04 Oct 2010 The iStockphoto Correction
iStockphoto announced some major changes last month which negatively impact all but a few contributors. This post is very late to the discussion, which has been rapid and intense. At this point everything has calmed down even though the usual post-backlash backdown hasn’t happened. Below a quick summary of the changes is a comprehensive list of reactions from all sides of the industry, then some insight into why these changes correct an imbalance with the iStockphoto business.
Royalty Changes – to be introduced January 2011
- Royalty rates are now determined annually rather than by your entire iStockphoto history
- Royalty rates are now determined by credits used to purchase your files (“redeemed credits”) rather than sales (downloads) quantity
- Exclusive contributors will earn between 25% and 45%, introducing a new top level royalty rate
- Non-exclusive contributors will earn between 15% and 20% depending on your previous year’s performance
- Once determined, a contributor’s royalty rate can go up during the year but not down
- The 10% Extended License bonus for exclusive contributors will be removed
- The minimum credit value used to calculate subscription royalties will drop from $0.95 to $0.65
The Agency Collection (TAC) – live now
- Created from images contributed by some of the best stock photo agencies
- All image-exclusive content
- Will be distributed on iStockphoto, Getty Images, Jupiterimages and Punchstock
- Will be priced above Vetta
- Standard royalty rate of 20%
Vetta Changes – live now
- Prices to rise
- Royalties to drop to 22 – 30%
- Vetta content will be licensed on the Getty Images website at a flat 20% royalty
- There’s difficulty reconciling the promises from iStockphoto with their own experiences:
- iStockphoto claimed that as their sales increase their profit margin falls (because contributors move up royalty ranks) and this is “unsustainable”. The response is that the iStockphoto profit margin cannot fall below 60% (the highest royalty rate is 40%) from a product that the company doesn’t pay to create.
- iStockphoto claims 50% of all sales occur in the last four months of each year (which is relevant because contributors are calculating their redeemed credits from previous years to ascertain their likely royalty rate for 2011) but very few (none that I’ve seen) have reported that they received 50% of their sales for 2009 in the last four months. It’s right around 33% for me and all those I’ve asked.
- iStockphoto claims that 76% of exclusive contributors will retain or increase their current royalty rate (note that they didn’t say they would ‘earn’ the same or more). Almost all exclusive contributors are reporting that their calculations show their earnings will drop dramatically.
- iStockphoto claimed that these decisions came from within iStockphoto management, and not from parent Getty Images. However, it was frequently cited that the changes are not consistent with the spirit for which iStockphoto became adored by so many, while eerily familiar for those with experience of dealing with Getty Images.
- There’s also been lots of name-calling and assertions that the motivation for these changes is to increase the profits of the company at the expense of the community.
- Threats to drop exclusivity, stop contributing or withdraw portfolios have been common in the iStock and independent threads. The more business-minded contributors see little value in removing their existing portfolios which represents a substantial investment traversing the most laborious submission process in the industry. Profit minded contributors will still assess the opportunity of contributing to iStockphoto in the context of the return that it produces, which despite all the changes, isn’t likely to drop beyond profitable for quality producers.
- Contributors have initiated campaigns on designer forums and blogs, encouraging photo buyers to seek alternative agencies which provide a better royalty for contributors. A number of buyers and contributors who also buy images have declared their intention to stop buying from iStockphoto, though there’s little to indicate those buyers add up to a significant quantity of sales in the context of iStockphoto’s massive buyer base.
- Dreamstime CEO Serban Enache announced an offer to “exclusives elsewhere” to gain a 20 cent upload bonus for accepted images, which is usually reserved for exclusive Dreamstime contributors. He later added an offer to review submitted portfolios without making them active yet, allowing contributors to get ready to start earning at their full potential as soon as they’re free of their exclusivity obligations.
- Other agencies have added “Fair Trade” banners or written blog articles boasting about how much better they treat their contributors.
- There were many complaints about the quality and exclusivity status of images in TAC. The complaints were totally justified as many of the images were well below the acceptance standards at iStockphoto. Others images which contributors highlighted were found to be available at other agencies, despite the TAC requirement for image exclusivity. Seemingly most of the participating agencies didn’t bother shooting new content for the collection, but recycled existing content – and probably their poorly performing content if some of the highlighted examples are any indication. iStockphoto claimed there were some technical issues which resulted in rejected images appearing online. Each example highlighted, even in independent forums, was hastily removed.
Quantity of images has never been a problem for iStockphoto. Their extreme upload restrictions ensure that the 50% of their entire portfolio that’s not exclusive is the best 50% of all content in the microstock market. They already have the best portfolio of all microstock agencies and despite paying some of the lowest royalties, contributors can’t submit their content fast enough.
In such an over-supplied market, there’s no need to pay suppliers generously. With the Vetta Collection doubling, tripling or quadrupling contributor earnings, iStockphoto exclusivity was exactly that: generous.
The contributors who generate top-tier content in volume are the most profitable for iStockphoto, so they’re the ones who received the good news in these announcement. The middle tier, lower tiers, hobbyists and non-exclusives are ‘less’ beneficial to iStockphoto’s bottom line, so this is where the cuts were made. While it’s logical for a business to better reward those who generate more revenue, in iStockphoto’s case it’s complicated by what they claim as a vital part of their success: their community. There’s no doubt that the iStockphoto community doesn’t believe these changes are in their best interests.
iStockphoto is a profit seeking enterprise, just like all iStockphoto contributors. There’s little doubt that the company is in a very strong position. It appears the numbers show its position is strong enough to take some more profit from contributors and absorb the consequences. So while it might be uncomfortable and even a little damaging in the short term, these changes are very much a correction.
Regardless of your reaction to the announcement, be it based on emotion, principle, or mathematics, iStockphoto has an open and perpetual offer to contributors. Each day that your content is online with the company is your explicit acceptance of that offer. Regardless of whatever you say, your strongest voice is your content that remains in, and continues to flow into the iStockphoto portfolio.