of buildings or people's personal property (like land).

The root of this misunderstanding is complicated. The term "property" in an actual "property release" refers to two particular forms of intellectual property: trademarks and copyrights. Examples include logos, designs and other works.

Now, just because these are "protected" works, it doesn't mean that one cannot publish photos of them. It only means that the manner in which such works are depicted cannot cause confusion among the general public about who "owns" the properties, or other legally complex factors. It is impossible for a photo of a bottle of coke to cause the general public to suddenly think that the Coca Cola company was now owned by a freelance photographer in Topeka. If the photographer sold the image to a publisher, and the publisher's use of the image would imply that it had a unique and special business relationship with Coke, then that would trigger a trademark infringement claim. But that would be with the publisher, not the photographer, nor the stock agency that sold the image. Furthermore, such an infringement couldn't possibly happen by merely the photo being printed. Text around the photo would have to give this impression. And, since the photographer or anyone selling such a photo cannot know or control how a publisher uses a photo, they could never be held liable for the infringement.

Like the myth about the tongue's different taste regions, the history of the "property release" stems from a single misimpression from long ago. Certain physical structures, such as the Golden Gate Bridge and the Transamerica building in San Francisco happen to be registered trademarks. And, they have been infringed upon inappropriately in the past, but these were cases that have nothing whatsoever to do with photography. And at the time, news of these suits briefly caused publishers to shy away from publishing photos of such places unless photographers could provide property releases for them. Those releases were not for the buildings, but for the right to use the trademarks. This was very short-lived, however, because it is impossible for photographers to obtain "true" (and legally valid) property releases for trademarks without paying enormous sums of money. So, even though the publishers stopped asking for those releases, the rumor perpetuated nonetheless: photographers erroneously interpreted these requests as "mandates" that all photos of buildings required "property releases." And they've been behaving that way ever since.

To be crystal clear, property releases are not required to sell or resell photos of buildings and other real estate (or physical property of any sort, such as land, pets, livestock, homes, etc). If something happens to be a registered trademark (building or otherwise), then the publisher will already be quite aware that they are the ones that need to obtain permission from the trademark owner (which may not even be the building owner). Any permission obtained by the photographer would be entirely useless to the publisher. In fact, every single property release used by photographers gives no legal right to use a trademark, and since buildings and other items do not require consent for photos of them to be used, these property releases are worthless pieces of paper. But they also cause no harm.

For more, see Photographers' issues concerning trademarks and photography.

Fact #5 You usually do not need permission to shoot pictures of (or on) private property.

While it's true that property owners can restrict photography, that's not saying much. They can also stop you from picking your nose. It's their property, so they can stop anyone from doing anything. You've seen signs that say, "No shoes, no shirt, no service." There's also the sign that reads, "We reserve the right to refuse service to anyone." In short, property owners can apply restrictions indiscriminately and inconsistently and arbitrarily.

But, the owner has to proactively take an action to prevent you from doing things. It's not that you're prohibited from actions by default, and they then grant you permission later. So, most of the time, there are rarely (if any) actual restrictions property owners enforce.

This includes taking pictures. It's permitted by default, and to prevent it they must take explicit actions, including (but not necessarily limited to) posting signs, as noted above. If you are not stopped (or are given reasonable advanced notice), any photos you take are legitimate, and can be sold legitimately. (See later section on "ownership.") Further, one may not retroactively enforce their restriction. That is, if you were at a private event, and then later told you were not allowed to take pictures, it has no affect on your photos or your ability to sell those images. (Publishers, on the other hand, may need releases if the nature of the publication would require it. But that doesn't affect the photographer's liability.)

So, if you're in a bar, or in an amusement park, or touring a winery, you are allowed to take pictures unless you're told not to while you're there. And if you do take pictures, you can sell them to any buyer willing to assume the risk, if any exists.

Sometimes, photographers will often seek permission to shoot pictures ahead of time. This is not only unnecessary, but invites someone from stopping them. If you know ahead of time that you will need permission, that's another story.

Fact #6: You do not need releases for Art, Books, Exhibitions, Presentations, Fairs, Contests, Postcards, Calendars, Etc.

At the risk of over-simplification, the only time a release is needed is if a person can be seen as supporting or advocating an idea, product or service. True, there are often disputes about whether a given publication of a photo of someone could be construed in such a way, but the dispute gets closer into the safety zone when that publication is a form of artistic expression. The First Amendment of the US Constitution protects "artistic exhibitions" (and publications) as a form of free speech, so consent from anyone else—by definition—is never required. Money or profit has nothing to do with whether a work is published or "depicted in an artistic manner."

Again, people argue frequently about whether such depictions are, in fact, artistic in nature, which leads to a complex argument: is it art, and if not, is it a promotion, and if so, is it the type of promotion that should have required consent from the person in the photo?

While these are all good questions, the reality is that no one has ever successfully won the argument that a model release was necessary for a photo that was used in a book, in an art gallery, or at a fair, or any of the items in the above list. In short, the law is on the side of the First Amendment by default - a claimant bears the burden of proving otherwise, and that's a difficult and very expensive bar to clear. While is indeed a very deep and complex subject, those wishing to seek quick answers can feel relaxed: "don't worry. You're fine."

For for more info, I encourage you to read this.

Fact #7: Photographers do not need releases for photos in their portfolio.

A portfolio is a collection of artistic works that demonstrate the skills and talents of the photographer. Permission is not required in order to use photos of people in a portfolio. This includes all forms of publication of the portfolio, whether in physical form, or as a website, or other media.

The one thing to be aware of, however, is that sometimes photographers take pictures of people in special, "closed sessions," where an agreement was made ahead of time—before the photo was taken. If a subject posed for a photographer with the pre-arranged agreement that the photos would not be used in a portfolio or any other manner, than that agreement takes precedent. (Of course, a new agreement, such as a model release, can supersede it.)

For more on this, see Personal Privacy and Model Releases

Fact #8: Posting photos online is just another form of publishing.

