Corbis Sales Improve . . .

Stock Asylum Staff Report
Aug. 31, 2006


Asserting that Corbis "just had the best two quarters in its history," CEO Steve Davis told Wall Street analysts the company experienced 16 percent revenue growth on a currency neutral basis during the first half of this year.

Though he stopped short of calling the world's second largest stock photography company profitable, Davis told the analysts that, excluding certain expenses like costs associated with improved technology, "the direct operations for Corbis are starting to generate cash."

In a lunchtime conference call on this date, he painted a picture that included revenue improvements in virtually all areas, from the company's image licensing business to the smaller divisions like rights clearance, photographer representation and media management (digital asset management).

In other matters, Davis said Corbis is interested in entering the micropayment stock photo market segment, indicated average Corbis prices are up for both rights-managed and royalty-free photography and noted the company will continue to create wholly-owned imagery even though such work represents "a modest part of our revenue."

Davis also said Getty Images' new "rights-ready" image licensing model is "neither right nor ready," according the Corbis market research. However, he added that the stock industry will likely find new ways to simplify image purchases during the next five years, which is one of the goals of the rights-ready model. (Click here for more on rights-ready.)

Chief Financial Officer Sue McDonald reported that Corbis revenue reached $127 million during the first half of this year. Corbis did not report first-half figures last year, but some simple math would put the 2005 number at about $110 million. The company did report annual revenue of $228 million for all of 2005.

McDonald said revenue adjusted for currency fluctuations was up 13.8 percent. She added that 12 percent of the first half growth was organic, meaning it came from the company's core businesses rather than from acquisitions.

About 90 percent of Corbis' revenue comes from licensing imagery. McDonald said Europe accounted for 51 percent of image revenue, while 43 percent came from the United States and six percent from Asia.

Davis claimed that most new revenue resulted from "a substantial positive shift in the customer's perception of creative imagery from Corbis." He said some of the gains came from an ongoing re-organization of the company's sales staff. "I think we've only just begun to see the gains there," the CEO noted.

As a privately held company owned by Microsoft Chairman Bill Gates, Corbis is under no legal obligation to report financial results. The company started reporting basic revenue numbers after 2004, leading some observers to speculate that Gates is considering an initial public stock offering at some future date.

The analysts call on this date was the first mid-year report offered by the 15-year-old company.

Davis said the call had to do with the company's desire to be more transparent in its operations. "There are no plans to change our ownership structure in the near future," Davis asserted.

Davis said new micropayment stock photo web sites that license photography for as little as $1 per image are opening up new markets without substantially undermining the rights-managed and royalty-free segments.

"We absolutely believe that it is net additive," Davis said. He said Corbis does not believe it will become a driving force in stock photography because there are "too many inherent limitations to the model."

Davis admitted that Corbis will likely enter the micropayment business, but said Corbis has not decided if it will acquire an existing company or start its own. In general, acquisitions are no longer a part of the company's core strategy, he noted. He did not, however, rule out additional acquisitions. "We look at four or five things each month, but have decided to pass on those for the most part," he added.

The CEO said the average price for a rights-managed image from Corbis during the first half of this year increased nine percent to $271 while the average price of a royalty-free images went up 17 percent to $208.

Royalty-free revenue was up 22 percent this year, while rights-managed revenue was up eight percent. However, rights-managed sales still account for 80 percent of all image licensing revenue at Corbis.

Corbis has traditionally emphasized rights-managed imagery and has only recently started to actively promote royalty-free.

Davis noted that wholly-owned imagery currently provides only modest income for the company, but said Corbis will continue to create its own imagery for three reasons.

First, by shooting wholly-owned photography, the company can control production so the resulting images better match the company's market intelligence; second, the company does not have to pay royalties when it owns the copyright; and third, it provides more flexibility in responding to changes in the marketplace.

"It will never be a dominant strategy," Davis added. "You always want to keep the copyrights in the hands of the owners."

Davis also said that Outline, the company's celebrity portrait division, experienced 19 percent revenue growth; that only 20 percent of Corbis' image sales are totally automated with no human intervention; that about 80,000 royalty-free images were added to the Corbis collection during the first six months of the year; that the company will add about 120,000 royalty free images by the end of the year with 50,000 of those being wholly-owned; that revenues from services other than image licensing should reach almost $30 million by the end of this year; that Corbis' mobile device business will add flash animation in 2007; and that the company will make an eight-figure investment in technology during 2007.

The Corbis web site is at: http://www.corbis.com.