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Author Topic: Selling Portfolio  (Read 22335 times)

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« on: May 26, 2010, 05:31 »
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Hi Microstockers,

Due to changes in personal circumstances, my partner (business) and I are thinking of selling our stock portfolio of almost 10,000 images. How do we begin to try to put a price on this given the fluctuations in sales and revenue and lack of clear understanding on what the future might bring.

Can anyone point us in the right direction. We believe we have a strong portfolio and it does generate a good income each month.

The portfolio is probably best seen here : http://shutterstock.com/g/eastwestimaging

Appreciate any bits of advice.

Phil (for EastWest Imaging)


Microbius

« Reply #1 on: May 26, 2010, 06:17 »
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Hi Phil,
That is really tricky, great portfolio by the way. This has been asked before and the answer I gave then was that you would probably achieve a price equal to 5 years worth of income assuming a drop in value of 50% per year. So if the portfolio brings in $50,000 per year you can probably get 50000+25000+12500+6250+3125= $96 875.
Not to say that it is only worth that much, ideally you should be able to get a lot more-- but I think with the uncertainty that is what the market will give you.
I hope I am wrong!

« Reply #2 on: May 26, 2010, 07:15 »
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Hi Phil,
That is really tricky, great portfolio by the way. This has been asked before and the answer I gave then was that you would probably achieve a price equal to 5 years worth of income assuming a drop in value of 50% per year. So if the portfolio brings in $50,000 per year you can probably get 50000+25000+12500+6250+3125= $96 875.
Not to say that it is only worth that much, ideally you should be able to get a lot more-- but I think with the uncertainty that is what the market will give you.
I hope I am wrong!

Don't forget that the buyer also needs to make a profit... If the estimated earnings in five years is $96 875, the buyer could pay perhaps only $65 000 to make it worth to take the risk. Personally I think the portfolio is much more worth than $96 875.

There is not an easy answer to the original question, at least the buyer needs to see statistics on how the portfolio is performing money-wise.
« Last Edit: May 26, 2010, 07:17 by Perry »

« Reply #3 on: May 26, 2010, 07:19 »
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Due to changes in personal circumstances, my partner (business) and I are thinking of selling our stock portfolio of almost 10,000 images.

I would go to the bank and try to get a loan instead. The amount of loan could be two or three times your yearly microstock earnings and you should be able to pay it back in five years or so.

The problem with selling your portfolio is that the buyer needs to make a profit, that's money YOU LOSE. Of course even banks need to get a profit, but it's much less than what a risk investor needs to get.
« Last Edit: May 26, 2010, 07:23 by Perry »

michealo

« Reply #4 on: May 26, 2010, 07:45 »
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I think that you will realize more of the value if you keep it under your control.

I am not sure I agree with "5 years worth of income assuming a drop in value of 50% per year" I know Lee Torrens is barely uploading and his microstock income has been maintained.

You could approach Yuri or Lookstat or someone to manage your portfolio on your behalf.

I am curious to know what kind of valuation you have on your portfolio?


Hi Microstockers,

Due to changes in personal circumstances, my partner (business) and I are thinking of selling our stock portfolio of almost 10,000 images. How do we begin to try to put a price on this given the fluctuations in sales and revenue and lack of clear understanding on what the future might bring.

Can anyone point us in the right direction. We believe we have a strong portfolio and it does generate a good income each month.

The portfolio is probably best seen here : http://shutterstock.com/g/eastwestimaging

Appreciate any bits of advice.

Phil (for EastWest Imaging)

« Reply #5 on: May 26, 2010, 08:03 »
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You can't look at it with random specs like 50% drop per year.  Especially with evidence to the contrary with other portfolios.

Bottom line is that you have to treat this as if you were securitising it as you would with any other revenue stream.  You would essentially take a forecast, lets say you make 1000 this year, and lets assume that you lose 10% each year.  So your cash flows would be:

1000
900
810
736 + 2230 (this is (736 / 1.1) /0.30 assuming that the drop in revenue is 30 percent after 4 years

Then, you take each year and take the present value to today's date.  The rate you use will be the rate that the party wishes to earn on the investment they are making by buying your portfolio.  I wouldn't discount that by more than 15% personally, given a good portfolio can really produce stable returns for a decent period of time

so

1000/1.15
900/1.15^2
810/1.15^3
(736+2230)/1.15^4

This is really just basic finance and could be interpreted other ways and the numbers change based on your assumptions, but discounting at 50% is really shorting yourself badly and well, if you are going to get ripped off, let someone else do it, don't help them

