I have recieved a lot of inquiries from Wall-street personalities and companies due to the gracious blog posting in PE Week Wire on the imaging marketplace, so I wanted to dive deeper to clarify beyond just the financials.

1/ Getty-Images does not clearly distinguish between total addressable market and "market", probably to puff itself up as the owner of the imaging marketplace. More than 50% of (traceable corporate) images produced (by about 17,000 commercial Photography companies in the US) are generated by suppliers making less than $5M in revenues and have less than 10 employees. Very few of those (less than 1%) use Getty-Images as their distribution channel. In fact the majority of images sold in the world are traded offline, yes, offline (Getty-Images started its online presence in 2000, after going public on NASDAQ in July of 1996 and re-listing on NYSE in 1998). In addition, the peer-to-peer exchange of digital images, we estimate, is at least twice the size of the traceable exchange. It is quite irrelevant if Getty-Images is performing better than its peers, but Getty-Images by no means owns more than 10% of the addressable market. The risk for Getty is that a new kid on the block will be more successful in emptying out the market with a new business model, rather than outperform the existing players.

2/ Getty-Images is not a marketplace, it is a Super-Store in the economic sense of those definitions. A large part of the images in their store are produced by their own photographers (organic and non-organic) and sold to their existing, primarily agency customers. But the real definition of a "free-market" marketplace is that customer own their product which they sell, un-arbitrated and completely transparent, to buyers. Getty-Images charges exorbitant commissions (known to be in the range of 60%), which can't hardly be considered a marketplace transaction fee. It is suggested on the internet that Getty-Images plays unfair, even include changing photographs and forcing the original photographers to hand Getty-Images an additional 100% of the delta. True or not, that is not the kind of trust that makes anyone believe that Getty-Images will become a true marketplace.

3/ The photo acronyms are meaningless. Stock photography does not exist. It is an artificial definition, used mostly to identify a low priced photograph. But a "stock" photograph can be sold rights-managed, royalty free or exclusive and in the new world of publishing even be published as editorial. And therefor, being the leader in stock photography means absolutely NOTHING. Did you know an exclusive photograph is really not exclusive (it is only exclusive to a certain usage), that a buyer has no guarantee that the photo does not show up somewhere else. So, the only measure of success is how many photographs the company has sold and how many times over.

4/ Getty-Images has very restrictive policies to let users participate in their Super-Store, another sign it does not meet a true marketplace definition. WIth dSLR sales growing last year at 60% rate and 9B images produced on those cameras (18B cumulative dSLR images since 2003), Getty-Images is clearly not successful in monetizing the exchange of those images (even if you argue the majority of images have no re-sale value). The number of professional photographers is estimated to be around 36,000 according to PPA and D&B numbers. We believe Getty-Images falls short on counting the majority of those as their suppliers. We believe the unincorporated semi-pros that produce at least one sellable image to be much, much larger (cumulative roughly around 9M dSLR have been sold since 2003).

So, regardless from which angle you slice the business, Getty-Images by no means, has amassed critical penetration in the Total Addressable Market of image exchange. But if you artificially constrict the size of the market by calling it stock, rights-managed, royalty free, editorial or creative, perhaps you can swing it. Undoubtedly someone will buy into it.

Tags: Getty-Images, Corbis, Jupiter-images, PE Week, Wall-Street, PE Week, Images, Revenues, Stock, Super-Store, Cameras

A Puffer Fish is a fish that blows itself up to dramatically change its appearance and size: not unlike Getty-Images (GYI), Corbis and Jupiter-Images (JUPM) in the imaging market. All three have hybrid business models that disguise the money they really make in the exchange of digital photography. But we know better, we've analyzed empirical data and studied their reports carefully.

That does not mean these "Three Bandits" are failures: Getty-Images is very successful as a photography agency (doing about $805M in revenues per year), Corbis is a very rich catalog of historic photographs stashed away in a bunker in Pennsylvania, slowly being digitized at a cost of about $25 per photograph (revenues around $250M). Jupiter-Images is the division of JupiterMedia, formerly a magazine publishing and events company, now morphing into a content acquisition company.

But they are not a successes either. Organic growth of these companies is well below the growth of the image exchange market and their combined market share is less than 10% of the image exchange addressable market. So, while the $1.5B asking price for Getty-Images doesn't sound outrageous (less than 2x revenues), what you're buying is an outsourced photography agency. Getty-Images is in essence a people factory with ever eroding profit margins.

