20 Oct 2015 Envato Moves Financial Structure to the US

Envato, the Australian company behind PhotoDune and the largest digital media hub provider in the world with over US$250M in total community earnings and over US$50M in annual revenue, has today announced that they’re opening a subsidiary in the US.

The company has decided the chances of reaching USA’s premium providers and a bigger portion of this leading market is worth the logistical hassle of moving everything over.

They’re announcing the changes almost three months before they become effective to give their 5 million+ members enough time to adjust, and their contributors enough time to complete the necessary tax forms. They’re also welcoming questions, concerns and comments from their community, and hope the early notice will help them to complete the transition smoothly and successfully.

Why Are They Doing It?

Global expansion was one of the big points in the company’s roadmap for 2015, and in the past months they committed time and effort to enhance their financial tool and tax rollouts. The new US office is their first move in extending their global presence and business operations.

They chose the US for obvious reasons: it’s the leading market for media businesses; has wider payment options; and, better opportunities for converting both providers and buyers.

While not mentioned, there may also be currency reasons: the Australian dollar has fallen more than 20% against the US dollar over the past 18 months, although that’s more a benefit than disadvantage for Australian companies charging in USD.

Envato in the Stock Photo Industry

With nine years in business, Envato has grown into a huge and very successful company. As they said in their announcement, they went from operating from a garage in Australia to managing a massive creative ecosystem with users from all over the world.

This company has never taken external funding and until now has operated completely from Australia, two aspects that make their success that much more impressive. And they’re not showing any signs of slowing down: as they disclosed in their 2015 roadmap announcement, they hit $250M in community earnings earlier this year.

With such high revenue it’s odd to many that they have such a low profile in the stock photo industry. This is mostly because Envato has much higher success in their other marketplaces – primarily Themeforest and the Tuts sites – and allocate less resources to growing their stock photo and video marketplaces.

This latest move towards US market is a hard one to pull off, demands lots of effort at all levels of the organisation, but is potentially very lucrative. It’s something that Canva, also Australia-based, may need to do in the future as well.

What Are The Changes

From January 1st 2016, all US buyers and sellers will pay and be paid by the US subsidiary.  Envato has prepared online forms for the W-9s for US contributors and W-8s for internationals, as all other US-based microstock agencies have done. Not filling out the forms will mean Envato will have to withhold 28% of royalties to send to the IRS.

The royalty withdrawal process will also be modified, with only a single payout available each month.

As a US trading entity, Envato will need to block countries sanctioned by the US government such as North Korea or Afghanistan. Contributors in those countries are few, but will need to close their accounts before the switch at the end of the year.

For a better understanding and smoother adoption of all these changes, the company has placed several explanatory articles in their community’s Help Center platform, and community managers will be handling forum threads on the subject and responding to users contacting them directly. They also said they are keen on taking feedback and suggestions, not only about the new tax regulations and changes, but also about future possibilities to penetrate the now blocked markets.