They Must be Kidding . . .

By Ron Rovtar
Stock Asylum Managing Editor
July 26, 2007

Getty Images recent decision to abandon traditional rights-managed licensing for all stock footage raises serious questions about the company's judgement as it struggles to rekindle growth levels of the firm's recent glory days.

Clearly, many industry observers believe footage will be the future darling of stock photography. Faster internet download times will eventually make video a staple of the medium. Footage also is showing up on advertising displays in banks, department stores and malls. There is no question that sales of clips will grow, though how quickly remains uncertain.

By changing pricing models now (this is speculation, of course), Getty may be trying to get ahead of the curve and avoid a potentially messy situation down the road, which seems smart enough.

It might be much harder to move rights-managed video into a rights-ready collection once suppliers start making a comfortable amount of money from rights-managed. Suppliers might object to shaking the boat after sales take off. By making the change now, Getty may believe it is avoiding a potential problem later.

And Getty, like its major competitors, is enamored with the notion of a highly automated distribution system. Automation replaces people, which saves money and improves the bottom line. Rights-ready, with its broad usage categories and rigid pricing structure, promises to be much more automated than rights-managed and this probably looks just fine on paper.

But, is this really a good idea?

Probably not. Ever since stock photography distribution started moving onto the Internet a dozen years ago, it has been clear that many customers remain uncomfortable with too much automation. Customers often want to talk to a real person.

Among other things, buyers like to make sure they are getting exactly the usage rights they need and they like to negotiate the price when they are spending a lot of money for rights-managed imagery.

One stock distributor at a recent Picture Archive Council of America event expressed frustration that even royalty-free buyers often call to complete a transaction. Of course, there's not much to talk about when buying royalty-free, which offers the broadest possible usage rights for a non-negotiable price.

Yet, rights-ready is nowhere near as simple or inexpensive as royalty-free, nor is it as flexible as rights-managed. It is a two-headed creature that can sometimes be simpler and less expensive than rights-managed or, in other circumstances, more frustrating and costly.

Rights-ready's simplified structure may work well when a buyer needs exactly the rights offered in a single usage category. For example, a customer wanting a clip for a local TV ad that will run many times over a long period might find the perfect solution in a category called "advertising and promotions: limited distribution" –– at least if the price is acceptable.

But, what about the buyer who wants the same clip for a point-of-purchase video to run in a single store during a one-day sale. We checked one clip of a dog and the same $1,020 price tag applies to a 10-year local television ad campaign and a one-day, one-store video showing.

The one-day user is not likely to be amused. Nor is this buyer likely to become a loyal Getty Images customer if the company does not show some flexibility here. Rights-managed clips of equal quality are available elsewhere for much lower prices.

In the same vein, consider the buyer who wants the dog clip for an in-house presentation at a mid-sized company. The "internal company" license with a price of $540 may look okay. Now suppose the company wants to put the image on its web site for a week so employees around the world can see it. If the company has no secure intranet, the web usage will soar another $1,020.

Rigid pricing works for royalty-free imagery because most buyers perceive royalty-free to be an economy product regardless of the use. We all love a bargain. Rights-ready is no bargain, especially for modest uses. In fact, it frequently will exclude buyers who would have bought a rights-managed clip without thinking twice.

But, even if rights-ready does not necessarily make sense for some buyers, maybe it makes sense for Getty Images and its suppliers. Buyers don't have to get everything they want. Is it possible the added automation will make Getty a leaner, meaner competitor.

Probably not. In fact, as the stock photography industry moves into the second phase of the digital revolution, this could turn out to be a mistake of significant proportions.

Two things appear to be happening very quickly today. The service we call stock distribution is becoming commoditized at an alarming rate and, not coincidentally, Getty Images is beginning to lose its sway over the rest of the industry.

For an excellent discussion of commoditization, we recommend chapters five and six of The Innovators Solution by Clayton Christensen and Michael Raynor (Harvard Business School Publishing Corporation).

Without getting too deeply into Christensen's and Raynor's work, suffice it to say that the authors suggest that "modularization" can be one of the signs of commoditization. (We're grossly simplifying here, but stay with us.)

When computer makers start buying motherboards, graphics accelerators and other components from third party suppliers that sell such items to numerous competing companies, that's modularization.

When stock distributors can purchase high-quality, out-of-the-box search engines, arrange to upload tens of thousands of images from collections supplied by other distributors or aggregators and can have their new web site up an running in a matter of weeks, that also is modularization. Long gone are the days when a distributor needed a proprietary search engine and its own image library.

Because of modularization, the population of stock distributors is exploding and will continue to do so for years to come. If Christensen and Raynor (not to mention common sense) are correct, this probably means greater competition and decreasing margins.

It also means the influence of carefully crafted brands can wane. When there are a lot of alternatives that all look somewhat similar, buyers start to shop price and service.

This should deeply concern Getty Images, which is clearly the best known brand in stock photography. And it should tip off the company's management that the rules are rapidly changing. This is not a good time to squander customers for any reason.

Getty Images once had the best commercial imagery, the most imagery and, by far, the best search engine. Getty built its reputation on the fact that it led the commercial stock photo industry in all these areas.

Unfortunately, competition is relentless and the company's edge is slipping away. Some distributors now have more images and some are uploading better new imagery. Nearly everybody in the industry has a perfectly adequate search engine.

Getty's continued lead is based more on market momentum than on any particular advantage in any particular area. In the real world, momentum has a way of dissipating if you don't give it a boost once in a while.

Which brings us back to the brave new world of video clips and rights-ready's place in it.

Packaging an array of rights together for a single price can be a valuable addition to more stratified and complicated rights-managed pricing.

Some high-end buyers like such packages because they save a considerable time, and sometimes money, when buying images that will be used in a variety of media.

Crafted properly, such packages can easily be added on top of more traditional rights-managed pricing within the same collection.

However, by pricing all high-quality clips outside the range of short-term users; by making it difficult to cross some media boundaries at a time when advertising and marketing professionals must often do exactly that, Getty has created a product that may attract a few buyers, but send many more away.

This is not a one-size-fits-all world anymore. Neither Getty Images nor any other stock distributor can afford to treat customers this way. Competition is heating up to summer kitchen levels.

This probably is why Steve Davis, former CEO of Corbis, called rights-ready "neither right nor ready." It also is why, to date, most distributors have kept rights-ready at arms length.

For the company's sake, Getty management ought to reconsider its commitment to this ill-conceived licensing model. Successful stock distributors of the future will need to create licensing processes that are friendly to all customers, not just some. And, if automation must be sacrificed to this end, so be it.

Getty Images web site is at: http://www.gettyimages.com.