Jupiter Reports Q1 Loss . . .

Stock Asylum Staff Report
May 9, 2007 (Updated May 10)


Jupitermedia reported on this date that it sustained a first quarter 2007 loss of $1.04 million in net income due partly to legal fees and other costs associated with recently aborted merger talks with Getty Images.

Revenue for the first quarter of 2007 was $34.8 million, essentially unchanged from the previous quarter, but up from $33.9 million reported for the first quarter of last year. The company had projected revenue of $34.5 million to $35.5 million for the first quarter of this year with zero earnings.

Revenue from the sale of online images, a category represented by the company's Jupiterimages division, was $27.9 million, an increase of more than $1.8 million from a year ago, and an increase of $827,000 from the previous quarter.

Of all image sales, $14.3 million came from licensing single images and CDs, $6.8 million from subscriptions and $6.8 million from subdistributing imagery through third-party stock suppliers.

Jupitermedia shares took a hit on the day following the release of quarterly results. A little after mid-day, the stock was trading at $6.41, a decline of $0.75 per share or 10.47 percent. Volume was heavy.

In a conference call with industry analysts, Jupitermedia CEO Alan Meckler said the Jupiterimages product line is continuing to grow as the company adds more subscription services.

But, despite the company's dependence on royalty-free and subscription imagery from an extensive collection of wholly-owned work, Meckler was careful to emphasize growth in rights managed sales, which accounts for about 15 percent of Jupiterimages' stock imagery sales.

"I must say that a year ago I did not think I would be talking about stellar growth in the rights-managed area," Meckler told the analysts. "The fact is that rights-managed has been a star for us and we think it will continue to be so," he added later.

Meckler contended that Jupiterimages is taking market share in this area because of the quality of its brands. Through recent acquisitions, Jupiter owns some high-end rights-managed brands like Botanica, FoodPix, IFA Bilderteam, Nonstock and Workbook Stock. The company also offers some third party rights-managed collections.

"The downside for us," Meckler admitted, "is that it is not as profitable as royalty-free. The majority of the images are not wholly-owned."

Concerning royalty-free imagery, Meckler said there has been a decrease in sales through third-party image distributors, but an increase in sales through company-owned offices around the world.

Interestingly, Getty Images recently reported improved royalty-free sales through third-party distributors, some of which are the same companies that license royalty-free images from Jupiterimages.

At the same time, Getty reported a 5.2 percent year-over-year decline in revenue from rights-managed imagery during the first quarter of 2007. This could mean that a percentage of image buyers are moving away from using rights-managed photography altogether or it could mean that some buyers are migrating to suppliers like Jupiterimages, Corbis and others.

Commenting on Getty Images' recent acquisition of PunchStock, Meckler said he does not believe the ownership change will dramatically impact Jupiterimages. A number of Jupiter brands are represented by PunchStock. In the past, Getty has refused to subdistribute Jupiter imagery, but has thus far said nothing about which brands, if any, will be removed from the PunchStock web site. Meckler would not comment about how much revenue JupiterImages receives from PunchStock.

Meckler said Stockxpert, Jupiterimages' micropayment web site, is seeing growth. He said the site was recently moved from a server in Hungry to one in the United States, which should improve download speeds.

The CEO said Stockxpert will be adding new services. Beyond adding video, he did not elaborate other than to say there would be improvements not offered elsewhere in the industry.

He said he does not believe giving away free images is a good idea. Some micropayment sites owned by other companies and Stockxpert's sister web site, stock.xchange, do exactly that.

In announcing the most recent quarterly results, the world's third largest stock photo distributor said stock-based compensation expenses and the fees associated with the abandoned Getty Images deal accounted for all of the first quarter loss.

Jiupitermedia continues to build its images division, but has recently turned more attention to online media and trade shows. Meckler has said that there will likely be fewer acquisitions of stock photography distributors in the future. The company's imagery division grew to its current size through an aggressive acquisition program executed over three years.

The Darien, CT, company predicts revenue of $36 to $37 million for the second quarter of this year with projected net income of $1.3 million.

Jupitermedia recently announced that it has promoted Donald J. O'Neill to the position of chief financial officer, replacing Christopher Baudouin who left Jupitermedia in December. O'Neill, formerly of Arthur Andersen LLP, has been with Jupitermedia since April of 2000, serving as the company's comptroller.

JupiterImages is at: http://www.jupiterimages.com.

Jupitermedia is at: http://www.jupitermedia.com.