SS Announces Commission Increase for May 2008

[leaf]

Given the unhappiness expressed by Yuri and others on the SS forums, I should think it very likely indeed that SS will introduce a higher band for more prolific contributors.  BUT, remember that these contributors are not the ones that make SS any profit; yes, they attract customers, but they are the least profitable for SS.

I'll be very surprised indeed if SS increases beyond 40c for upper tier contributors.

it will be very interesting to see what shutterstock does.  I agree with sharpley that this must be the most anticipated raise of the stock sites.  Yuri wrote a very convincing post here, I wonder what shutterstock will do to try and please the top contributors.  I really don't think 40 cents will be enough to make too many Yuri and friends happy, when they stated that SS needed $1.00/download to compete with the likes of fotolia and SS

Yuri wrote another very convincing post here, at microstockgroup forum, about low subscription earning and opt-out at StockXpert. But he is still selling at StockXpert for $0.30 and Creastock for $0.25. People saying one thing and do another.
Do you think that all "angry" people will leave SS if rise is only $0.40 ?

well good point.  Yuri makes .30 at shutterstock though (just to be technical), along with everyone else who has sold over $500 there.

I wouldn't be surprised if shutterstock goes up to 40 cents .. but more than that... i dunno.  I am hoping to be pleasantly surprised!

I agree it would be foolish for any non-exclusive NOT to submit to shutterstock, even if we only got .25 cents, but the point Yuri made was that if shutterstock does not offer a decent increase in earnings istock may be become more and more attractive to new photographers gaining a larger and larger share of the market.

[DanP68]

That's the way I read it too.  I don't see anyone just walking away from SS and remaining independent.  But I could see a small exodus of contributors to IS as exclusives.

[GeoPappas]

I agree that SS will probably only do a .05 to .10 increase to .35 or .40, but it will probably be associated with another sales tier.  For example, raise the current rates from .25/.30 to .30/.35, but then add another tier for .40 (possibly for sales over $1000).  Sort of like this:

.30 - < $500 sales
.35 - < $1000 sales
.40 - > $1000 sales

They can't change anything drastically because they have already raised prices to customers and are basing their increase on that change in price.

If they do go over .40, then I believe that they will just be adding more sales tiers.  For example:

.30 - < $500 sales
.35 - < $1000 sales
.40 - < $1500 sales
.45 - < $2500 sales
.50 - < $5000 sales
.55 - > $5000 sales

Or something like that.

I also don't think that they will raise prices as high as the $1 that Yuri suggests, because if they did it would show that they were making much more profit than they previously stated and then people would want to know why they were keeping so much profit previously.

[leaf]

well as yuri notice, last time they increased prices by 70% while they increased commisions only 30%, so he was arguing they should increase commissions extra much to make up for the low raise last time.

I think it might looks something like this

.25 - < $500 sales
.30 - < $2000 sales
.35 - < $5000 sales
.40 - < $10000 sales
.50 - < $50000 sales
.60 - > $100000 sales

ahh it is so fun to guess, we could continue this forever ... we need may to come soon.

[fullvalue]

well i took it from here

We're doing this in order to accommodate a new, separate Earnings Schedule page, wherein we show all the different earnings rates in an easy-to-read grid rather than in the text of the TOS itself. We hope you find this centralized schedule of rates useful and clear.

I bolded the text i wanted to highlight, text from here

seeing as they said 'all the different earnings rates' that sounds like more than 2 tiers to me.  if there was 2 I would have said both the earning rates....

By tiers I wasn't meaning different prices for different sized downloads, i was meaning different commission levels for how much you have allready earned on shutterstock.

They already have "different earnings rates"  i.e. they have a rate for EL, affiliate sales, footage, imagery (2).  Sure they could introduce more but my point is that the wording doesn't reveal anything.

[helix7]

I'd love to see a $0.50 but realistically that won't happen. It would be a fair rate, but still not a realistic expectation.

I'm expecting the worst and hoping for the best on this one. Worst being $0.35 or less.

[lisafx]

I am thinking .40 sounds like the most likely. 

You are right, .35 would be considerably below expectations and might benefit istock with some more exclusive contributors...