All that said, you need to find a buyer and negotiate the terms

« Reply #6 on: May 26, 2010, 08:17 »
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The rate you use will be the rate that the party wishes to earn on the investment they are making by buying your portfolio.  I wouldn't discount that by more than 15% personally, given a good portfolio can really produce stable returns for a decent period of time

I personally would never invest in such a hazardous business as stock photography just to get 15% in profits after many years, I would be much better off investing in something else.
« Last Edit: May 26, 2010, 08:20 by Perry »

« Reply #7 on: May 26, 2010, 09:22 »
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Your best bet might be to approach a few of the big agencies with the idea of them buying the collection and treating/promoting it as their "in-house" library. Although it definitely goes against the grain at iStock, I could see SS, DT and particulary FT being interested.

Good luck!

lisafx

« Reply #8 on: May 26, 2010, 10:28 »
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Phil, I am sorry to hear you are in a situation that requires selling your portfolio.  You are one of the pioneers and top sellers in this business. 

I have no idea about selling your portfolio, but I certainly wish you the best of luck in whatever you pursue after this :)

« Reply #9 on: May 26, 2010, 10:42 »
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Thanks for all the replies and helpful insights. We are only thinking of selling the portfolio as I might be moving countries and it will be difficult to maintain the partnership - I'm certainly not destitute - it's just one possible solution that's all.

Putting a value of year's of hard work and future earnings is definitely going to be a difficult exercise.

lisafx

« Reply #10 on: May 26, 2010, 10:56 »
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Good to hear it is not some personal disaster :)

I hope you will post back when you have figured this out.  It may come in handy for a lot of us down the road...

Microbius

« Reply #11 on: May 26, 2010, 11:02 »
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You can't look at it with random specs like 50% drop per year.  Especially with evidence to the contrary with other portfolios.
I want to make it clear that I dont think the return from the portfolio will actually drop by that much per year; just that I think that is what the market will pay you for the portfolio. It would be great if you could let us know how negotiations go and what sort of price you get!

Or how about some of the people who have asked the same question previously let us know the sorts of offers they were made?

ETA. What about just freezing the portfolio and continuing to just split the income on the existing photos? You can always set up a new individual account on the sites seperate from the partnership. In my opinion this bound to yield more for you then the sale of the portfolio.
« Last Edit: May 26, 2010, 11:05 by Microbius »

« Reply #12 on: May 26, 2010, 11:38 »
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Your best bet might be to approach a few of the big agencies with the idea of them buying the collection and treating/promoting it as their "in-house" library. Although it definitely goes against the grain at iStock, I could see SS, DT and particulary FT being interested.

I'd think that might be a good option too. Recent history is of course littered with examples of agencies who have bought collections and who have subsequently been proved to have lost bucket loads of cash in the process. For example it seems bizarre now that Jupiter paid $20M for Banana Stock's 15K images back in 2006 and now those images are loitering in the bargain basement of PC/TS. I think they'd struggle to offload them now for one hundredth what they paid for them.

With that in mind only those who fully understand the microstock model should even contemplate placing a value on a portfolio. Only a fellow long-standing microstocker or a microstock agency could understand the variables that will affect the likely income from a given portfolio __ and nobody better than Phil himself regarding his own port.

I would regard buying a microstock portfolio as a risky investment in a young and changing market. Personally I'd want to be reasonably confident of being in profit within a couple of years simply because so many things could change within that timescale. Basically it's a significant risk so any buyer is going to want the potential of decent rewards if it works out. From a buyer's perspective I reckon a portfolio's earnings over the last two years would be a reasonable starting point for negotiations to begin. I don't think I'd sell my own portfolio for two years earnings but then I don't need the money and I'm happy to take the risk on it's future earnings myself.

PaulieWalnuts

  • We Have Exciting News For You
« Reply #13 on: May 26, 2010, 12:23 »
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I wouldn't discount that by more than 15% personally, given a good portfolio can really produce stable returns for a decent period of time

Stable? Microstock?

It's a very nice portfolio. Pretty difficult to put a value on though. A traditional business may get a buyer who's willing to value it at a 3-5 year ROI. With microstock there are too many factors that can change even over a year so I would think any potential buyer might be more reserved with a value based on 2 years of earnings or less. But I dunno.