What determines the need for a release is whether a photo makes someone appear to support, advocate or promote ideas, products or services. The medium itself is irrelevant, whether it's traditional physical media, or online/electronic media. One cannot say whether a release is required for photos "posted on the web" because it depends on the way the photo depicts the person in it.

When photographers put images on their professional website, they think that this suggests that the people in those photos could be construed as sponsors or advocates, but that's not complete. Putting photos online to "sell" does not require a release, depictions of "art" do not require a release, and a "portfolio" does not require a release. The only way a photo would require a release is if the photographer created a self-promotional piece (such as an ad) that promoted his or her services, and used a photo of someone that might suggest it is a client.

Fact #9 Ownership of physical pictures and ownership of rights are different.

When people hire photographers to take pictures of them, they think they own the photos, or have rights to publish them. They don't. This has to be agreed upon, usually ahead of time (but it can be negotiated later.) Normally, this isn't a problem. But where things break down is when subjects don't like the photos of themselves. Here, they try to demand them back, but they don't have this right. (They also cannot retract permission if it's been granted in writing, such as a model release.)

The same thing is true of pictures taken on (or of) people's property. They think that because it's their house, or their private event, or their pet, that they have the rights to the photos. They don't. Nor can they stop the photographer from publishing those photos. Non-humans do not have inherent rights, unless protected by trademark or copyright.

Concusion

The reality is that photographers (and stock agencies) don't get sued for the publication of an unreleased image. And given the very high cost of suing someone, litigants are usually told by their lawyers to go after the "publishers" of the images in question, as they are the ones who bear the true legal liability.

As an active photographer, understand that most people are entirely uninformed about model releases, and factor this into your business dealings. Publishers, stock agencies and many others may vehemently demand a model (or property) release before buying photos, or for accepting your images into a stock agency. Despite their being wrong, this is the way of the world, and you can only do what they ask, or don't play.

But don't underestimate the sales potential of your unreleased images, and the large market of buyers who don't make such demands.

For those with interest in reading the details, I have many articles that answer all the technical questions, like this one and this one. I also wrote a book called, Photographer's Guide to Model Releases.

Search Engine Optimization and The Long Tail

I was inspired by an entertaining article I read in today's New York Times titled, The Dirty Little Secrets of Search, detailing the rise and fall of JC Penney's Google rankings. Turns out, JC Penney's SEO consulting firm allegedly bought a huge number of paid links on websites, most of which aren't actual sites at all, but domain names purchased solely for the purpose of placing links to PC Penney. Google takes this very seriously, and has been known to eliminate sites completely.

The rationale for this approach is, as most people know by now, that your ranking is governed most largely by the number of other sites that link to yours. Unfortunately, what many people still don't know is that gaming the system doesn't work. (Link exchanges are a sure way to lower the ranking of both sites that link to each other. That's why JC Penney's SEO firm just created sites that had one-way links.) While it'd be nice to have organic linking, where people simply "talk about you" (and provide a link) on many websites on the net, that's not so easy to do and takes a lot of time.

In this day and age, if you're going to succeed as a stock photographer, you have no choice but to figure this out. This strategy begins with two questions: 1) which keywords or phrases do you want to rank highly for, and 2) how do you seed yourself around the net?

The answer to the second question begins with the first: find the right keywords.

Here is where most photographers (and agencies) get it wrong: they shoot for keywords like, "stock photography," and other industry trade terms. But this doesn't work so well. Google's Traffic Estimator shows terms like "stock photography" yields only about 90,000 global monthly searches. Sites that rank highly for only a few keywords or phrases never do well, even for popular search terms. Instead, reach for many search terms -- as many as possible.

My site (danheller.com) ranks in the top five positions on 751 search terms, and 1205 search terms rank in the top 10 on Google Search results, according to Google's Webmaster Tools. But I'm not actually trying to rank highly for any given search term at all. That would be futile. Odd as it may sound, I rank #1 for "stock photography business," but I swear I didn't try to. Of course not, because that search term doesn't generate enough traffic to warrant investing any special time or effort. That's the point. This is the "long tail" approach to keyword indexing: it's about breadth, not depth. I don't get that much traffic to any single page. By ranking highly in such a vast number of terms, it's the aggregate that matters.

All this starts with simply being indexed. That is, search engines have to know what words and phrases you have before it can rank them. Choosing the right words is one thing, but you also need Google to trust your keywords. In other words, trust you. Unlike standard text on a page, which Google is good at, photos are different. An algorithm doesn't know what's inside a photo -- it has to look at other characteristics to determine its content, such as surrounding text, the name of the page it's on, and of course, its metadata. In particular, the "keywords" tags embedded in the IPTC header of the image file.

Once again, here's where most photographers and agencies get it wrong: they "pollute" their keyword lists with dozens, if not hundreds, of phrases and expressions, hoping the target image will come up as a search result for any one of them. But Google will actually penalize people try to game the system with "black hat" approaches, like using repetition (singulars and plurals together), lots of synonyms, intended misspellings (by seeing both the misspelled and correctly spelled words together), and tons of generic terms (such as "photo", "image", "photography," etc).

Products like Cradoc's Keyword Harvester and A2Z Keywording each suffer from (and perpetuate) this problem. The main reason is because they are trying to anticipate what a searcher might look for. This is not only impossible, but the mere attempt reduces your credibility index in the eyes of almost all search engines.

Almost all? Which search engines does it actually work for? One of the people responsible for this policy told me "microstock agencies is where our customers submit their photos, and those search engines are not that smart. So, we have to be thorough."

True enough, but this raises two issues. First, despite the fact that microstock websites are popular among amateur photographers and a growing population of desperate pros, looking to pick up the pennies from as many sources as possible, the vast majority of those looking to license images don't go to stock agencies. They go to main search engines.

Second, even among the brain-dead search technology employed by stock agencies (except for Getty's whose search technology is quite good), proper keywording techniques still perform quite well at those places. The reason is that people searching for images don't go about it in the diligent, thoughtful way that photographers think they do. People do not search using conceptual terms that those who sell keywording products would lead you to believe.

