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."

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.

Picscout's IRC - commenting on other people's comments

When Picscout announced its new Index Registry Connection (IRC), the blogosophere has been abuzz, and with it, personal emails directly to me requesting public commentary.

Though I'm no longer affiliated with Picscout (past VP of marketing), I feel compelled to chime in on the subject. However, I obviously have information and insight that I'm not at liberty to discuss. This is a bit frustrating because some of it would help dispel some of the myths and misunderstandings that many people have about the IRC. However, there are a few things I can say that will merely help steer people in the right direction, at least insofar as their overall understanding of the stock photo market and the IRC's relationship to that. A great deal of this is based on blogs I've posted over the years, all of which pre-dated anything Picscout is doing today.

What we know, and what Picscout has announced, is that they are in the first stages of a technology that will someday be used as the foundation for new business models yet to be discussed. Those who've expressed concern about the IRC at this point have done so based on rather erratic speculation. According to Picscout, the IRC is just an index. It's currently being populated, and they are building an API for application developers to attach to the index to get information about images. Yes, Picscout has made a preliminary prototype that uses this API -- the firefox plug-in -- but one can assume that more applications will have access to that API at some point in the future.

But this hasn't caused some unfair and somewhat simplistic criticism of the browser plug-in. It has been ridiculed as a "bad way to reach image buyers" and that "no one really wants to add a plug-in just to see who owns an image." True, but Picscout didn't characterize it that way. It's just a prototype sample to demonstrate how the IRC can work. One can reasonably assume that, over time, many third-party applications that use images -- especially those used by image buyers -- could incorporate this API as well. There's nothing secret here; this is precisely why technology companies build APIs.

There are also those who've critiqued the basic premise of an IRC. That's like criticizing Google and Yahoo for creating technology that "scans and indexes the web." As image-recognition algorithms evolve, it's natural to index images and track on the web. That there may also be an added element that points to a "licensing agent" for those images not a "good or bad" thing--it's just something people can use. It can become better or worse depending on many other factors.

For example, similar models are already in use. All major media publishers (music, film, video, and news organizations) employ some sort of recognition technology to identify their content, which is then used to track their copyrighted content online. That some of them have been used in unpopular ways is true, but it's simplistic to throw the baby out with the bath water. There are also benefits to those mechanisms; they enable device-makers and others in the supply chain to create popular and useful tools to play such content on devices ranging from MP3 players to TV set-top boxes. The ease and convenience of instant-viewing of movies, songs and other content is a direct byproduct of such technologies applied in non-combative ways.

The difference with PicScout's IRC is merely that Picscout doesn't "own" the content they crawl and index, as opposed to media publishers that only do their own content.

But there's another important difference that the IRC does that other publishers don't do -- it provides for a new pathway within the communication channel for a potential "user" to legitimately acquire arbitrary content. I spoke of the inevitability of this sort of thing back in 2007 and 2008 when I outlined business models that would evolve as image-recognition engines such as Picscout's and Idee's grew powerful enough. In fact, my entire article, The Economics of Migrating from Web 2.0 to Web 3.0, predicted precisely the kind of IRC model that Picscout has now announced.

It's true that Picscout hasn't yet announced details of its intended business models, but just like the inevitability of the IRC in the first place, there's a very limited number of business options available, each of which are similarly predictable. (I identified a variety of such models in the article above.) The real question before us is not what Picscout might do, but how well they do it. Choosing the right partners, technology back-end, marketing, and competitive differentiation will all be instrumental in their success. After all, both Google and Yahoo attempted the same technology and business models, but only one succeeded.

Another concern I've seen raised by some industry watchers is how the IRC will affect stock pricing. John Harrington's post was one of several that expressed concern over the inclusion of CC (Creative Commons) images into the index. (CC attribution allows publishers to use images for free, in exchange for credit attribution). The concern that CC images are "free" and will thereby affect market prices is mis-attributed. I've written extensively about the myths of how "free" affects pricing--you can read them in the "Pricing and Profit" section of my blog. Those articles basically highlight common and repeating events that show how open-market pricing mechanisms has a tendency to optimize price points. Don't get me wrong--there is a concern about CC images, but it's not because CC images are free.

The problem with CC images is more tied to the legitimacy of the images in the first place. This, too is something I've written about a lot before, but I can summarize the basic problem this way:

The CC is used mostly by consumers who neither understand or care one bit about the legal complexity and liability that can come from publishing CC-attributed images.

It's also the case that those who CC-attribute their images don't believe their images would ever be licensed. Lastly, CC photographers don't think about it--they just assign CC attribution with indifference, much the same way one clicks on the Agree button on license agreements for new software purchases.

It's important to recognize the mindset of people who currently use CC-attribution because it forecasts how their behaviors might change under different market conditions. And that's where the IRC comes in. If the IRC shows that people can monetize their images in ways that were previously unavailable to them, they wouldn't be so indifferent to CC. In other words, CC photographers do not universally share the political focus and determination that Lawrence Lessig has. They are not an army of political adversaries that have it out to dispense with copyright. Most CC photographers are largely unaware that they're part of someone else's agenda. The simple smell of money--of easily accessible money--will convert most CC users into regular photographer-contributors.