And do agencies let you take over someone's account or would you need to re-upload everything from scratch? If from scratch, then prior sales history isn't a good measure of future potential.
« Last Edit: May 26, 2010, 12:34 by PaulieWalnuts »

« Reply #14 on: May 26, 2010, 13:19 »
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My suggestion is to incorporate a company and distribute the shares between you, your partner and maybe others. Then the shareholders can appoint a director/manager who will be paid according to an agreed rate and manage the port for the shareholders and distribute the dividends at an agreed time.

The shareholders can always replace the director/manager later.

« Reply #15 on: May 26, 2010, 13:45 »
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I think it would be a terrific idea for a site to acquire images from those who wish to sell their images outright...or from the estate of those who have died. Mainly because the site would know exactly the "present value" of those images over the next few years and they could easily construct a payment schedule with X amount down and Y per month for Z months. What I'm really saying is that they could get the images for a very low investment in up-front money or time. I see this as a potential major profit center for them.

RacePhoto

« Reply #16 on: May 26, 2010, 21:18 »
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I wouldn't discount that by more than 15% personally, given a good portfolio can really produce stable returns for a decent period of time

Stable? Microstock?

It's a very nice portfolio. Pretty difficult to put a value on though. A traditional business may get a buyer who's willing to value it at a 3-5 year ROI. With microstock there are too many factors that can change even over a year so I would think any potential buyer might be more reserved with a value based on 2 years of earnings or less. But I dunno.

And do agencies let you take over someone's account or would you need to re-upload everything from scratch? If from scratch, then prior sales history isn't a good measure of future potential.

Just like the seller wants the best deal, don't forget the buyer isn't going to just throw down large bundles of cash betting on the future.

Most small businesses sell for a price, in the range of 2-5 times earnings before interest and tax expenses are deducted.

This is based on current earnings and potential future earnings. The word current doesn't include 2005-2008 for example. Although history is interesting, the buyer will want a complete looks at the financial records for the recent year of income and expenses. You don't open the books until after they make an acceptable offer, then the negotiations begin. :)

Looking at the same thing that Paulie pointed out, two times the annual earnings would allow the buyer to recover their investment in 4-5 years.


« Reply #17 on: May 27, 2010, 13:33 »
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I think it would be a terrific idea for a site to acquire images from those who wish to sell their images outright...or from the estate of those who have died. Mainly because the site would know exactly the "present value" of those images over the next few years and they could easily construct a payment schedule with X amount down and Y per month for Z months. What I'm really saying is that they could get the images for a very low investment in up-front money or time. I see this as a potential major profit center for them.

that's exactly the model  agencies want to avoid -- they'd be paying best guess projected price for all images -- there's liitle to gain  - not all images will meet expected returns, and many will only show a  small % profit.  why tie up all that cash when they can leverage their investment 100-fold by selling other people's images on consignment?  it's the photographer who takes the risks now -- spending to create a portfolio with hope that there will be an adequate return.

s

« Reply #18 on: May 27, 2010, 13:48 »
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I'm speaking of getting the images for very little money. Like cheap. Really cheap. My guess is that there are plenty of images that can be purchased outright for, say, one or two months projected earnings. As an example, if I had to sell rights to images in order to liquidate an estate for heirs, I'd take whatever I could get for a fast sale. Add to that those who just want to get out of the business of micro at any price. I could see a formula for a given portfolio that could yield profits in a few months.

« Reply #19 on: May 27, 2010, 14:11 »
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You can have approach similar like in business or stock market...
Average  P/E (price/earnings) is 15 for stock market in global, this means that each company is worth 15 of their average annual earnings...

If we calculate 50% drop in earnings every year (maybe this is too much but customer wants a premium on his offer) that is:
50+25+12,5+6,25+3,125+1,56+0,78+0,39+,019+0,09...= cca $100K
« Last Edit: May 27, 2010, 14:22 by borg »

« Reply #20 on: May 27, 2010, 14:48 »
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If we calculate 50% drop in earnings every year (maybe this is too much but customer wants a premium on his offer) that is:
50+25+12,5+6,25+3,125+1,56+0,78+0,39+,019+0,09...= cca $100K

That's an extraordinarily complex way of basically saying '2x annual earnings'.

« Reply #21 on: May 27, 2010, 15:30 »
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That's an extraordinarily complex way of basically saying '2x annual earnings'.