Keywording properly is really boring, and far less time-intensive than people make it out to be: just the basic "facts" about the photo can be described in a handful of terms. The search engine will do the hard part. Granted, this is a bit simplified, because it doesn't address issues like word definition ambiguity, synonyms, and so on. But this isn't done by humans anyway; it needs to be handled by the search engine's heuristic engine. True, stock agencies don't have them, but again, the trade off is whether to achieve "good enough" with the less-frequently used stock agency or the "proper" method advocated by the search engines.

This is why the "proper" method achieves the best of both worlds: you will be indexed properly and given higher "credibility" with public search engines like Google, and you won't be penalized by the microstock agencies even though images might only use a handful of keywords, rather than dozens or a hundred.

The next question is how to get all those coveted links from other sites to direct traffic your way. This technique is not easy; it requires work. You need to write a lot, post to discussion forums, socialize and network, be on the "inside" with industry people, and above all, talk about what you know. And here's the real hidden secret, I'm not talking about photography. The discussion forums, industry people and the topics you talk about are best when it's something other than photography because it's highly likely that you're an expert at something other than photography.

Of course, if you are well-informed about photography and are regarded as a leader in the field, then go for it. But if you are, then you're probably not reading this... at least, not with the goal of improving your photography business. I am better known for my business analysis, which happens to be in the photography field, than I am for my photography as an art form. That I sell lots of images (prints and licenses) is not a byproduct of my artistic skills. It's the byproduct of having published so much about the business of photography.

The more you engage in discussions online and offer useful, insightful and meaningful commentary, the more people will link to you. Offer to write for magazines. Try even writing a book or two. Sure, it's an investment of time. What'd you expect? That it'd be easy?

Getty and Flickr: Prophesies Coming True?

People have been emailing me copiously, asking for a statement in response to the new relationship between Getty and Flickr, where Flickr members and visitors can work with each other through a new program with Getty Images called “Request to License”. The details of this program are listed here. From that page:

When a prospective licensee sees an image marked for license, they can click on the link and be put in touch with a representative from Getty Images who will help handle details like permissions, releases and pricing. Once reviewed, the Getty Images editors will send you a FlickrMail to request to license your work, either for commercial or editorial usage. The decision to license is always yours.

Why are people asking me about this?

For years, I've been proposing that precisely this model be implemented. Most of my blog entries in 2007 and 2008 articulated this very model. The first was on Feb 13, 2007, in an article titled, "The future of photo sharing sites and agencies". There, I predicted the inevitable convergence between companies like Getty and Flickr:

I believe it will invariably happen that major photo agencies like Getty and Corbis can (and should) move into the consumer market. Consider what would happen if major stock agencies expanded their businesses by opening the flood gates and letting everyone in. By removing the barriers that require photographers to "submit images," and having a separate portion of their sites be entirely open, much like other photo-sharing sites are, they would give more options to buyers, and provide more opportunities (and greater incentive) for photographers to join at all levels. Getty owns iStockPhoto.com, which is a microstock agency that sells images for much less, but this is not a consumer-based, social networking style photo sharing site like flickr is.

The key here is in italics: microstock agencies are not social networking sites, they are therefore limited by both buyers are sellers than the social-networking sites. My premise for this logic is based on my years of research showing that 80% or more of licensed images is peer-to-peer, directly between buyers and photographers, not among agencies. You can read this research in the article, "The Size of the Photo Licensing Market"). The summary of that research is this basic truism: Most buyers find images on non-stock agency websites.

On Feb 18, 2007, I wrote how the photo-sharing and social-networking sites can capitalize on this opportunity in an article titled, "Two-Phased Approach to photo-sharing/licensing model". I said:

Phase One of this business will be where a photo-sharing site merely allows visitors to license images directly from the site. Phase Two will involve the distribution of the same photo assets to other sites, much the same way online ad sales are hosted (or "published") on other websites. ... For the sake of discussion, I'm going to assume that the approach ultimately adopted is the one I've suggested in the past: make it pure and simple by giving the user a toggle for setting whether his photos are (or aren't) permitted to be "sold".

And that's exactly what Getty and Flickr are doing now. Over four years later.

You may note that I said there was a two-phased approach. That second model will eventually become part of more photo-licensing business models. (In fact, it already exists, but among companies too small to get anyone's attention--partly because the technology and business models they've adopted do not properly understand and implement the true nature of photo licensing, copyright issues, and potential target markets. This is an aside for the moment; it may come up again when larger players eventually begin to consider the opportunities.)

Speaking of predictions, I remain steadfast in my opinion of the inevitability of what happens next:

In July, 2007, my blog post titled, "The Solution to Getty's Woes" explained how Getty can get out of its financial troubles by simply buying Flickr directly from Yahoo and using it as the main stock licensing engine. The article got into exceedingly detailed analysis of Getty's financial model (and troubles) combined with the explosion of available imagery on sites like Flickr that make this solution not only obvious, but inevitable.

On a directly related note, I called into question the life expectancy of the Creative Commons in this article (2008), where I again proposed that Flickr allow users the option of choosing between allowing their images available for free via CC, or to get income from their images. I said,

...it begs the question about whether enough people would choose the option to "make my images free"(CC) if it were next to the checkbox that says, "pay me a quarter if someone's dumb enough to buy it."

And then there's the buyer. If they were given the choice between "free images, with disclaimers and risks" and modestly priced images without such risks, it wouldn't be very likely that the "free" versions would be chosen very often.

The concept of CC would never survive under these two conditions.

Without getting too far afield, I have no qualms with the CC, per se. It's more about how simplistically it's been designed and deployed. It's just not sustainable in the real world business market. The problem is not the "license terms" and the structure of the legal contracts--those are all just fine. It's the fact that the system can be gamed so easily by both buyers and sellers, that it's too unreliable to be sustainable beyond a small handful of casual users (by comparison to the larger market of stock imagery). The true protections for both buyers and sellers is to leverage the copyright registration mechanism. That is, creative commons images that are also registered with the copyright office lowers the risk both both buyers and sellers, as explained in that article. Since no one is building copyright registration into their online business models, and the CC itself has a fundamental objection to the concept of copyright in the first place, the CC will be relegated to an historical footnote , bringing strength back to the for-fee licensing model. And which brings us back to why I'd always argued that Flickr should have enabled image licensing.