[GeoPappas]

well as yuri notice, last time they increased prices by 70% while they increased commisions only 30%, so he was arguing they should increase commissions extra much to make up for the low raise last time.

But even if they raised commissions 70% this time (which I highly doubt), that would still only bring royalties to .425 and 0.51, which is nowhere near the $1 that Yuri is asking for.

I think it might looks something like this

.25 - < $500 sales
.30 - < $2000 sales
.35 - < $5000 sales
.40 - < $10000 sales
.50 - < $50000 sales
.60 - > $100000 sales

That would mean that anyone with sales of < $2000 would not get a raise.  I think that there would be a huge outcry from many submitters if that happened, since the majority of submitters don't come anywhere near that mark.  To get to the $2000 mark, you would have had to have sold at least 7000 images!

[Jimi King]

I think .35 is all we're gonna see. Particularly in view of all the competition offering subscription deals.

And as for a tiered structure, that would be complete suicide for them. Remember their whole business plan is based on their customers NOT downloading the full quota. Giving their biggest contributors an incentive to upload more photo's is not really going to help them at all.

[helix7]

...You are right, .35 would be considerably below expectations and might benefit istock with some more exclusive contributors...

This should be SS's biggest concern. Sure a lot of people will always stay loyal to SS, and never consider exclusivity no matter what SS does. But more and more people might give exclusivity more consideration if the trend I'm seeing around the forums continues. IS seems to be outpacing SS in contributor profits growth. Given similar rates of upload, IS seems to pull even or ahead of SS over time, even for people who previously had SS as their landslide front-runner. What keeps many people away from istock exclusivity is the simple fact that they make more money being non-exclusive, largely the result of SS. But take SS out of the equation, or severly reduce the percentage of earnings that SS represents for a contributor, and istock exclusivty starts to make more sense.

SS needs to really up the ante with the commission raise if they expect to keep these contributors over the next few years. If the disproportionate growth continues, the numbers might align for more contributors to reconsider ditching SS for istock exclusively.

[Waldo4]

I doubt that their largest contributers withhold much of anything from them, they would then have to find a way to take photos more efficiently to upload more since I suspect that their time is already maxed out.  For the top level contributers, I highly doubt (and Yuri's post backs this up) that SS makes up a very significant portion of their income. 

It will be interesting to see the aftermath of what becomes of IS's subscription plan.  To my eyes they are leveling a two pronged all out assault on the market in a major power grab; a direct attack by offering a favorable pricing plan for the most lucrative customers in the industry, attempting to lure them away from the competition, and outflanking their competition by stealing some of their best photographers.  Just like a battle, these two facets are mutually beneficial, more customers = more earnings for contributers, more earnings = more exclusives, more exclusives = competition's photo catalog hurt at the highest level (IS wouldn't be stealing noobs, they'd be stealing some of the best and most established photographers that contribute many of the premier photos in a collection), hurt the opponents photo catalog = more customers and the cycle continues.

IMO SS has to do something drastic, they will be harmed the most by IS's power grab, and I don't think that the tiered approach to payments is the answer, they have to find something else.  It is not the super top level earners that are the problem, it is the step below.  These guys I suspect is where the bulk of their broad quality comes from.  Higher quality than the noobs, not quite as much a the super top guys, but there are lot more of them than the super top guys.  These are the people that IS will be stealing.  The problem for SS is that losing these people will spread the earnings,that was concentrated in these mid level guys to the lowest people, more than shifting it to the super top, their customer base is already established in their areas of expertise.  This will make the ascension up the tiers more rapid for their lowest level contributers, who there are lot more of.  At first it wouldn't be significant, probably good for them actually, but over time as more and more ascend up the ranks, the payout per file would increase.