Hehehehe! Isn't complex too much..

I just want to explain how to calculate " The value of business" ...

Generally speaking, stock prices are spinning (in the history ) of about 15 average annual earnings ...

« Reply #22 on: May 27, 2010, 15:36 »
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^^^ Stock images have little or nothing in common with the financial 'stock market'. You might just as well try to compare a portfolio's value with that of sheep, pigs and cattle in another 'stock market'. If pork futures are rising in price it doesn't mean the portfolio's value will be increasing too.

Microbius

« Reply #23 on: May 27, 2010, 16:35 »
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Looks like most people who have come up with a price have come up with a figure roughly equal to 2x annual earnings.

« Reply #24 on: May 27, 2010, 19:42 »
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I think it would be a terrific idea for a site to acquire images from those who wish to sell their images outright...

that's exactly the model  agencies want to avoid -- they'd be paying best guess projected price for all images -- there's liitle to gain  - not all images will meet expected returns, and many will only show a  small % profit.  why tie up all that cash when they can leverage their investment 100-fold by selling other people's images on consignment?  it's the photographer who takes the risks now -- spending to create a portfolio with hope that there will be an adequate return.


If an agency such as DT or SS were to acquire stock images to sell, the agency would be in a position of competing with its clients (i.e. us). While some businesses do compete with their clients, it is often a bad idea. I wonder sometimes if Adobe got out of the stock image selling business partly for that reason.

« Reply #25 on: May 27, 2010, 20:00 »
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I don't agree that the sites would be competing with customers. The sites would not be creating images or accepting/rejecting them. The images have already been accepted and are selling irrespective of who owns the image. It would be a service to photographers who could rely on a site to purchase the images at some predetermined price should they wish to sell through change in interest, retirement, death, etc.

« Reply #26 on: May 27, 2010, 20:42 »
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I don't agree that the sites would be competing with customers. The sites would not be creating images or accepting/rejecting them. The images have already been accepted and are selling irrespective of who owns the image. It would be a service to photographers who could rely on a site to purchase the images at some predetermined price should they wish to sell through change in interest, retirement, death, etc.

but again, why invest capital in old images when you can get same product for free and only have to pay AFTER the sale is made;  maybe they'd have to decrease the rejects for a few wks on "too similar", 'already got enuf a thus'  but there's no financial reason to tie up yur own capital when others are begging you to take a % of ther sales.  there are very few portfolios that couldnt be replaced quickly.  the only way this might work is if the buy price were so low that the company was assured a profit in a very short time

s


« Reply #27 on: May 27, 2010, 21:33 »
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In my latest nightmare I cant figure how model relise will be on translated iStock if I buy you port.
My friend shoot his wife yesterday and they reject him with Nosensical explanation. Bla, bla its new, its in gray scale but it must be gray but in rgb,
You exif data is from 1904 year etc. etc.....
You whitness are dead ?!
Your model release does not comply with the new standards. Images shot after the 1st of September 2009 must comply with the new guidelines???

lagereek

« Reply #28 on: May 28, 2010, 02:44 »
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With a bone-fide port like this, why dont you approach one of the leading Agencies for outright sale, they are then working on your port at 100% profit and exclusivity perhaps.

« Reply #29 on: May 28, 2010, 02:48 »
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Here's an off-the-wall idea to see what the market value for your portfolio might be: Put it up for auction on eBay. You can even create a bit of a stir by starting the bidding at $0.99 with no minimum selling price.

Given that you'll be the very first person to ever do this, you'll be sure to get lots of publicity from the prominent blogs: Microsoft Diaries, Lookstat, PDN, Ellen Boughn, and Fast Media Magazine come immediately to mind. Go ahead, give it a try - you've got nothing to lose, and who knows, you might even find a buyer. And be sure to mention you got the idea on this forum if you do it!

Microbius

« Reply #30 on: May 28, 2010, 05:51 »
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Here's an off-the-wall idea to see what the market value for your portfolio might be: Put it up for auction on eBay. You can even create a bit of a stir by starting the bidding at $0.99 with no minimum selling price.