Twenty years ago Getty-Images started with a $20M investment from grandpa Getty and has continued to purchased a wide array of photo agencies (hence the Puffer Fish) and large libraries of photographs that over time become stale rather than increase in value. The average sales price of those, primarily editorial, photographs is declining steadily (more so than creative photography), leaving the company with a large family of complacent celebrity photographers and mainstream content only the a select few publishing agencies are interested in.

With publishers (of all kind) looking for original content, the imaging Super Store approach (as described here) from the Three Bandits is fundamentally flawed. But the reason why we don't believe in the longevity of their business models (and their asking price) is that they ignore and suppress the massive influx of new digital photographers that create phenomenal high quality and original content most publishers would be dying to get their hands on.

So anyone buying these companies will soon find out how small Puffer Fish really are.

Tags: Getty-Images, Corbis, Jupiter-images, Photography, puffer fish, Photographers, Margin, Editorial, Super-Store

I have received quite a few comments on my previous post (like this) on the imaging marketplace and I am making an attempt to clarify my condensed writing.

The market of selling photographs is fundamentally different than that of selling music, books or other goods. Rather than selling "premium" supply as defined by the number of people that buy the same product, the value of a photograph is defined by how little it sells (just like art). Fundamentally a photography superstore (like Getty Images, Corbis, Jupiter Images and even Digital Railroad) that sell the same image the way Amazon sells books yields the wrong value to the buyer.

A buyer doesn't want the photograph he is about to purchase see appear in deep circulation, yet a reader of a book makes a buying decision based on popular opinion (Oprah, iTunes) and purchases it too. Selling images (and art) requires an inverted superstore that derives its value from the massive distinctive images it sells. Coincidentally the imaging marketplace has changed dramatically from a monolithic market (between agency and pro-photographer) to a Long Tail of supply and demand (between anyone and anyone).

A fantastic opportunity lies ahead to create a new marketplace for photography that caters to new and high growth audiences. Don't get discouraged by the puffer fish of the imaging industry, that portray they own the market. They don't.

Tags: Getty-Images, Premium, Corbis, Jupiter-images, Digital Railroad, Amazon, Photographers, Monolithic, Free-market, Long Tail

Two weeks ago Digital Railroad (a private digital photo aggregator, funded by Venrock and Morgenthaler) announced it was restructuring, cutting half of its employees and repositioning the company into a photo marketplace. Today Getty Images (GYI) is said to be looking for a buyer at around $1.5B, after its stock price is unable to recover for more than two years. And Corbis, well -- Corbis is being kept afloat by Bill Gates. Swallowing stock photography companies as fast as it can is Jupiter Images' attempt to boost its potential acquisition price, a strategy that didn't work so well for Getty Images. So, why are these companies not growing organically while the dSLR market that produces those images is growing 60% YTY and GMV of the image market is north of $22B.

Here is my take: the imaging markets consists of demi-cartels that produce "premium" supply that does not meet the requirements of an ever growing and changing market of buyers. No longer is the size of the buyer's market dictated by agencies nor is the new seller's market defined by the old definition of pro-photographers. As a result sell side content does not find enough buyers and the only way to make money is to make sellers believe that if their work is good enough, it will sell.....nice promise. Out of desperation most photographers post their images on multiple websites to get maximum visibility, a true testament of an inefficient market.

Getty Images is really a hybrid business, it has about 3,000 photographers on staff and does editorial projects for its main customers and in armored trucks if it needs to, providing news worthy photography on location. The side-business of Getty is the stock photography business which yields ever declining average sales prices for royalty free and rights managed photography. So, in essence, Getty Images was trying to become a "record" company with its own supply while on the side playing the independent party with a transparent image store; i.e. the "free-market" supply is competing with Getty's core business model. Over the years, many photographers have complained of unfair practices that gives better treatment to Getty's images than to the supply from individual photographers.

The Digital Photography market is in the same state as the music industry (albeit condensed in time) , premium supply doesn't turn out to be premium, demand has changed and the "record" companies in this space have no other option but to erode their premier status business model. I was right three years ago, let that be noted.

As for Digital Railroad, I doubt that they'll develop the macro-economic strategies that determine the success of any real "free-market" marketplace at this point. It would take a sizable investment in technology to turn a super-store into a "free-market". Adobe is rumored to be working on an image marketplace, but here too, the devil is in the details.

We don't need another Amazon.com of the photography business but a real free-market in which YOU the photographer and buyer make decisions on what transactions you want to engage in.

Tags: Digital Railroad, Getty-Images, Corbis, Jupiter-images, Premium, Photography, Amazon, Adobe, Stock