For example (using wild guesses for #'s, just to illustrate my point):
Currently:
50% sold at higher rate
50% sold at lower rate

Lose a bunch to exclusives, even though they gave a good raise to the top group and the situation becomes:
40% sold at higher rate
60% sold at lower rate

Because of the nature of tiers, concentrating more money in the lower tiers will rapidly become:
60% sold at the highest rate
40% sold at the lowest rate

Now this is assuming that IS can steal a bunch of exclusives, but the nature of SS leads to the fact the they have to out do both whatever the increase at IS will be, plus the multiplier for going exclusive.  As is (as I gather from all my reading here and elsewhere and personal experience), income growth at SS is rather stagnant, adding more is necessary just to maintain a level, which is not true elsewhere, adding more grows income.  Now you can increase the submission rate to SS to grow income, but the midlevel guys in the crosshairs are probably maxed out in their submission rate, they have the time and experience that their shooting efficiency is at a peak.  For these guys to see significant income growth at SS, the only way to accomplish it is via a big raise.

SS can only give so big of a raise to these mid level guys and remain solvent, they lack powerful financial backing unless they are currently running at a very excessive profit level.  IS has the financial backing an corporate stability to operate strategically in or near the red for a short period of time in an effort to offer a more lucrative deal to these mid level guys.  If income growth shows acceleration at IS, there will be takers for the exclusivity option, the more takers the worse the situation becomes over the long term for SS, as the acceleration up the tiers for their lowest level guys would begin.

Do I have an answer for what SS can do strategically?  No, I can't see one.  On a whole as a business their talent pool of photographers will swing increasingly more toward the beginners in the industry, and IS will steal some of their customers that follow the quality photos.  In many ways SS today reminds me of AOL in the mid 90's.  Their buisiness model allowed rapid ascension to near the top of the industry, but as both their customers and contributers grow into the young industry they find that there are better options available once established.  At first AOL was the internet for everybody, but over time they increasingly became the internet for beginners, eventually there reached a point where there were no beginners left.  I don't see that happening in this industry, there will always be beginners, but the dropping from a place for everybody to contribute to the place for beginners to contribute could very well happen, offering a tiered based raise would do little to solve this. 

SS needs to find a way with their buisiness model to maintain linear or near linear earnings growth for a mature port with continued contributions, something that is not occurring, the models at other sites that create the near linear growth for mid sized ports become more and more lucrative over time, and SS does not have the financial ability to make up this difference with a tier based pay system, since they would have to continually raise prices, and continually give larger and larger raises to the mid level contributers just to keep up with the competition for their services.

If my thinking is correct and the power grab by IS is successful, the potential is strong for a major merger looming on the horizon between SS and one of the per photo big players like DT, offering a good exclusivity option of their own, forming a binary system of major players before IS can take over market dominance.

[jsnover]

And as for a tiered structure, that would be complete suicide for them. Remember their whole business plan is based on their customers NOT downloading the full quota. Giving their biggest contributors an incentive to upload more photo's is not really going to help them at all.

But the reasons buyers don't download their full quota is not (my guess, obviously I don't have any real data on this) because they run out of things to download.

The corporate folks aren't in on weekends and if things get busy, it isn't their #1 priority to donwload stuff today, so they skip days here and there. None of that changes if SS changes the commission structure for contributors.

If SS contributors look like DT (it's been a while, but when checking about a year ago it was a tiny percentage of contributors that had big portfolios and were making the bulk of the sales), it's true that only a small percentage of contributors will get the higher royalties, but those are the folks most likely matter to SS - the ones they don't want to pull their portfolios.

I think the numbers in leaf's chart are perhaps too low (for example, I'm not yet past the $10,000 mark and I think to go from 30 cents to 40 cents is OK, but doesn't feel like much of a "big hug' to me), but I think a tiered system of some sort makes a lot of sense.

[Freezingpictures]

I doubt that their largest contributers withhold much of anything from them, they would then have to find a way to take photos more efficiently to upload more since I suspect that their time is already maxed out.  For the top level contributers, I highly doubt (and Yuri's post backs this up) that SS makes up a very significant portion of their income. 

It will be interesting to see the aftermath of what becomes of IS's subscription plan.  To my eyes they are leveling a two pronged all out assault on the market in a major power grab; a direct attack by offering a favorable pricing plan for the most lucrative customers in the industry, attempting to lure them away from the competition, and outflanking their competition by stealing some of their best photographers.  Just like a battle, these two facets are mutually beneficial, more customers = more earnings for contributers, more earnings = more exclusives, more exclusives = competition's photo catalog hurt at the highest level (IS wouldn't be stealing noobs, they'd be stealing some of the best and most established photographers that contribute many of the premier photos in a collection), hurt the opponents photo catalog = more customers and the cycle continues.