Given that you'll be the very first person to ever do this, you'll be sure to get lots of publicity from the prominent blogs: Microsoft Diaries, Lookstat, PDN, Ellen Boughn, and Fast Media Magazine come immediately to mind. Go ahead, give it a try - you've got nothing to lose, and who knows, you might even find a buyer. And be sure to mention you got the idea on this forum if you do it!
Great idea, I'll certainly be putting a bid........ one of the very early ones though!

hqimages

  • www.draiochtwebdesign.com
« Reply #31 on: May 28, 2010, 06:25 »
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Unfortunately the price of things is set by the market, so you will only make what someone is wiling to pay.. I think it would be a hard thing to sell actually..

« Reply #32 on: May 28, 2010, 06:59 »
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Your best bet might be to approach a few of the big agencies with the idea of them buying the collection and treating/promoting it as their "in-house" library. Although it definitely goes against the grain at iStock, I could see SS, DT and particulary FT being interested.

Good luck!

I would think that any site's offer would only take into account income from sales on that site.  An individual would base their offer on income from all sites the portfolio appears on.   Should mean a substantially lower offer from a site than an individual.

fred

michealo

« Reply #33 on: May 28, 2010, 07:41 »
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You can have approach similar like in business or stock market...
Average  P/E (price/earnings) is 15 for stock market in global, this means that each company is worth 15 of their average annual earnings...

If we calculate 50% drop in earnings every year (maybe this is too much but customer wants a premium on his offer) that is:
50+25+12,5+6,25+3,125+1,56+0,78+0,39+,019+0,09...= cca $100K

15 relates specifically to the S&P 500 and not the market as a whole

« Reply #34 on: May 28, 2010, 08:44 »
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I would think that any site's offer would only take into account income from sales on that site.  An individual would base their offer on income from all sites the portfolio appears on.   Should mean a substantially lower offer from a site than an individual.

Not necessarily. With Istock helping themselves to 80% of the sales revenue they actually make far more than I do each month from my portfolio, even with the contributions from other agencies. Having said that because they already get 80% of the revenue they haven't got much of an incentive to pay for the remaining 20%, other perhaps than denying the images to their competitors.

« Reply #35 on: May 28, 2010, 09:32 »
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Assuming a site paid zero for a portfolio they would add an immediate 20% to their bottom line with nearly zero cost. If they paid, say, 2-3 months income stream for those images then their "payback" is 2-3 months. The 20% additional bottom line profits continue indefinitely. Not a bad investment.

« Reply #36 on: May 28, 2010, 14:10 »
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^^^ Stock images have little or nothing in common with the financial 'stock market'. You might just as well try to compare a portfolio's value with that of sheep, pigs and cattle in another 'stock market'. If pork futures are rising in price it doesn't mean the portfolio's value will be increasing too.

I think you are mistaken...

I am on financial stock market for a more than 6 years constantly...

Also, I am talking about average ratio (P/E) for all types of earnings through history...
All markets throughout history breathe about 15 earnings for the total value....
This refers to approach when each job is considered like a factory of money, regardless of the business sector.

But if you need better suggestion for right valuation, go to the Internet and find current P/E for Getty images... They have stocks on the financial stock market...

Then the value will be : Getty's P/E * Average annual earnings for portfolio...

What will be the annual average earnings for a portfolio, in which the period, depends on the assessment of the owner....
Yuri on his website has a good calculation for it ... From his experience ...


« Reply #37 on: May 28, 2010, 14:40 »
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I think you are mistaken...

I am on financial stock market for a more than 6 years constantly...

Also, I am talking about average ratio (P/E) for all types of earnings through history...
All markets throughout history breathe about 15 earnings for the total value....
This refers to approach when each job is considered like a factory of money, regardless of the business sector.

But if you need better suggestion for right valuation, go to the Internet and find current P/E for Getty images... They have stocks on the financial stock market...

Then the value will be : Getty's P/E * Average annual earnings for portfolio...

What will be the annual average earnings for a portfolio, in which the period, depends on the assessment of the owner....
Yuri on his website has a good calculation for it ... From his experience ...

Ok then __ I'll happily sell you my portfolio for just 10x annual earnings. According to your calculations that would be a real bargain for you wouldn't it? You could probably buy everyone else's portfolio too for 10x annual earnings. I'd even produce a new portfolio every year for you if you're paying 10x earnings for it.

Do you realise that new images are being accepted at the rate of 5M per year? That means that most agencies will probably have doubled their collections in the next couple of years. Unless the market volume or the price doubles too then the average image will probably be earning less, maybe half what it is today. And it won't stop there either. We've all enjoyed an ever-increasing market and rising prices for the last few years. Once those factors level out, as surely they must at some point, then the same size pie will be split amongst an ever-increasing number of images. I suggest that even paying 2x annual earnings for a portfolio might prove generous.