So, why is this all good for the photo licensing industry? I articulate this answer in the blog entry I wrote on March 15, 2007 in the article titled, "Photo-sharing-licensing sites leveling the playing field."

As more companies engage in the business of licensing images, photographers with credibility will gravitate to the sites that offer a better return on their money... In a way, this is how photo agencies started in the very beginning, only better: because photographers don't have to be "accepted," the playing field is much more level, and the market forces can be more free to let the money flow to those who really do merit the higher earnings (rather than at the whim of photo editors). The buyer, it turns out, is the best photo editor, and it will be pretty clear in short order which sites are hosting good, honest content.

I summarize with another excerpt from that article:

...the most basic, fundamental truism about photography remains: there are more people who have it as a hobby than as a profession, and the barrier to entry is low... the honeymoon period for Getty will end once photo-sharing sites become new outlets for photographers where the open market can decide their rates."

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.

Photo Agencies and The Stock Industry: a Matter of Proportion

In my blog post, "There are Lies, Damn Lies, and Statistics", a series of email replies inspired me to post a follow-up. I'll get to them at the end, but first, a recap:

In that article, I mentioned how a Shutterstock survey focused on a small, select group of traditional image buyers to gauge their purchase expectations over the next year. I went on to say that it is the result of surveys like this (and others) that most stock photo analysts draw the wrong conclusions about the nature of the broader stock photo marketplace, which itself leads to a trickle-down effect of misinformation throughout the industry. In this case, the Shutterstock survey lead many to conclude that the industry is growing. And this perpetuates another misperception that agencies represent the lion's share of sales and revenue, which itself leads to the misperception that making money in stock requires joining an agency.

Each misperception leads to another, and another, and another, until finally, the industry is full of chaos and confusion, myth, and suspicion.

For now, I want to clarify that, just because it's easy to see how most analysts misinterpret information, it doesn't necessarily mean that it's easy to know how to do it right.

A primary example of this can be found in a July 18 article in the New York Times business section, titled, A Matter of Opinion?. The issue is how credit rating agencies were giving high marks to the very companies that were ultimately responsible for the credit crisis that lead to our current economic meltdown. After facts were uncovered, many feel these credit agencies should have known all along that banks and other institutions were engaged in speculative and complex financial instruments that would lead to this.

And that's how I feel about those who cover the photography industry. The evidence is so overwhelming that the predominant view of the stock photo industry is so wrong, that it is flatly irresponsible of the press and analysts to perpetuate that view. It's also important to point out that this is not the company's fault. Their survey and their data is just fine -- their goal was to illustrate other points more german to their businesses. The problem rests entirely within the press and blogosophere who are inappropriately using that survey to support (and perpetuate) incorrect conclusions about the industry at large.

First and foremost: The stock photo industry does not revolve around stock photo agencies. Though there are no scientifically viable surveys that show the total size of the market -- and therefore, the proportion that agencies may represent -- there is a great deal of asymmetric information (indirect data gathered from independent sources) to support the premise that agencies' role is minimal.

I've written many articles that cite multiple data sources that suggest that most stock imagery is licensed on a peer-to-peer basis--directly from photographers. Even though many of these individuals do tiny amounts of licensing annually for themselves, it's their collective economic activity that has far more gravitational pull on the industry than the entirety of stock photo agencies combined. (They are what my books call the "dark matter" of the photo industry: you don't see them, but they are there, and they account for over 80% of the stock photo universe.)

Once taken into account in discussing and analyzing the nature of the stock photo industry, a great many assumptions and other factors are instantly called into question. For one, the effects of pricing and other actions taken by agencies. If, even for the sake of argument, one assumes they are not the center of the universe, but rather, involuntarily pulled by everyone else, how they are presented and covered would not just change industry perceptions, but it could have a trickle-up effect, putting more pressure on industry executives to make better, more economically viable decisions that lead to industry growth.

As for the stock agencies themselves, I have no qualms about how they conduct their businesses, per se. True, I think they leave a lot of money on the table with their pricing, and I think they miss out on a great deal of consumer opportunities, but I don't think this harms the market at all--again, they do not "set trends", they are inadvertent followers of larger forces. I also understand well that running a profitable business is difficult, and growth is often fraught with risk. The graveyard of companies that tried to migrate to a consumer-oriented business is crowded.

Nor do I have an issue with how they market themselves. There was absolutely nothing wrong with the Shutterstock survey that I alluded to in my prior article. Shutterstock's business is to sell stock imagery, and their survey happened to focus on a particular market segment that they felt was their primary buyer base. That this segment of buyers (narrow, though it may have been) happened to show certain behaviors that also happens to underscore Shutterstock's future prospects shows that Shutterstock has a bright future (at least for the short term).

Also, the PR agency that helped promote the message, Morton PR, was particularly honest, insightful and articulate, not just about the survey itself, but in its own recognition that the survey was not (and did not intend to be) reflective of the industry at large. Not every survey is designed for that purpose, and Morton was uncharacteristically open about this, as compared to other PR firms that have contacted me as representatives of other stock agencies.

I also happened to point out that iStockphoto also had a banner year, and is showing signs of improvement for next year as well. This fact being anecdotally supported by a comment from Lee Torrens at microstockdiaries.com on his own bump in sales, despite the fact that he hasn't increased his submissions to any stock agencies.

So, if that data isn't representative of the entire market, what kind of conclusions can we learn about industry trends? And what data do we use to learn this information?

In the spirit of setting expectations correctly, I can address these questions by proxy: my replies to the emails I get on this subject.

First, there's the most common question: "How does a photographer succeed at selling stock if not through agencies?"

Begin by dispensing of the premise that agencies are the de facto channel for stock photo purchases. You can (and should) sell directly yourself, irrespective if whether you also sell through agencies.

As an added note: I strongly discourage anyone from signing an "exclusive" arrangement with an agency that did not reciprocate by prepaying minimum royalties. After all, this is standard boilerplate contract language for book publishing. Why allow a stock photo agency better rights than a book publisher?

