A State of Stock (2 of 3)—The Rise of the Micros

I believe iStockphoto was the first. If not the first, it was the first in my experience of the micro-payment agencies whose business model was (and hopefully is still) creating such a challenge to the strength of the growing monopoly in Royalty-Free Stock photography that is Getty Images.

The business model is simple-individual sellers can create an account, and through that account make images available. Then other individuals can purchase credits, through which they can buy the images. The cost in credits to purchase an image is affected by image size, and intended usage. For each credit used to purchase your image, the seller gets half—gold hard cash, or the digital equivalent thereof—in a micro-payment. Hence, these types of sites are known as micro-payment agencies.

And purchasers get discounts for buying more credits at one time. First, you can get up to 10 credits, depending on the deal and the code you find, just for opening an account. From that point, you get more “free” credits the more credit blocks you buy. The catch, and of course there is one, is that credits expire a year from purchase. So you run the risk of losing your “free” credits if you buy too large a block, that is, too many credits to use up in a year.

And it’s not just images. iStockphoto offers original vector illustrations, video, and Flash files, all available for purchase, all Royalty free. It’s a truly unique marketplace, and, thus far, a growing competitor to the strength of RF conglomerates like Getty. The image quality is lower, of course, and in general the images suffer from an apples to apples comparison to top RF professional photography. But there are gems there, rough diamonds that, with a little digital polish in the right hands, can become the stuff of Wonder.

The big issue at Company B was unlimited usage of images. Publishers that rely on keeping products in print seldom keep track of actual print runs, as a whole. They keep an inventory in stock for customers to order, and base profit on copies sold, not copies printed. This gives them flexibility to go to press as needed—print on demand of a sort—and that business model isn’t flexible enough to determine exact print runs, which is how the basic micro-payment agency, or rights-managed agencies for that matter, gauge their prices. As a solution for this, the micro-payment agencies allow you to purchase additional rights—say for unlimited press runs—for additional credits. Again, there is the quality trade off. You need the talent on the back-end to make it a worthwhile exchange.

But the disturbing part is that Getty Images purchased iStockphoto, this year. Thus far, the purchase has not adversely affected the business model, at least from this users perspective. But it’s still disturbing to see an idea, which was changing the very paradigm of RF stock imagery swallowed up by the biggest fish in that industry. In the interim, there have been other purveyors of this business model to come up since I first noticed iStockphoto. StockXpert.com, for example (which is now owned by Jupiter Images, which narrowly avoided getting swallowed up by Getty), and there are more coming up every day. Shutterstock.com. Fotalia.com. Dreamstime.com. Imagecatalog.com You can find a dozen more, of varying sizes and quality, in a simple search.

But, as has ever been the business model for the internet, the first and best run usually ends up being the dominant force. And, again, the dominant force has been swallowed in turn by the more dominant force.

That said, with so many alternatives out there, it seems likely that, as Napster changed the way a reluctant music industry looked at music downloads, these RF image community websites, creating a conduit from photographer directly to designers, are changing the shape of RF stock today. How to best take advantage of this paradigm shift is what I’ll consider next.

Next: Some conclusions.