« Reply #38 on: May 28, 2010, 15:10 »
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A business broker would have a struggle trying to put evaluations on micro stock images. You've got an extremely small supply of goods that are made much smaller as a percentage of the supply every day. You've got an increasing "decay" rate of effective sales due to those new competing images coming on line. I don't think the annual earnings evaluation method would mean much in this scenario. 

And you've got the mercurial nature of each site regarding pricing and business practices. That's a huge uncertainty factor that would further devalue such an evaluation. Add to that the fold rate of second and third tier sites with next to zero payout possibilities. And there doesn't seem to be any "comps" of earlier similar sales. Or, for that matter, any market at all if the major sites won't honor the copyright sale to another party.

If they came up with a value at all it would likely be a few cents per image. Still, sites could find it profitable at a low enough price to offer to buy them.  It wouldn't surprise me if some site isn't considering this method of supply already.

« Reply #39 on: May 29, 2010, 07:37 »
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You all talk about the risks, I am talking about the averages and the current state ...
When you buy business or stocks, you buying it at the current state of the economy and markets...

The current state is that RPI increase, price increases, growth in the number of customers that still exceeds the growth in the number of photos ...

What will be tomorrow, or for a couple of years, who knows....
« Last Edit: May 29, 2010, 07:45 by borg »

« Reply #40 on: May 29, 2010, 07:46 »
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Here's an off-the-wall idea to see what the market value for your portfolio might be: Put it up for auction on eBay. You can even create a bit of a stir by starting the bidding at $0.99 with no minimum selling price.

Given that you'll be the very first person to ever do this, you'll be sure to get lots of publicity from the prominent blogs: Microsoft Diaries, Lookstat, PDN, Ellen Boughn, and Fast Media Magazine come immediately to mind. Go ahead, give it a try - you've got nothing to lose, and who knows, you might even find a buyer. And be sure to mention you got the idea on this forum if you do it!

I would go this way :)

« Reply #41 on: May 29, 2010, 08:00 »
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Did it occur to anybody that when you take over an existing port, you will have to re-upload all under your own account? That means 15 per week on IS and back to level 1 on DT. Let alone if they would re-accept all, since technical standards went up a lot the past 5 years. Prepare for some unpleasant surprises in earnings, compared to the current earnings of OP.

Microbius

« Reply #42 on: May 29, 2010, 08:36 »
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Unless the new owner contacts the sites about allowing the existing account to continue under new ownership. As it's a partnership it is a business account rather than an individual's.

« Reply #43 on: May 29, 2010, 08:45 »
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Did it occur to anybody that when you take over an existing port, you will have to re-upload all under your own account? That means 15 per week on IS and back to level 1 on DT. Let alone if they would re-accept all, since technical standards went up a lot the past 5 years. Prepare for some unpleasant surprises in earnings, compared to the current earnings of OP.

I believe 99% will be accepted, look at his/their portfolio :)

PaulieWalnuts

  • We Have Exciting News For You
« Reply #44 on: May 29, 2010, 09:57 »
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You all talk about the risks, I am talking about the averages and the current state ...When you buy business or stocks, you buying it at the current state of the economy and markets...The current state is that RPI increase, price increases, growth in the number of customers that still exceeds the growth in the number of photos ...What will be tomorrow, or for a couple of years, who knows....
I did some digging and at least one site responded that they don't allow portfolio transfers. If all of them have the same policy this is a huge risk.

The seller would need to take down all of the images, they would need to transfer copyright, and then the buyer would upload those images to their portfolio.

You would be starting from scratch. Your RPI is zero. Your current state is zero. You no longer would have the same search placement as the images had before. It could take months to start seeing stable income and get a feel for what kind of income the portfolio would generate.

If I were considering buying a portfolio this issue just dropped my perception of value by quite a bit. It's not like taking over a restaurant that has stable and predictable income and things just continue as normal. You're closing the restaurant down and starting it over without knowing how business will be.

michealo

« Reply #45 on: May 29, 2010, 10:00 »
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^^^ Stock images have little or nothing in common with the financial 'stock market'. You might just as well try to compare a portfolio's value with that of sheep, pigs and cattle in another 'stock market'. If pork futures are rising in price it doesn't mean the portfolio's value will be increasing too.