Once you take out the exclusivity clause, you can and should sell your images through any and all channels you can. Including--and especially--your own website.

Selling your own stock is easier now than it ever has. Many applications allow you to build your own stock site, that even the most technically squeamish can produce. It's beyond the scope of discussion to address that; I talk about it more in length in this article, which also happens to be in my book on building a photo career.

The barrier to success in stock photography is less technology as it is psychology. Most don't think it's possible (the "agency" fallacy), or they just don't want to put the time and resources into it. There's also a misperception of time: that sales should come right away. Or that they'd come sooner with an agency. No -- It takes time for your stock images to derive revenue, regardless of where they are for sale. Yes, the revenue curves are different between a personal site and an agency site, but "different" isn't necessarily better. After one year, you may get more revenue from an agency site than yours, but over five years, you're sure to get more from your own site. This is usually because you will charge more on your site (because buyers are more willing to pay higher prices--a factor that most agencies don't really understand yet), you will keep more of the revenues (in fact, all of your own revenues), and your own site will likely get more traffic to your pictures than the agency's site will.

The assumption that the agency is going to do better for you and every other contributor is naive. There's going to be an uneven distribution of traffic to contributors on agency sites, and there's a 90% chance you're going to be on the short-end of that stick.

Which leads to next question I get: "It just doesn't seem to me to be that smart to be in a situation where you give away 80 to 90% of your profit. I want to create something where I keep 80 to 90% of the profit."

Stock agencies get 90% of the profit because they're doing 90% of the work. If all you do is take pictures and upload them, then all you deserve is 10% (IMHO). The value of stock photography is not the photo. It's getting it sold. If you go to the effort of creating your own website, generating traffic, building a buyer base, then you too can earn 90% of the profit (the 10% you don't get goes into your cost of setting it all up). I talk about that in my two articles on stock agencies, here and here.

This next email question represents another misimpression about stock sales: "...discussions among a number of us who primarily do landscape, scenic, wildlife photography [...] lead us to think that there is no significant stock market for this type of work. What are your thoughts?"

Most stock photo sales are done in vast, wide, disparate and unstructured transactions around the world. There actually is a very big market for landscapes and scenics and wildlife photos, but there are also billions of such images from millions of photographers too. Even bad photos sell. The problem isn't that there isn't a market--it's getting noticed among the crowd. This leads to two points, one of which I've already made: getting noticed and ranked is a function of building your own personal site and personal presence on the internet.

The second point is that stock photography should not be regarded as a vehicle for generating lots of money with little work.

Stock photography touches many people as either a buyer or seller of a photo. So much so that it is so thinly distributed among people around the world, it's fool-hearty for an individual to approach it with high expectations.

So, what does all this say about selling stock photography as a form of personal income?

For so long as the industry remains chaotic and unmanaged by any central body, stock photography will also be unstructured. There will be little innovation that helps sort, rank and distribute photos based on merit--it'll remain as it is now: arbitrary. And just as you should not rely on buying lottery tickets to sustain an income, neither should you rely on on stock imagery when it is so highly subject to sales channels that are diffuse and arbitrary.

In this day and age, stock falls into Truism #4 of my list of The Five Truism about having a Photography Business, which I originally wrote in 1998. Truism #4 says Diversify Your Business. Only a very few who truly know and perfect the stock photo marketplace should do nothing but stock. For everyone else, you don't "succeed" at stock so much as you use your existing imagery from other sources to augment your income.

Most who sell stock -- even well -- do it as fun way to earn a bit more from their hobby or as a lifestyle business. That's how it was for me for well over ten years of my photo career. And as I am more into consulting now, it's that way for me again.

In closing, I will summarize by quoting my last blog:

Turning a blind eye to the rest of the stock photo universe affects decisions about where to put marketing dollars, where to do research into buyer behaviors, pricing, and business development. If it were generally accepted that the market were larger, agencies could form partnerships with other media licensing agents, social groups and legal networks that reach that larger market.

"There are Lies, Damn Lies, and Statistics"

There's another old saying about statistics: "The biggest liar in the world is a politician, and the second biggest liar is a statistician."

The root of these witticisms comes from the fact that statistics can be used to support most any argument. It all boils down to what your message is, and what details within the statistical data set support that message.

In marketing, this is called positioning.

An illustration of this can be found in two recent news items. One from microstockdiaries.com reports iStockphoto having publicized their expectation to reach $200 million in 2009 revenues. By comparison, the official figures for 2007 were $71.9 million. A huge gain, clearly.

Secondly, a survey from Shutterstock shows that 40 percent of graphic designers are using more stock photography in 2009 as compared to last year, and 32% of them say they will be using even more stock images one year from now.

In each case, the respective companies want to present data that not just supports the notion that their sales are growing, but that the ingenuity of their business strategies is paying off.

From a marketing perspective, the stats are genuine. However, it's the broader interpretation by the analysts and the press that makes the data deceptive. Is stock photo pricing on the rise from the $1/image bottom spearheaded by microstock agencies a few years ago? Is the industry really growing by the same proportion represented by the increased revenue growth? One needs to churn through the numbers and deconstruct surveys to determine what, if anything, can be learned from this.

I contend that most all photo industry surveys leave out too much critical information to draw good, if any, conclusions. In fact, one could draw entirely opposite conclusions for some surveys. For example, one main unstated detail about the Shutterstock survey is the company's subscription service. Here, a buyer can pay $1 for a photo, or he can sign up for a subscription, where he'll pay $250 a month and download 25 photos a day. On a per-image basis, the economics of the math is quite attractive. Yet, chances are likely that most subscribers never use all the images they download. If one were to calculate the images actually used, they're most likely paying far more than the $1/photo price they could have gotten if they stuck to pay-per-use model.

Of course, the picture gets muddier still, because not all image prices are entirely $1 either. (Prices go up with size.) The fly in the ointment for those analyzing the statistics is that it's impossible to know how much buyers use what they've downloaded. One fellow blogger told me, "It's like an all-you-can-eat buffet: Do people really eat more than if they just ordered off the menu? How you can you tell?"