Because of this, I think it'd be good for Picscout--and good for photo pricing--to be inclusive of the CC community. But there's another, entirely different problem with CC that negates this advantage... for now.

The problem is, where there's profit, there's also greater incentive to game the system. As such, CC presents a significant risk. The misunderstanding and indifference by the consumer public about CC is what allows bad actors to step in. You can read about that in more detail here. The game is to give a CC attribution, and then deny that "you" are the one who gave it. Either the photographer or the user of the image can do this dishonest act. An arbitrating judge would never discern between a lying photographer looking to swindle the publisher, or a lying publisher, looking to swindle the photographer. In the event of a dispute, the dishonest player usually is the one who wins because he knows the game.

Therefore, users of CC images have to trust that the CC attribution on the images they publish is legitimate, and that's not very practical. Combine the effects of these bad actors with the social phenomenon that consumers are in the habit of attributing the CC license to any image they touch--including those they do not own--the result is a time-bomb waiting to explode: when all those mis-attributed images are used by naive publishers seeking to use "free images" through the the IRC, the lawsuits start flying.

It's not as though "most" CC images are mis-attributed. The problem is that it's an unknown number. And the risk for Picscout is that even a small number can result in a PR nightmare. If a disproportionate number of images in its index are CC-attributed, it'd be like being in a dark room full of thieves when the lights go on: you not only can see what's been stolen from you, but who stole them. If most of the goods are CC images, people learn to avoid the room if it attracts thieves. Buyers would do more than just withdraw from using CC images, they'd avoid Picscout's IRC entirely.

The same would not be said of "traditional" infringements--in fact, quite the opposite. If the large majority of the IRC index contains validated works from credible suppliers, the IRC's reputation not only goes up for the buyer, but it would attract more business partners. Here, infringement claims would be regarded as proof and legitimacy of the system.

The issue of CC credibility points to another important factor in IRC's success: managing copyright in general. First, I'll dispel the silly notion that the IRC can be used as a vehicle for easier and more frequent infringements. The IRC is not a search engine, and infringers wouldn't use the IRC if their intent is to infringe. The IRC is just used to identify information about images a human finds through other means. That is, you already have the image--you just want to know how to properly license it.

The legitimate question is whether the IRC actually helps increase licensing. And this gets to a critical point people have asked that Picscout has yet to answer: Will infringements be pursued? As a general point of interest for industry watchers, protection of copyright is one of the most critical cornerstones of copyright economics. There's a direct relationship between copyright enforcement and compliance, which itself is due to the direct relationship between copyright compliance and social norms.

In other words, most copyright infringements are because certain behaviors are regarded socially acceptable--the norm. Infringements of photography are not usually because people want to save money through stealing. To understand the economic effects of this, understand that music copyright compliance trends finally turned positive when music labels struck deals with music companies to create ways for consumers to buy music more easily. And that wouldn't have happened had the music labels not been aggressive in pursuing infringers. I address that issue thoroughly in my article, Proposal for Privatizing the Copyright Registration Process, where I write:

...there's a lesson in behavioral economics: Consumers don't fear copyright infringement consequences, companies do. Markets don't grow by educating individuals about copyright; compliance is achieved--and business grows--by creating convenient and automated mechanisms that make both access to and use of content easier. The recent announcement by Apple and record companies to remove copy protection mechanisms in songs further reflects this economic reality.

That cornerstone of economic viability--pursuing infringements--must be real and present in some form, or there is no economic infrastructure to sustain a licensing business model. What makes this problem hard for photography is that, unlike music, which is protected by music companies, the common photographer does not attempt to protect his image copyrights. Worse, photo agencies do not step in to protect images the way music companies do in any significant manner. Even large stock agencies are puppies compared to the pit-bulls of the music industry when it comes to protecting copyrights. And photo industry trade associations literally do nothing--this, compared to the recording industry trade associations that vigorously pursue infringements.

Photography infringers steal because there is no social norm dictating otherwise. Most are totally unaware that they are doing something wrong. The IRC can lead a potential buyer to a licensing agent, but unless that agent is also prepared to protect that asset, social norms won't change. And people don't build new technologies to support licensing mechanisms unless they know social behaviors will participate in that system.

While the IRC can be used as an infringement tracker, it's unknown as to who is going to pursue infringements. And that's the elephant in the middle of the room. If the culture of stealing images doesn't change, too few people will use the IRC sufficiently enough to justify investment in its growth or participation by third parties that have to choose whether to invest time, money and resources into supporting the Picscout API.

By contrast, if someone does pursue these licensing/infringement conditions, it gives incentive throughout the entire supply chain to participate. Buyers would be more diligent about licensing images to avoid infringement suits, causing more photographers to use the system to track their images, causing more agencies to get more images into the system to increase the rate of licensing, and more third party applications will build IRC access tools into their programs.

In summary, all the critiques of the IRC that I've read are premature. But that doesn't mean there aren't serious questions and challenges ahead.