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.

The Changes

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

The Reaction

Angry Photographer, Janno PugiThe reaction from iStockphoto contributors has been intense and overwhelmingly negative. Contributors have lots of very sound reasons to be upset. Here’s some of the highlights:

  • 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.

The Correction

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.

24 Comments
  • Nancy Walker
    Posted at 21:07h, 04 October Reply

    The one thing not mentioned is that the required credit levels are unreachable. Many of the best selling contributors will a drop of 20% to 40% in their royalty rate next year. It’s just not realistic to believe that iStock will attract enough new buyers to make up for that drop in royalties. Exclusives are hit additionally with the drop in royalties for the Vetta collection, even as the prices for the Vetta collection are increased.

    • Lee Torrens
      Posted at 18:32h, 05 October Reply

      That’s a good point Nancy. I spoke to one of the top non-exclusive contributors who calculated that he will drop to 19%. I suspect he’s among the top three non-exclusive contributors there, so based on that only a few will stay at 20%. However, that’s based on lifetime sales, so the new method of redeemed credits calculated annual might mean there’s more. I guess we’ll never know, now that it’s all private information.

  • Dave Ewers
    Posted at 23:56h, 04 October Reply

    IStock will suffer in the long run with this cut in pay. As more angencies with good portfolios come up buyers will look at them too, with lower prices and good quality there will be no reason to deal with Istock or getty.

    • Lee Torrens
      Posted at 18:38h, 05 October Reply

      It’s always difficult to figure what will happen long term, especially given how frequently changes are made. The quality of both non-exclusive and exclusive microstock is clearly rising, so other agencies will continue to improve in quality. The deciding factor then will be whether iStockphoto can maintain or increase its lead. Making it more difficult to achieve higher royalty rates makes it look less appealing, but if they reinvest their increased profits to grow their reach and make the site easier for buyers, exclusivity might still be the best financial option for high quality high volume producers. I spoke to one exclusive Black Diamond who calculated that he’ll earn more (the 45% tier), so he’s staying put.

      I suspect the reason iStockphoto keeps raising prices is because they’re seeing little price resistance among the bulk of their customer base, so the end result is higher revenue. Other agencies can undercut on price, but as we’ve seen from many of the failed and non-starting microstock agencies over the years, undercutting on price is no guarantee of success.

      We may have little to no idea what the long-term future holds for us, but it’s sure fun to think about and speculate. Thanks for your comment.

  • GP
    Posted at 17:57h, 05 October Reply

    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.

    haha …

    This is wrong in principle and mathematical. Most are not Exclusive and they pay the highest percentage of Istock 80-85%. Of these gains are the main site. Quality of their stockimages, is the highest, because of the filtering is the most rigorous, they do not make any compromises.

    Most authors multiplied by the highest profit multiplied by the highest quality images = big win for iStock

    Example – Arcurs

    My income from Istock is only 15% of my total income from all stock sites.
    To me it is indifferent if income IS is change to 10-12% of them.

    • Lee Torrens
      Posted at 18:26h, 05 October Reply

      All valid points, but what about when you consider:
      – the value of exclusive content in marketing
      – lower rejection rate (top tier contributors have quality way above average)
      – higher sales (I realize this is because iStockphoto places them higher)

      Also consider that 50% of all content on iStockphoto is exclusive.

      Also consider that even though they have the highest quality non-exclusive content, the quality among the top performing exclusive contributors is very high relative to the entire market. That’s not to say that there isn’t some crap among their exclusive collections, but the higher end exclusive content at iStockphoto is better than the higher end non-exclusive content anywhere, excepting for a few examples like Yuri.

      I expect iStockphoto would prefer one exclusive contributor who’s earning $40k each month than 20 non-exclusives generating the same total earnings. Even though they pay double to a top tier exclusive per sale, these changes clearly demonstrate that top tier contributors are more valuable to the company. They’re specifically trying to discourage the non-exclusive and middle & lower tier contributors.

      15% is a common percentage for iStockphoto earnings among non-exclusive contributors, so I see how these changes make little difference to you.