Of course, with digital imagery, it doesn't matter--you never run out of inventory. Shutterstock makes $250 regardless of how much the customer downloads, or how much he actually publishes. The only thing the company wants to do is optimize the amount of money the customer forks over. And the more attractive the "deal" appears, the more likely he'll pay.

So the surveys that Shutterstock does only has that one objective: to enhance that marketing message. Everyone else, however, is using this information to get a pulse on the health of the stock photo industry. And to do that, we really do need to know how many photos the client is publishing.

While we can't know directly from buyers, we can look at broader industry data on advertising purchases and editorial print to get a rough idea of the health of the industries that use stock photography. And, as we all know, ad sales and printed editorial pages are shrinking. So we can naturally assume that, even though "traditional buyers" may be paying more for subscriptions--as Shutterstock and iStockphoto have told us--buyers aren't using more images than before.

These contradictory trends (higher revenue from stock agencies against lower image usage) should be a strong hint to industry watchers that what they thought (and have reported and blogged about) isn't what's really going on.

While stock photo industry executives can be applauded for making more money, the fact that clients are actually paying more to publish fewer images would suggest that these companies have always under-priced their inventory--that buyers have all along been willing to pay more. It's like the all-you-can-eat buffet: if the price for a full dinner on the á la carte menu is $50, and the buffet price is $5, what affect does it have on the buyer if the price doubled to $10? Probably not much. And this is precisely how most image buyers feel about most stock photo prices, too. They're already too low to care if the price happens to double.

This is yet another illustration that most all stock agencies never put any science behind their pricing strategies. I've blogged before about this before in my article titled, The myth that microstock agencies hurt stock photo pricing.

The question still remains, just what is the sweet spot for pricing? That is an entirely different matter, and the aforementioned article above discusses the science of pricing in much more detail. Ultimately, the article concludes that the problem is that no one does true, statistically viable surveys on who the real buyers and sellers of stock imagery are. Almost all price surveys out there are retrospective--what happened in the past--and are limited to a very small and unrepresentative sampling of the stock industry on the whole.

And that's why Shutterstock's own surveys can ultimately lead to more self-destruction than the temporary uptick they may have gleaned from the marketing message.

Viable Sample Sizes

Unfortunately, there's a more disturbing fact at hand. If the Shutterstock survey is representative of anything, it's that it is typical of the kinds of surveys usually done by everyone in this industry. And the major errors are that their sample sizes are far too low, and the people they survey do not represent a random distribution of buyers. In this case, Shutterstock asked only 300 "successful art directors and graphic designers" (according to the survey report) about their buying habits.

Why only "successful" ones? Unsuccessful buyers are still buyers, and there's plenty more of them than successful ones. One can even argue that "unsuccessful" art directors probably overpay for images. (Another quote, this one from P. T. Barnum, "There's a sucker born every minute.") And if there are more of them, it would suggest the market will bear higher prices than what people currently see. The real question is, which group represents a more accurate sampling of industry buyers and their behaviors?

The PR firm that contacted me about this survey (Morton PR) said in response to my query on the matter:

...the survey doesn't include the average consumer ... many professional photographers obsess about the importance of the design community as an image marketplace.

And this type of thing is at the root of a systemic problem with the stock photo industry: The obsession with the "traditional" buyer.

What is it that constantly reinforces this misperception about the stock photo industry? To illustrate, ask yourself this: What percentage of the cell phone market is represented by the iPhone? Most people think it's rather large. All you hear and read about these days is the iPhone and applications for it. Everywhere you look, people are hunched over their iPhones, thumbing away... often while driving.

Now, let me broaden the question to include all smart phones, such as the Blackberry and all the Palm phones. What percentage of the cell phone market do all smartphones represent? While most people think these devices account for 80% of phones, the reality is that they all collectively add up to only 10%.

The false impression that people have of the cell phone industry is a byproduct of several factors: hype, consumer buzz, and the news media. The psychological effect all these have on human perception translates to our subconsciously looking for smartphones: because that's all we hear about.

The same thing is true of the photo industry: all the "news" gravitates around stock agencies. And by consequence, everyone thinks that's the only important part of the industry. And this belief creates an echo chamber and feedback mechanism, resulting in even more news coverage, bloggers, photo forums, industry trade groups, and of course, survey methods.

A classic (and consistently repeated) example of how this misperception is perpetuated by press-analysts can be found in the article, Will Hobbyists Take Over? Here, Jim Pickerell addresses this question by examining only stock agencies. He concludes:

An examination of iStockphoto's top sellers reveals that those making the most the sales are very active stock producers, not part-time shooters. Over 70% of those with images on iStock have had five or fewer downloads. They are the hobbyists.

The assumption that iStockphoto is a viable representative of where most people buy stock images is more than just incorrect, the agency represents such a very narrow niche of buyers that it is probably least representative of any single buyer demographic. Yet, the constant focus on iStockphoto (because it's the largest of stock agencies) is like the iPhone of the cellular world. Accordingly, his statement perpetuates the misinformation that the company sells the lion's share of images worldwide.

The evidence against this is overwhelming. Even traditional research in the year 2000 showed that only a third of licensed images came from stock photo agencies. The rest were purchased directly from photographers. In those days, only pros were selling stock images--consumers weren't really that engaged in online photo sharing to a sufficient degree to affect the market. But has that ratio changed towards or against agencies over the past ten years? What with the growth of photo-sharing social networks and high-quality digital cameras, why would one think that the ratio of stock image sales would remain in the hands of pros, or even the stock agencies?

Pickerell's observation of iStock's sales and the distribution of pros/hobbyists is quite easily explained: most pros heard of stock agencies, and have traditionally use them, so it's natural that they gravitate there. The same with the photo buyers who use them: they go there because they always have. They all happen to be the native species to that particular economic ecosystem -- it shouldn't surprise anyone that "hobbyists" won't go there, or do well there. That iStock may have many "hobby-like" members is nothing compared to sites like like Flickr which have have millions upon millions of users. And many of them sell stock quite well.