IMO SS has to do something drastic, they will be harmed the most by IS's power grab, and I don't think that the tiered approach to payments is the answer, they have to find something else.  It is not the super top level earners that are the problem, it is the step below.  These guys I suspect is where the bulk of their broad quality comes from.  Higher quality than the noobs, not quite as much a the super top guys, but there are lot more of them than the super top guys.  These are the people that IS will be stealing.  The problem for SS is that losing these people will spread the earnings,that was concentrated in these mid level guys to the lowest people, more than shifting it to the super top, their customer base is already established in their areas of expertise.  This will make the ascension up the tiers more rapid for their lowest level contributers, who there are lot more of.  At first it wouldn't be significant, probably good for them actually, but over time as more and more ascend up the ranks, the payout per file would increase.

For example (using wild guesses for #'s, just to illustrate my point):
Currently:
50% sold at higher rate
50% sold at lower rate

Lose a bunch to exclusives, even though they gave a good raise to the top group and the situation becomes:
40% sold at higher rate
60% sold at lower rate

Because of the nature of tiers, concentrating more money in the lower tiers will rapidly become:
60% sold at the highest rate
40% sold at the lowest rate

Now this is assuming that IS can steal a bunch of exclusives, but the nature of SS leads to the fact the they have to out do both whatever the increase at IS will be, plus the multiplier for going exclusive.  As is (as I gather from all my reading here and elsewhere and personal experience), income growth at SS is rather stagnant, adding more is necessary just to maintain a level, which is not true elsewhere, adding more grows income.  Now you can increase the submission rate to SS to grow income, but the midlevel guys in the crosshairs are probably maxed out in their submission rate, they have the time and experience that their shooting efficiency is at a peak.  For these guys to see significant income growth at SS, the only way to accomplish it is via a big raise.

SS can only give so big of a raise to these mid level guys and remain solvent, they lack powerful financial backing unless they are currently running at a very excessive profit level.  IS has the financial backing an corporate stability to operate strategically in or near the red for a short period of time in an effort to offer a more lucrative deal to these mid level guys.  If income growth shows acceleration at IS, there will be takers for the exclusivity option, the more takers the worse the situation becomes over the long term for SS, as the acceleration up the tiers for their lowest level guys would begin.

Do I have an answer for what SS can do strategically?  No, I can't see one.  On a whole as a business their talent pool of photographers will swing increasingly more toward the beginners in the industry, and IS will steal some of their customers that follow the quality photos.  In many ways SS today reminds me of AOL in the mid 90's.  Their buisiness model allowed rapid ascension to near the top of the industry, but as both their customers and contributers grow into the young industry they find that there are better options available once established.  At first AOL was the internet for everybody, but over time they increasingly became the internet for beginners, eventually there reached a point where there were no beginners left.  I don't see that happening in this industry, there will always be beginners, but the dropping from a place for everybody to contribute to the place for beginners to contribute could very well happen, offering a tiered based raise would do little to solve this. 

SS needs to find a way with their buisiness model to maintain linear or near linear earnings growth for a mature port with continued contributions, something that is not occurring, the models at other sites that create the near linear growth for mid sized ports become more and more lucrative over time, and SS does not have the financial ability to make up this difference with a tier based pay system, since they would have to continually raise prices, and continually give larger and larger raises to the mid level contributers just to keep up with the competition for their services.

Waldo you should have a blog 

[Waldo4]

Waldo you should have a blog 

But that would take away from the fun of interaction with everybody here.

[Pixart]

I'm the broken record that keeps saying SS will have to sell single photos just to keep in check with Istock.  Evolve or die.

[helix7]

...If my thinking is correct and the power grab by IS is successful, the potential is strong for a major merger looming on the horizon between SS and one of the per photo big players like DT, offering a good exclusivity option of their own, forming a binary system of major players before IS can take over market dominance.

Interesting thought. I hadn't really considered a merger before, and what that could mean for the industry. Could be cool to see how such a joining of companies could tip the scales.

