16 May 2013 Commoditization and what it Can Teach Stock Photographers
This is a guest post by Luis Alvarez of Stock Performer.
The supply of stock photography knows no limits! Today’s stock agencies offer huge image libraries and grow ferociously each month. Is stock photography becoming a commoditized product? What can photographers learn from other commoditized industries and be more successful?
At Stock Performer, we talk about this regularly with our users and we wanted to contribute to the conversation. This article aims to explore the commoditization of stock photography and compare it with other commoditized industries. Such comparisons help photographers generate revenue in today’s highly competitive market.
What is commoditization?
Let’s start off by looking at The Business Dictionary’s definition of Commoditization
Almost total lack of meaningful differentiation in the manufactured goods.
Commoditized products have thin margins and are sold on the basis of price and not brand.
This situation is characterized by standardized, ever cheaper, and common technology that invites more suppliers who lower the prices even further.
The Business Dictionary (link)
Basically, a commoditized product is an oversupplied product which is difficult to distinguish from another in its category, thus pushing prices down. Think of all the isolated portraits on white! Or business people group pictures! Handshakes anybody!?
Is stock photography commoditized?
From the definition above, it seems so. But let us look what some business leaders in the industry have to say:
Content is increasingly ubiquitous. So power resides with the consumer, not the provider.
Jonathan Klein, CEO of Getty Images (2007) (link)
We’re seeing a commoditisation of the market
Gary Shenk, CEO of Corbis, said in an interview with BJP (2009) (link)
Photographers need to understand that the stock photography market is flooded
Phyllis Giarnese, Stock Photography consultant and former creative director at Getty Images (2009) (link)
As of today, the main agencies have millions of files on offer. Supply is very high. Here is an overview:
|Shutterstock||24 million files|
|Fotolia||21 million files|
|123RF||19 million files|
|Dreamstime||16 million files|
|iStockphoto||10 million files|
Ask yourself: what differentiates images on sale at one agency compared to those on sale at others? Especially considering that many of those images are identical due to non-exclusivity?
Based on these quotes and information one can safely conclude that the Stock photography market is commoditized.
What other industries are commoditized?
For our article we explored the following three industries: Smartphone manufacturers, Airlines and Specialty Coffee retailers. Here is a very short summary why each of these markets are commoditized
- Smartphones (hardware not software): Many smartphone manufacturers are finding it increasingly difficult to create differentiating factors on their hardware. If you disregard the operating system, you will notice that there really isn’t much difference between a Nexus, HTC or a Motorola. They lure customers by giving them the most hardware features at the best price. Read more here and here.
- Airlines: Remember the times when flying was luxurious? Well that’s over. Passengers now want to fly from A to B at the best price and they have plenty of airlines to choose from. Airlines end up competing on price as they cut down all the frills. Budget conscious customers force airlines to live on low-margins. Read more here and here.
- Specialty Coffee: You can get a good coffee at Starbucks, McCafe, Dunkin Donuts and a number of other places. There were about 500 such outlets in the US in 1989. In 2006 there were 24,000! Customers have a large choice but suppliers cannot always differentiate themselves enough to impose a higher price for a cup of coffee. Read more here.
And despite the challenges and bankruptcies faced by the players in these industries, some are very successful. For example:
- Smartphones? Apple
- Airlines? Easyjet, Singapore Airlines
- Specialty Coffee? Starbucks
How do they succeed? How can they compete in the tough conditions of commoditized markets? What can we learn from them?
How companies succeed in a commoditized market
When looking at the companies in our case study we realized that it is possible to succeed in a commoditized market. If they did it, photographers can do it too. What are the key elements of their success?
- They cut costs to live off low-margins
- They focus on a specific market segment and are the best at it
- They innovate constantly to either differentiate their products and charge higher prices or to cut their costs and offer lower prices
- If premium, they provide great full customer experience, from selecting and buying all the way to owning the product
How can you become a more successful stock photographer?
The strategies mentioned above are essential for success in today’s commoditized stock photography market. With some adaptation, you can follow them and increase your success and money.
Based on our research, a successful photographer strategy should follow these guidelines:
Cut costs and increase your margings
- Review your workflow and reduce all cost points.
- Pass the price pressure on to your suppliers, make up artists, models, etc… Find new ones to work with at a better price.
- Partner with other photographers to share ressources and equipment.
Focus your talent on a segment and be the best
- Invest your time and ressources into your specialty area. You can never be the best at all areas, so choose your strength and compete on it.
- Niche: produce content which is rare but with a healthy demand. Such content can be sold at agencies with higher prices.
- Premium: Invest in high value productions. Get experienced and qualified models, rent out excellent locations, ensure your pictures offer high value. Competition is lower in this segment. Sell them at agencies with higher prices and increase your margins.
- Basic: Produce basic images, isolated on white or similar, but in a cost-efficient way and in large quantities. Sell these on agencies with lower prices and generate revenue on quantity.
Scale production to better cope with low margins
- Outsource parts of your workflow to allow you to produce more than you would on your own.
- Get an assistant and produce more without compromising quality.
- Find new markets to sell your work and generate new income streams. Your images can also be sold outside the stock agencies, think about art sites, prints, mugs and more!
Innovate wherever you can
- Use any skills you have to innovate.
- You might have the skills to build hardware cheaply or to program software to automate parts of your workflow.
- Innovate to develop creative lighting or post processing techniques which set your images apart.
Choose a strong agency well suited to your style
- Your success depends on your agency’s success. Partner with an agency which provides good revenue, innovates and has a good customer experience.
- Choose an agency well adapted to your type of work. If you are a premium photographer, sell on higher priced agencies, because you will sell. If you shoot more basic items, then compete on price on lower priced agencies.
Just like Starbucks, Apple and EasyJet have strong competitors, you too have to fight against tough competition.
You can choose to go the Apple way and produce innovative, high value imagery and sell it at higher prices, or go the EasyJet route and establish a very efficient production workflow creating simple but great images at a low price.
The stock photography industry has commoditized, pick your strategy, react and work hard!