As for the buyers, the story is much the same. We don't expect to see many non-traditional buyers go to agencies either, since they traditionally never have. And since agency's websites rarely come up in general search results for most search patterns, there's no sign that this trend will change much in the future.

Ok, But So What?

Indeed, fear may be at the heart of all this. For if one to were actually do a proper study proving my point, what then? How would that change things?

More to the point: What's the alternative to a stock agency? Though many photographers sell on their own sites, it's not necessarily easy to do. It's a saturated market, and it's hard to get instantly noticed. Most photographers either can't, or don't want to build their own sites, nor have the patience or wherewithal to wait for their site to increase in google rankings so their images are "discovered." Which brings them all back to agencies (not that they do any better with them, by the way--it's just easier to fail with an agency than it is to fail entirely on your own).

The same is true for the traditional photo buyers: they've used stock agencies for years as well, and typically choose the kinds of images produced by those particular kinds of photographers. Tracking the behaviors of buyers who don't use agencies is, admittedly difficult. How do you find them? True, they're everywhere, but that doesn't necessarily help.

Difficult though it may be to target the consumer-photo-buyer, it doesn't mean they don't exist, or aren't worth trying to track. And it certainly doesn't mean they don't have a very large tidal effect on the market as a whole. They deserve attention. Ignoring them is, and always has been, the greatest reason why the stock photo industry has been struggling. There's more to the stock universe than agencies.

It reminds me of the quote from the Blues Brothers movie, where Elwood (Dan Aykroid) asks the bartender, "What kind of music do you usually play here?" To which she responds, "Oh, we got both kinds. We got country and western!"

Turning a blind eye to the rest of the stock photo universe affects decisions about where to put marketing dollars, where to do research into buyer behaviors, pricing, and business development. If it were generally accepted that the market were larger, agencies could form partnerships with other media licensing agents, social groups and legal networks that reach that larger market. (Getty's relationship with Flickr is in name only--there's been no actual change in how business is done. They only want to get access to rights-managed images from a uniquely small and select group of photographers. In short, it's a marketing ploy, not a true embracing of the consumer market.)

Discovering Buyers and Sellers

If the wider stock industry is so large, who are those photographers? To name a few: Wedding photographers, sports shooters, and many other "pros" (as Pickerell defines them) who have begun selling their inventory as after-market stock over the past five years. Do they get more than 50% of their income from stock sales to qualify as "pros" in Pickerell's definition? No, but they're not hobbyists either. And they certainly account for a great deal of sales.

An internal survey done by a magazine that I once wrote for showed that over 75% of pro photographers that don't "normally" shoot stock sell over $15K of stock licenses annually. This isn't a lot of money by Pickerell's definition of a "pro stock photographer" -- or, for a photographer that focuses solely on stock -- but it certainly represents a healthy chunk of stock sales that he dismisses from his calculations. The circulation for that magazine was over 50,000 at the time, which means that 37,500 people earn $562,500 annually from stock sales. While not huge by itself, it's one (small) magazine. Extrapolate to all pro photographers everywhere, the numbers get impressive: 500,000 photographers would generate $5B in stock sales annually, and Pickerell's data doesn't take into account.

And those are the pros. What about non-pros, who outnumber all pro photographers by orders of magnitude? We don't know specifically because no one has done that kind of survey. (Doh!) But, we can look to other data that might suggest what that might look like. For this, I revert back to the question of who the buyers are:

The Small Business Administration says that small businesses account for 80% of the american workforce. If so, this segment of the US economy must easily overshadow the "traditional photo buyer". And it would be naive to assume they don't license imagery. So, where do small businesses get their images?

A survey I did in 2007 of individual stay-at-home graphic designers and page-layout contractors (many of whom were part-time) shows that they purchased an average of $10K of images in the past year for their small-business clients. They create ads and brochures for professional services (doctors and lawyers) and family-owned businesses (drug stores, hardware shops, restaurants and cafes), among others (sometimes including larger corporations).

In fact, smaller companies were five times more willing to pay higher license fees than larger companies. This should also be no surprise, as big companies have weight and negotiating skills. WalMart negotiates for lower wholesale prices from suppliers, for example. On the other side, consumers are willing to pay higher per-unit prices as a general rule anyway. Consider ATM fees, which are usually $2-3 per withdrawal, regardless of the amount. Most consumers withdrawal $20, making the fee 10% of the transaction. Richer people withdrawal up to $200, reducing the fee to just 1%.

If stock agencies really wanted to improve per-image pricing, target the consumer. While they say they do, over 75% of the buyers I surveyed never heard of "stock photography" as a business. (Several thought I was referring to "stock footage", as in film reels.)

Of those who were familiar with stock-photography as we know it, only 60% heard of Getty. And only 10% of them used Getty. (In follow-up interviews, they heard of Getty because those are often the by-lines for newspaper photos; not because they purchased from them.)

So, where do they get their images? The #1 answer: "Google". Most people use the internet to find images, and extremely few image search results are from stock agencies. They bought directly from the photographer. Those photographers were not necessarily pros either. One woman said she expressly avoided buying from pros because they make the purchase process too difficult; they would require her (and sometimes her client) to sign lengthy license agreements. "It's just not worth the time. The cost of the image isn't the problem, it's the hassle."

If they're buying images and avoiding pros, one can only assume these are "hobbyists."

The #2 answer for where people buy images was specifically characterized as "Local Photographers." In follow-up interviews, the pattern is the same: friends, wedding photographers, art photographers (found from local galleries), referrals, and even their own photography.

The average purchase price per image from these hobbyists: $150/image. A price even Shutterstock would envy.

Was my survey representative of the industry at large? Not according to the rules of statistical sampling and random choosing of participants. I make no claims about the science of my methods. I conducted my survey by tracking down and interviewing the people who created the brochures that I receive from local businesses in my mailbox everyday. I also find those who create tri-folds that you find in hotels--the kind that advertise helicopter tours over the Grand Canyon. Things like that.