I would love to see more if this sort of thing happening in microstock. So far, business dealings have been pretty mild in this industry, except for the istock acquisition. Mergers could shake things up in a good way. Maybe a company with good marketing muscle joins up with a lesser known company that has a massive collection.

Also on the contributor side I'd like to see some interesting dealings. Buying and selling of entire portfolios for re-distribution, more groups of artists and small businesses created around microstock, etc.

[Waldo4]

A lot of industries, as they more from infancy to maturity, act very similar to the ways that star systems form.  At first there is just a big pool of matter (customers), over time clumping points form (companies that cater to them) and the mass begins to collect.  As these points begin to grow they develop gravity to attract more matter to them.  As more and more matter is brought in to the system a collection of random mid-size bodies begins to take shape.  This is a very unstable system so given more time and/or more mass it will morph into a stable system. 

These stable systems follow 3 primary forms, single system can develop (like ours) with one large company and several smaller ones (video games in the 80's and 90's are a prime example).  Binary systems can develop with large bodies and several smaller ones (Coke/Pepsi and GM/Ford prior to the 90's), or one body gets too large and it becomes a black hole and swallows up all matter (US Steel, Microsoft). 

Once a market reaches a certain size and matures, almost surely a few of the top companies swallow up all of the competition, all that is left is a few minor players that are different enough from the giants to remain stable and separate.

The auto industry in America is a great example.  Started with a bunch of different little companies, but then Ford made a market play that devoured customers.  To combat a few of the other companies banded together and formed GM, it it became a very stable system for a long time.  The few other auto makers that existed in America afterwards were very minor players compared to them.  Global trade has changed the dynamic completely though and it is right now a fairly unstable system.

IS has begun their major power play, in the end IMO we will end up with either an IS centric system with a few other unique minor players, a system with IS and a conglomerate and a few minor players, or IS winning out and devouring everything.  They are going to start * mass (customers/photographers) from the other companies with this move, the only way to stop them from from becoming overly dominant is for another big mass gobbler to step to the forefront, and this is typically done in the marketplace by the competition banding together.

Not yet, but if IS grows too much more this market is ripe for some investors to come in and merge a few companies into major competition for them.  If IS steals too many customers, and profits elsewhere fall, owners would be much more willing to sell out to a major investor and cut and run with their profits.  And we'd be left with a stable system of the big 2.

[Sean Locke Photography]

You are right, .35 would be considerably below expectations and might benefit istock with some more exclusive contributors...

That sounds like a threat! 

[jsnover]

...If my thinking is correct and the power grab by IS is successful, the potential is strong for a major merger looming on the horizon between SS and one of the per photo big players like DT, offering a good exclusivity option of their own, forming a binary system of major players before IS can take over market dominance.

Interesting thought. I hadn't really considered a merger before...Maybe a company with good marketing muscle joins up with a lesser known company that has a massive collection.

You mean like Corbis buying someone (instead of creating their own lets-condescend-to-the-little-amateurs homegrown effort)? But perhaps they don't qualify has having marketing muscle until they can turn a profit on their own business

Jupiter owns all or most of StockXpert; Inmagine owns 123rf; who is there who might be the marketing muscle side of that equation to buy up DT and SS (just for example) to rival iStock?

[lisafx]

Now this is assuming that IS can steal a bunch of exclusives, but the nature of SS leads to the fact the they have to out do both whatever the increase at IS will be, plus the multiplier for going exclusive.  As is (as I gather from all my reading here and elsewhere and personal experience), income growth at SS is rather stagnant, adding more is necessary just to maintain a level, which is not true elsewhere, adding more grows income.  Now you can increase the submission rate to SS to grow income, but the midlevel guys in the crosshairs are probably maxed out in their submission rate, they have the time and experience that their shooting efficiency is at a peak.  For these guys to see significant income growth at SS, the only way to accomplish it is via a big raise.

Waldo, your posts are really interesting reading.  You obviously understand economics and business very thoroughly.  Would love to know what you do for your (other) day job...

I would like to point out that SS doesn't have to match Istock's income level plus exclusivity bonus by themselves.  They do need to up the ante sufficiently that the income from their site plus the other 4 or so big six agencies besides IS will be higher than Istock income plus exclusivity bonus. 

