THE BIG PICTURE
Getty Images struggles to frame a profitable future.
SEATTLE — With its vast archive of more than 350 million images, a stable of award-winning photojournalists and annual revenue of nearly $1 billion, Seattlebased Getty Images may be the most dominant player in the picture business.
It is also, arguably, the most controversial.
Getty has been criticized for selling the rights to photos that are freely available in the public domain. It was infamous for an aggressive copyright strategy that until recently included ceaseand-desist orders and debt collections against anyone, even churches and small organizations, that used its images without permission.
And, critics say, Getty can be tough on the people who make those images in the first place.
Just over half of Getty’s revenues, according to industry estimates, come from distributing “stock” photos — images of generic subjects, such as “house” or “orange juice” or “corporate executive,” that a commercial client might use in brochures, websites or advertisements.
The stock photo business is highly competitive, with Getty and its rivals, such as Adobe and Shutterstock, steadily cutting prices to keep market share. Last month, for example, Getty announced plans to move entirely to a “royalty-free” pricing model that would make stock images even cheaper for clients.
But if lower prices have benefited Getty’s customers, they’ve also meant less money for stock photographers, who have seen their earnings steadily fall — in some cases to as low as a few pennies per image.
Craig Peters, the new CEO of Getty Images, is unrepentant. He says Getty’s pricing simply acknowledges that the stock business is no longer dominated, as it was 20 years ago, by “a small group of photographers supplying a small number of customers at relatively high price points.”
To the contrary, as megapixel smartphone cameras and inexpensive broadband have saturated the market with ever-better, ever-cheaper images, Peters says, older business models have fallen aside, as have players who depend on them.
He points to Corbis Images, Getty’s one-time crosstown rival, which Getty acquired parts of in 2016 and which, Peters notes, was tenaciously sticking to an outdated pricing model “right up until the end.”
‘Race to the bottom’
Others are less matter-of-fact about the industry’s changes.
It’s “race to the bottom,” says Francis Zera, a Seattle-area commercial and architectural photographer who sells stock images through Getty and other agencies. (He actually shot Getty’s Seattle offices, in the Chinatown International District, for the company in 2013.)
Getty’s new pricing strategy, Zera says, simply encourages customers to expect stock photography for next to nothing. “It’s the old joke, ‘Why buy the cow when the milk is free?’ ”
Jim Pickerell, a veteran stock photographer and industry critic, agrees. Getty’s latest move, he says, can only accelerate the slide of the stock business toward “a strictly low-income, part-time, amateur endeavor.”
Critics also note that Getty, for all its forward-looking rhetoric, hasn’t entirely escaped its own past - not least the 2008 decision by founders Mark Getty (grandson of oil tycoon Jean Paul Getty), and Jonathan Klein to sell out to a private equity firm, which saddled Getty with more than $2 billion debt.
Last year, in what was widely seen as a turnaround effort, the Getty family acquired a controlling share in the company, promoted Peters to CEO and raised $600 million in outside capital for much needed investment.
But the turnaround has been slow. Although as a privately held company it doesn’t publish financial data, industry insiders say Getty’s earnings before taxes, interest and other expenses in the first half 2019 were up barely 3 percent over the same period in 2018.
Supply expands
That points to Getty’s larger challenge: The supply of new
photographs and videos is exponentially outpacing what producers or distributors can charge for each one.
Peters says that, since the late 1990s, the volume of licensed images Getty distributes annually has probably grown by a factor of between 30 and 60, while revenue has roughly tripled.
“The amount of imagery that you need to provide (today) — the economics of that have completely shifted,” he says.
In some respects, Getty Images is suffering from its own success.
Getty and Klein founded Getty Images in 1995 in London when the stock photography business was an inefficient but lucrative seller’s market, with small agencies selling premium images for hundreds and even thousands of dollars and splitting the proceeds with photographers.
But early on, Getty and Klein saw how digital technologies were disrupting the photo business. In 1997, they acquired Seattle-based PhotoDisc, a pioneer in web-based photos, and two years later, relocated their business to Seattle, which was emerging as a center of digital image technologies.
Over the next decade, as Getty snapped up stock firms and archival collections and built out an “editorial” operation to supply news, sports and entertainment images to media outlets, the company embedded these assets in a digital platform that made it cheaper and faster to get images from producers to clients.
By 2006, Getty had 2,000 employees, large offices in New York and London, and profits of more than a $130 million.
Beyond its control
But the digital-image market Getty had helped launch was now moving beyond its control. “Microstock” agencies such as iStockphoto were stealing market share with lower-end, often amateur-produced images that sold for $15 or less. Even after Getty bought iStockphoto in 2006, growth was becoming harder to sustain.
In 2008, Getty and Klein sold the business for $2.4 billion to private equity firm Hellman & Friedman, the first of Getty’s two private equity owners; the second, Carlyle Group, bought Getty in 2014 for $3.3 billion.
The private-equity era would bring more ambitious acquisitions, including Corbis’s image assets, in 2016. But it would also bring some critical missteps.
Getty’s private-equity owners had financed the purchase of Getty with massive debt — $2.6 billion in the case of Carlyle — which became Getty’s debt. With much of Getty’s cash flow now going to service debt and pay dividends to private equity investors, the company struggled to invest in new technology. That posed a potential problem in “a business where you’re being disrupted by new technology and new competition,” says Gregory Fraser, a senior analyst with Moody’s Investors Service.
At the same time, to generate more needed cash, Getty tried to raise prices on its midmarket, or “midstock,” images. But that ill-timed move, coming just as cheap micro-stock was flooding the market, hurt Getty’s business and cost it $100 million in annual revenue by 2016, according to Moody’s.
Some of that damage has been reversed since the Getty family came on board last fall. The firm had already begun introducing more competitive pricing, including monthly subscriptions.
Embracing technology
It has also rolled out a host of new technology initiatives. The company is beefing up its distribution platforms, and now needs less than a minute to get news, sports, entertainment and other editorial images from photographers’ cameras to its news media clients, who still make up 30 percent of Getty’s total revenues, according to Moody’s.
On its commercial side, Getty is using AI-assisted technologies to help clients more efficiently search Getty’s vast portfolio. It even has an initiative to algorithmically adjust clients’ image searches so that historically underrepresented stock subjects — such as “female physicians” — turn up more often.
Whether these initiatives will deliver the results Getty Images needs is still uncertain. The company’s debt, though reduced, remains substantial.
As technology and competition continue to drive down the costs of making and distributing images, customers will expect to pay even less. To compensate, Getty and its rivals have little choice but to keep boosting volumes while keeping costs down.
Industry experts say that means Getty Images and its rivals will continue pushing down the prices paid to stock photographers.
Pickerell, for example, estimates that the average price for a stock image today has fallen to around $29. John Harrington, a Washington, D.C.-based photographer and expert on the photo industry, thinks it’s even less — in “the sub-$10 range,” and that some stock photographers are getting per-image royalties of fractions of pennies.
Peters, while declining to discuss average photo prices, acknowledges that with more competition and a larger base of photographers working today, the stream of total royalty payments has “become more diffused, and so certain individuals have seen their individual pieces going down.”
None of which is encouraging for stock photographers themselves. Zera, the Seattle-area photographer, says the downward price spiral has made stock photography all but untenable for professionals like him.
“Everybody wants pretty pictures — as long as they don’t cost anything,” he says. “And that’s not a very solid business model.”