      -Lee

      • David Schrader
        Posted at 14:24h, 09 October Reply

        Hi Lee,

        Above you made the following comment: “15% is a common percentage for iStockphoto earnings among non-exclusive contributors, so I see how these changes make little difference to you.”

        You’ve confused me; I thought all non-exclusives made a straight 20% on all sales. If you could explain your comment in more detail, maybe the change in January won’t be quite as bitter.

        Thanks…

        • Lee Torrens
          Posted at 17:28h, 09 October Reply

          Hi David,

          In that comment we’re talking about the portion of GP’s earnings which come from iStockphoto compared to other agencies. We’re not talking about the royalty rate that iStockphoto pays, which for non-exclusive contributors will be 20% until next year. Sorry for the confusion.

          -Lee

  • StanR
    Posted at 20:52h, 05 October Reply

    Lee, Check the publish date on this article in your blog…
    …September 9th, 2010 by Lee Torrens
    just doesn’t seem corect.

    Thanks for your thoughts and summary of the iStock situation!

    • Lee Torrens
      Posted at 20:56h, 05 October Reply

      Thanks Stan, I’ve corrected it. I suspect the Sep 9 date was when I first started drafting it. Yes, it takes THAT long! 🙂

  • GP
    Posted at 05:45h, 06 October Reply

    According to my observations, istock has updated their general search criterion “best match”, which gave priority to showing exclusive contributors. I make a small light box with similar photos and review periodically how to arrange it.

    Basically a “new sales” – weighting of 10
    Many sales (of the photo) – weighting of 2
    Exclusive or not – weighting of 3

    Sample 1, with four photos from not-exclusive, downloads: 6 (7, 8,10), are listed before exclusive photo with 10 downloads (are with oldest sales)

    Sample 2, with one photo, from not-exclusive, downloads: 20, are listed before not exclusive with 300, 600 100, 100, 30, …, downloads!

    This is near the search model of the Shutterstosk – to sell new, better content, at the expense of the criterion “exclusive”. Either way, the percentage of exclusive contributors is only 17% of all authors of IS and they can not provide a sufficiently high growth rate of growth of new content for creative exhaustion.

    p.s. sorry for bad English, I use google translator.

    • Lee Torrens
      Posted at 18:22h, 07 October Reply

      I haven’t heard the 17% of contributors are exclusive. They regularly repeat that 50% of the content is exclusive, but the 17% figure is new to me.

      Your experiments are interesting, as is the extra weighting for new content. I think that’s a smart strategy, but I don’t often see it reflected in the searches I do for myself. The exclusive weighting appears to be much heavier, but I haven’t measured it mathematically like you have. Thanks for the info.

  • Cory
    Posted at 22:53h, 06 October Reply

    It will be interesting to see if the angry mob packs up their toys and leaves come January. There’s been a lot of talk, but istock charts is still showing growth in the collection and contributors. I’m not sure how it is going to end up, but it’s definitely a bad precedent to set to pay under 20%.

  • Helder Almeida
    Posted at 06:55h, 07 October Reply

    I like to see all other great microsites (Shutter, Fotolia and Dreamstime) responding to this, opening a exclusive colections with RM licence (or someting like Agencie/Vetta prices) for non exclusive artists … a shot at Gettys heart, and a fair way to all non-exclusive artists to make more money with their best images.

  • GP
    Posted at 19:05h, 07 October Reply

    Total Contributors: 32330
    Exclusive Contributors: 5650 (17.48%)
    Last statistics update: Thursday, October 7th

    Yes, not exactly 17, only 17.48% 🙂

    BlackDiamondContributors:36
    DiamondContributors:721
    GoldContributors:1065
    SilverContributors:3029
    BronzeContributors:7908
    BaseContributors:19571

    shutterstock.com – 254,626 photographers

    I think these 5650 photographers, are fairly small percentage of stock photographers in the world – actually they are only 2.17% of all microstock photographers, and there are large sharks that do not deal with in a micro small dollar goods and the goods as a macrostock ALAMY , GETTI, CORBIS – 500 -1000 $ for a photo

    Exclusivity tends to the dying in the micro stock model, IS it shows his last changed

    Trend from 2009 – september

    http://www.nitorphoto.com/temp/september.jpg

    for photographer with: Portfolio
    Files: 3304
    Downloads: >120000

    • Lee Torrens
      Posted at 19:28h, 07 October Reply

      They’re the stats from http://istockcharts.multimedia.de which are super useful, but don’t include everyone.