It's also not the first time I've done this sort of thing. But I get roughly the same results every time. It's admittedly not scientific, but the consistency of the responses certainly suggests that the "traditional" surveys done by industry analysts and trend-watchers is questionable.

Another fact my survey continues to support is the already-established truism that most stock sales are done on a peer-to-peer basis. That is, the buyer goes directly to the photographer. And this is also why it is hard to truly nail down the exact size of the stock photo industry. Unlike cell phone sales, where data is gathered by organizations that mine quarterly reports from publicly traded companies, photo sales are not done entirely through known entities who are required to release this information. (Heck, they may not even know themselves, because it's too "casual" as an income line item.)

Spending Habits

Having a better sense of who photo buyers and sellers are is one thing. But another important element is the analysis of their spending habits. This is another area where most traditional surveys fall quite short.

For example, surveys should break down buying habits by industries: which buy more, and which don't? Certain sectors do quite well in recessionary times, such as consumer staples, beverages, entertainment, to cite only a few. Would these companies show a trend towards one kind of photo source for imagery than those from other industries that don't do as well, such as construction, transportation, energy, travel? You can imagine that the old GM suppliers are probably not buying a whole of ads or spending marketing dollars, but companies that sell to grocery stores are probably buying a heck of a lot of imagery for their marketing programs.

Another data point about spending habits that's missing from the Shutterstock survey is "patterns." It showed that photo buyers "used more stock photography than they did a year ago." But that presents more questions than answers. The statement says nothing about total dollars spent on photography, or the distribution of how those dollars were divided. One naturally assumes that money has been diverted from one kind of photo expenditure (such as assignment) to stock. But that's just an assumption -- the survey didn't ask that.

For instance, if buyers spent 200% more on photos than last year, but only 10% more of that went to stock photo purchases, then it is still true to say that they "bought more stock than last year," even though their spending on other photo sources was even higher. (Of course, this is just a hypothetical to illustrate flaws in the survey methodology. I doubt this was actually the case here.)

The Business Paradox of Doing "Real" Research

In a follow-up interview I did with Felicia Morton, the president of the PR firm that helped orchestrate the survey and who represents Shutterstock, we discussed the difficulty in conducting what I would consider to be a viable study on the subject. The challenge is that a broad and detailed survey is expensive, so someone has to fund it. I asked whether someone would conduct the survey and sell the data to photo buyers. She said it was unlikely -- that companies like Nielsen Research wouldn't do it because they wouldn't think there's a sufficient number of buyers.

Seems obvious. Coincidentally, I had just such a client and would have been willing to pay for this research. So, I followed Felicia's lead and tried to contact someone at Nielsen to see what it would take to do the kind of research necessary to get a much more accurate handle on who really buys and sells stock images in the USA?

But, no one would return my call. I called two other national research firms, and one returned my call, and we spoke at length. But I was asked not to quote them by the time we got to the end of it. What I can say is that there is a general perception that the stock licensing industry probably is as large as I've always said ($20-25B), but the research firm doesn't believe existing players in the industry have any desire to either purchase the data, or (more importantly) to have the data out there if it were true. (This is why the firm didn't want to be named.)

Why would existing companies want to maintain the status quo if it were known that the stock industry were 10x larger than people think? Because it would require them to rethink their entire business model, which they would not be able to afford, which itself could compromise their current position. Therefore, with no one to buy the data, there's no financial justification for doing the research.

We also priced it out: it'd cost about $200,000 to do a real, nationwide research survey of consumers in determining what actions they've taken that might constitute a financial transactions involving stock image licensing.

Needless to say, when I reported this back to my client, he balked. His main concern wasn't so much the price (not that it would have happened anyway), but something more surprising: if the market really is $20B, everything changes. The big risk: one has to actually penetrate that market, or it might compromise the company's existing market position. It's hard enough to compete against companies that are already bigger than they are, but if it were known that there's far more fruit on the tree, then the bigger companies are already in a far better position to grow, ranging from financing to partnerships, and so on.

The question seems to have shifted now. It's not whether the market is so big, but rather, is it too big to tackle? Unless and until someone comes up with a business model that can successfully service the consumer-oriented stock photo buyer and seller -- which itself would require a monumental investment for a small company -- no one's going to try it. And if no one tries it, no one's going to spend money on a survey that shows the true market size. Moreover, no one wants that data to known, or it'll force the issue, and everyone's at risk. The industry is locked in its own self-imposed a stalemate.

This is not only understandable, but history has shown a similar phenomenon: again, in the cell phone industry. For years, not one of the major cell carriers was willing to "open up" handsets to allow consumers to download applications, not because they didn't think there was opportunity, but because it would disrupt their existing business models, which had been fine-tuned to a science. Furthermore, no one was willing to do the research to determine if there might be growth opportunity. Anything that might cause them to change their existing models was deemed as "risky."

When Apple finally disrupted this assumption, the model changed, and with it, so did the industry. Well, sort of. Cell carriers really haven't lost the stature they had before, but it sure has cost them considerably to weather the transition. But the real reverberations are being felt in the handset market -- all carriers (except for Apple) are suffering unprecedented losses. (The financial section of the July 16 edition of The New York Times had sequential headlines of reported losses by cell carriers.)

So, what will it take for the stock photo industry to change its ways and realize the potential of the consumer as both buyers and suppliers of stock photo content? It's unlikely to be spearheaded by an inside photo trade organization or stock agency, and the stock industry analysts, bloggers and pro photographers are locked into the position politically that the universe "is and always has been about agencies and pro photographers." (See my blog on the Economics of Controversy.)

It'll most likely be an outside player who sees the untapped opportunity of the global opportunity with stock imagery, much as Apple disrupted the cell phone industry. (An event that no one could have predicted just a few short years ago.) One thing for sure, whoever does shake the ground for stock, it will start by funding a statistically viable study.

I've predicted on my blog and in interviews that I think it'll be an existing media licensing company that merely expands its content library to include still images. They're already big, and they already have business models that include "consumers" as both producers and buyers of content. The stock licensing market is potentially enormous, and the existing stock agencies are drastically undervalued (because they don't recognize the industry as large.)

then again, I've heard of no rumors so far.