29 Jan 2016 Visual China Group May Acquire Equity in Getty Images
According to Chinese microstock news site Tukusheying.com, Getty Images’s long-time distribution partner Visual China Group is in negotiations to acquire equity in the company.
This news comes just a week after VCG’s deal with Getty gave them exclusive distribution rights to the Corbis content they had just acquired, for all regions except China.
Everyone is now asking, will VCG save Getty?
Getty’s Financial Problems
Getty Images took on $2.6 billion of debt to finance dividend payments to founders, senior management and previous owners Hellman & Friedman and fund the Carlyle Group LP purchase a 50%+ stake in October 2012. Since then, Getty has been servicing that debt, which cuts heavily into its ability to reinvest profits for growth.
For the third quarter of 2015, Getty is said to have informed bond holders that “a measure” of their earnings showed a 1% increase from 2014, but it’s unclear what that’s referring to. But other numbers are more clear:
The total revenues for the quarter were $202 million, remaining flat from 2014. iStock, assuming that’s what Getty refers to when it says its “midstock business”, has been consistently falling for a while, and brought in only $50 million in sales. This was 8% lower than 2014, but not as bad as the 10% and 15% declines it suffered in the first two quarters of 2015. So another positive: revenue is shrinking slower than before.
Last November Getty raised $100M in debt swap that was said to be destined to revive the iStock business. Many are now suspicious that the Corbis acquisition was made for a disturbingly similar figure, and that Getty was clearly heavily involved given their distribution deal was announced at the same time.
With third quarter results as a guide, Getty’s total annual revenues are roughly at $800M. Moody’s says Getty’s debt to earnings ratio is as high as 7.5. For comparison, that would put Getty’s revenue around double Shutterstock’s revenue, but Shutterstock doesn’t have any debt.
In summary, the reports all suggest Getty needs some big changes to avoid bankruptcy in the coming years.
Relationship with Visual China Group
The VCG are the top traditional stock photo company in China, and has been Getty’s distributor in China for over a decade now. They also recently added an investment and partnership with 500px.
Last week, VCG announced the acquisition, via affiliate company ‘Unity Glory International, Inc’, of Corbis’s image and video libraries. At the same time they announced Getty Images as the exclusive distributor of this content outside of China, and the progressive merging of all Corbis’s assets into Getty’s collections.
Details on the upcoming equity acquisition deal are yet to be officially announced, but VCG could be investing new cash, or buying bonds. Perhaps VCG will be the big change that Getty needs