      I disagree with the conclusion that exclusivity is dead. At the moment more of the highest earning stock photographers I know are exclusive than non-exclusive. Maybe the latest royalty rates will change the situation, but until then iStockphoto exclusivity is very likely the best stock photo earning choice for people with portfolios that work well on iStockphoto (which isn’t everybody).

  • GP
    Posted at 21:01h, 07 October Reply

    Yes, for now exclusivity is not dead but comatose. And treated with potent power, but Financial shocks.

    Non-exclusive grant income Istock 80% (old) / 85% (new) = 100% -94.1% = 5.9%
    Are for exclusive:
    decline in 30 -> 25 are for Istock 70 -> 75 = 100% -93.3% = 6.7% additional income

    decline in 40 -> 35 are for Istock 60 -> 65 = 100% -92.3% = 7.7% additional income

    This price is paid as income to a higher level of exclusive contributors, just the ones istock allegedly society.

    For me, this is not a dispute, and facts which are pillars of a line of a trend. And the math is clear – only two points are sufficient to oredelyane a straight line. Behold, the dots are there.

    It is just like those predatory fish that eat their own small children-fish.

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  • Donatas
    Posted at 12:47h, 14 October Reply

    No matter how much IS will pay, non-exclusive contributor still keep uploading to IS, as they upload to other smaller agencies. IS knows that, and that “good changes” is logical step for them.

  • Holgs
    Posted at 09:05h, 15 October Reply

    The point that isn’t clear from the otherwise excellent summary is that there will also be a significant amount of content in the “Agency” collection from IS exclusives – it looks like the first of that is going live now and for the rest of the month.

    This is really the first time that the “amateurs” from iStock will go really go head to head with the “professionals” from Getty in the same collection. That Getty is prepared to sell the Vetta collection directly to its best clients is also recognition that it really is premium content.

  • Ann
    Posted at 15:22h, 25 October Reply

    I have long respected your info and insight, Lee, but never more so than when I read your final paragraph:

    “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.”

    I was foolish to be there for 20%, so the 2011 15% change ended up being helpful impetus to leave.

    However, though my port was smaller than tiny, I did feel a sad twinge closing account. So, I can’t even imagine how hard, financially and emotionally, it would be to leave for typical-to-big contributor, however dissatisfied with terms. And so it goes.

  • Christian
    Posted at 16:13h, 08 November Reply

    Ever since this announcement I was curious what your take on it would be. I’m currently a gold canister exclusive contributor with iStock. By my estimations I’m going to see a substantial drop in earnings once the new system kicks in. However, as you mentioned, I’m keeping my images where they are for now and holding on to my exclusivity. If my earnings really do plummet in 2011 then I will consider dropping my exclusivity for the first time and diversifying my stock portfolio across several sites. I’ve always hoped to avoid the extra overhead of such action, but it may be my only choice going forward. Time will tell. So far iStock has been very good to me, so I’m giving them a chance before I “pull the plug”.

    • Lee Torrens
      Posted at 16:33h, 08 November Reply

      Hey Christian. You’re not the only one saying that your maths differ from the 72% figure that iStockphoto maths produced. I think ‘wait and see’ is a prudent approach. The only tip I’d have is to not overestimate the “extra overhead” of non-exclusivity, which is common among iStockphoto exclusives who have never been non-exclusive. Submission at iStockphoto is many times more laborious than all other agencies.

      • Christian
        Posted at 19:07h, 08 November Reply

        Lee, that’s very good to know about submission at non-iStock agencies. I do think I’ve been basing any extra-overhead involved with diversification on how much time/effort goes into editing and submission for iStock. So thank you for the encouragement.

        If the time comes for me to drop my exclusivity with iStock, I’ll definitely be combing through your blog archives in order to help determine the best agencies for me to consider going forward. Thanks again for what you do here.

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