This is part 2 of my article about the changes at iStockphoto.
What are the backgrounds and history of Getty Images within the microstock market?
First of all, for the rest of these considerations, I am talking about the microstock market – in the context of the Getty family, this affects not just iStockphoto but also Thinkstockphotos as their outlet for subscription offers. As for them it would not matter which of those brands are bringing in money, they are exchangeable for the sake of these considerations. What I believe might happen at place A could also happen at place B and vice versa.
Let’s have a look at the microstock market: We know that most agencies do not publish any numbers. But we have a few indications, one of them being the numbers of iStockphoto from the past. For example, in 2010 KK Thompson announced a weekly payout to contributors of $1.7 million, which would be about $80 million per year – putting this in comparison with the numbers announced by Shutterstock, you could assume the revenue of iStock at this time was in the range of $250-$300 million per year. Given that there seems to have been only little growth in the last few years, we can assume that iStockphoto is making revenues of somewhere between 300 and 400 million dollars a year.
Thanks to their IPO, we also know that Shutterstock has been growing significantly but still will need to make progress to achieve revenue of 200 million in 2013. Based on contributor reports, we can make a qualified guess that Fotolia and Dreamstime are next in line but far behind iStock and Shutterstock. Let us assume that both are in the range of 100 million dollars per year (though most likely this is more on the optimistic side). I don’t believe any other microstock agency is making significant revenue compared to those four. So we end up with a total market for microstock image licenses in the range of 700 to 800 million dollars per year, almost half of it being earned by iStockphoto. Jim Pickerell, author of the Selling Stock paid news service estimated the global market for still imagery to be roughly $1.5 billion, my estimate for the microstock market would be about half of the global market.
So: Yes, iStockphoto is – according to my assumptions – still by far the most successful and profitable agency in the microstock sector. It is not even close to going down as some people keep predicting for many years now. It just lost the dominance it used to have – I believe just a few years ago, it might have had a market share of 80 per cent or more in the global microstock area, and this might have dropped to about 50 per cent today.
Now, Getty Images has a long history of consolidating a once unstructured market by acquisitions of agencies and image sources. I have very few doubts that this has been their strategy or plan for the microstock market in the past as well. First they have acquired iStockphoto, later StockXchange/StockXpert were added through the acquisition of Jupiter Images. And I would not be surprised to hear if they had made an offer to acquire Shutterstock at some point before its IPO. It would have perfectly fit into the portfolio as an offer they could not really compete with as their offers Thinkstockphotos and photos.com have not been as successful as they might have hoped. You could also assume that those offers were mainly aimed at existing Getty clients (Thinkstock) and at a low-end consumer/blogger/web designer market (photos.com).
I believe with the IPO Shutterstock is no longer a candidate for an acquisition. The stock price has surged since to reach a market value of about $1.9 billion these days. While I am not sure if that is a justified value, it sets a price for an acquisition – and as Getty Images was valued about $3.3 billion when being sold from Hellman & Friedman to the Carlyle Group last year, it can be doubted that an acquisition of this size could be managed. My conclusion is that this plan or idea has been definitely dismissed at this point.
Also, let us have a look back: iStockphoto has not only disrupted the image licensing business from a “close circle of friends” between photographers and professional image buyers to an “open for all” market of small designers to hobbyist photographers. It also used new technologies to lower the price for the product significantly while still paying out enough to its contributors to make many of them approach this as a new full time profession. During all of this, iStock has constantly tried to shift the value of images upwards, trying to figure out where the sweet spot between mass market and high-end pricing could be. Projects like the Vetta collection introduced in 2009 had proven that a part of the new market was willing to pay higher prices.
Unfortunately, the competition did not understand, agree, was not capable or at least did not follow iStock’s lead. In other words: I can’t really blame iStockphoto for now changing their pricing to be more competitive with the low-end offers out there. It’s a logical move going hand in hand with the reduction in image quality requirements. If the main competitors would have followed iStock’s lead by raising prices it might not have happened.
What I assume how Getty is going to approach the microstock market in the future
So the plans had to be changed, to have a more competitive offer against their main challengers in the microstock field. Let us assume that those changes made in the past few months have been the result of these considerations. This would certainly make some sense: iStockphoto was established as a good mix between high quality images and low to mid price levels. Below iStockphoto, there was SXC as the free platform and Thinkstock/photos.com as the subscription offers. One of the missing pieces was a low-priced offer competing with the smaller agencies like CanStock, 123 and others. This has been achieved now with the reduction in prices for the Main collection.
At the same time, the existing subscription offer of Thinkstock is broadening their library as well through iStock’s partner program. There are probably millions of files added as all non-exclusive content automatically is being mirrored. It might become a more competitive offer to Shutterstock, though it is still far behind in the number of images offered. This is certainly part of the motivation to accept more content these days. By the way, I would not be surprised if iStock itself would make a new, more competitive subscription offer in the near future as well. The existing subscription (based on the credit pricing it does not allow a fixed number of images as others do) can not really be compared to any other subscription offer and never worked very well. They might either drop it completely or – more likely – start offering a “x images per month” at some point. This was dismissed in the past due to contributor’s concerns but in recent years this has not been a major problem enforcing changes, has it?
If you are still interested, read part 3 of this article here… 🙂