And since we are talking about mid to higher level contributors, it would be necessary to match or better the diamond level, double royalties on IS. 

[lbarn]

Waldo, your posts are really interesting reading.  You obviously understand economics and business very thoroughly.  Would love to know what you do for your (other) day job.

Earlier, I was thinking the exact same thing!

[helix7]

You mean like Corbis buying someone (instead of creating their own lets-condescend-to-the-little-amateurs homegrown effort)? But perhaps they don't qualify has having marketing muscle until they can turn a profit on their own business

Jupiter owns all or most of StockXpert; Inmagine owns 123rf; who is there who might be the marketing muscle side of that equation to buy up DT and SS (just for example) to rival iStock?

I'm not even saying that is has to be a stock company. Maybe some other company that is in a loosly related business could come in and acquire a mid-size microstock company, use their influence (be it marketing or whatever thing they do well) and make a well-funded entrance into stock that way.

Maybe it wouldn't even be much different than the companies you mentioned, where they do have good backing but still don't come close to rivaling istock. But at least that way we'd see some chake-up in the industry. Shake a few trees and see what flies out.

Something is going to happen. Not sure what, but i can see some movement taking place in the next few years. Even if only because of istock. Investors have taken notice, and will continue to take notice of that 5-year projection, and they may want to get involved in some microstock properties themselves.

[leaf]

Waldo, your posts are really interesting reading.  You obviously understand economics and business very thoroughly.  Would love to know what you do for your (other) day job.

Earlier, I was thinking the exact same thing!

dido, well put waldo.  Makes for some interesting reading.

->lisafx
the other 6 or so sites wouldn�t have to quite match istocks potential earnings because there is also the factor of time involved in uploading to 6-15+ sites.  If a photog. had only one site to upload to they would save quite a bit of time that could be used for creating more pics... or in the big players case, save $$ paying people to upload their pictures to 10 different sites.

[Waldo4]

Waldo, your posts are really interesting reading.  You obviously understand economics and business very thoroughly.  Would love to know what you do for your (other) day job.

Earlier, I was thinking the exact same thing!

I am a civil/structural/aviation engineer.  Got my start as the on-site construction engineer for air traffic control towers (did the 3 big ones, ATL, MCO, MIA), now I design radio and visual Navaids for runways and airports, primary the VOR/DVORs that create the superhighways in the sky for commercial aircraft.  I always wanted to engineer skyscrapers, got my fill with the towers, a very high stress and political environment (ATL is the pinnacle of tower construction, probably will never build one bigger in the western hemisphere),  nowadays Navaids are much more laid back, the and the politics of it is completely changed.  Though my job is almost 100% the implementation of what is commonly referred to as "pork" (all federal construction projects are).  It is quite humorous to listen to political candidates talk about budget issues when you are directly connected to it and know how federal funding really works.

IMO the two companies that could benefit the most from a foray into MS are either Google or Yahoo.  Google could tie a MS site catalogs into Google images and make boatloads of cash, they could more than double the customer base of the industry overnight, Yahoo could overhaul Flickr and have it loosely tied into a MS business.  If they could prevent downloading of non-CC images at Flickr and direct people to an MS site and promote it at Flickr as well as on Yahoo, they too could completely change the industry and double the customer base.  Right now google images and Flickr are a very primary source of blog photos, tapping that market and offering people images for a buck for their blogs at a very high traffic site would completely change everything.

[andresr]

Waldo, your posts are really interesting reading.  You obviously understand economics and business very thoroughly.  Would love to know what you do for your (other) day job.

Earlier, I was thinking the exact same thing!

dido, well put waldo.  Makes for some interesting reading.

->lisafx
the other 6 or so sites wouldn�t have to quite match istocks potential earnings because there is also the factor of time involved in uploading to 6-15+ sites.  If a photog. had only one site to upload to they would save quite a bit of time that could be used for creating more pics... or in the big players case, save $$ paying people to upload their pictures to 10 different sites.

True, but it takes less time to upload to the other big 6 than to istock alone, my assistant spent the whole of yesterday uploading 35 images to istock, (merging releases, disambiguating, categorizing ......... making lightboxes etc ... )
Today he finished 51 images in all other sites in 2 and a half hours.