I think you are mistaken...

I am on financial stock market for a more than 6 years constantly...

Also, I am talking about average ratio (P/E) for all types of earnings through history...
All markets throughout history breathe about 15 earnings for the total value....
This refers to approach when each job is considered like a factory of money, regardless of the business sector.

But if you need better suggestion for right valuation, go to the Internet and find current P/E for Getty images... They have stocks on the financial stock market...

Then the value will be : Getty's P/E * Average annual earnings for portfolio...

What will be the annual average earnings for a portfolio, in which the period, depends on the assessment of the owner....
Yuri on his website has a good calculation for it ... From his experience ...

It is not 15 for the market as a whole
& Getty hasn't been quoted for years since it was taken private, so any PE you quote for them is historical.

lisafx

« Reply #46 on: May 29, 2010, 11:04 »
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You all talk about the risks, I am talking about the averages and the current state ...When you buy business or stocks, you buying it at the current state of the economy and markets...The current state is that RPI increase, price increases, growth in the number of customers that still exceeds the growth in the number of photos ...What will be tomorrow, or for a couple of years, who knows....
I did some digging and at least one site responded that they don't allow portfolio transfers. If all of them have the same policy this is a huge risk.

The seller would need to take down all of the images, they would need to transfer copyright, and then the buyer would upload those images to their portfolio.

You would be starting from scratch. Your RPI is zero. Your current state is zero. You no longer would have the same search placement as the images had before. It could take months to start seeing stable income and get a feel for what kind of income the portfolio would generate.

If I were considering buying a portfolio this issue just dropped my perception of value by quite a bit. It's not like taking over a restaurant that has stable and predictable income and things just continue as normal. You're closing the restaurant down and starting it over without knowing how business will be.

Seems to me the smart way to get around this is to incorporate and list the portfolio and accounts at the micros as assets of the corporation.  Give the micros the corporate tax id # rather than your personal SS# and have them pay earnings to the corporation.  Then you sell the corporation and the accounts should stay open and continue as usual. 


« Reply #47 on: May 29, 2010, 12:02 »
0
Not long ago you could sell images for $250 plus each. It wasn't hard to produce 50 to 100 a day. That wasn't long ago. I don't think you can anymore because projected income is much less. It's difficult to say what an images true income will be over anything longer than a year.  The market constantly makes huge adjustments that makes it impossible to say what will happen and how much an image is really worth. Given that I wouldn't pay 2 years income for image. No way.

« Reply #48 on: May 29, 2010, 12:03 »
0
You all talk about the risks, I am talking about the averages and the current state ...When you buy business or stocks, you buying it at the current state of the economy and markets...The current state is that RPI increase, price increases, growth in the number of customers that still exceeds the growth in the number of photos ...What will be tomorrow, or for a couple of years, who knows....
I did some digging and at least one site responded that they don't allow portfolio transfers. If all of them have the same policy this is a huge risk.

The seller would need to take down all of the images, they would need to transfer copyright, and then the buyer would upload those images to their portfolio.

You would be starting from scratch. Your RPI is zero. Your current state is zero. You no longer would have the same search placement as the images had before. It could take months to start seeing stable income and get a feel for what kind of income the portfolio would generate.

If I were considering buying a portfolio this issue just dropped my perception of value by quite a bit. It's not like taking over a restaurant that has stable and predictable income and things just continue as normal. You're closing the restaurant down and starting it over without knowing how business will be.

you are right Paulie,

to add on to this...what about the model and the property release, "you" as the buyer do not have the right to sell images without those.
You can't just transfer the Copyright, the Copyright is for the buyer to use the image, not to resell it.

« Reply #49 on: May 29, 2010, 21:49 »
0
to add on to this...what about the model and the property release, "you" as the buyer do not have the right to sell images without those.
You can't just transfer the Copyright, the Copyright is for the buyer to use the image, not to resell it.
The model releases her rights to the photographer, his heirs and assigns.

« Reply #50 on: May 30, 2010, 01:31 »
0
Last year Scott M. (lumaxart) wanted to sell his portfolio. Try to contact him.

« Reply #51 on: May 30, 2010, 02:10 »
0
15 x earning is way to high, companies that are valued that high are much more deversified than a portfolio of microstock photos.

Maybe microstockgroup could branch out into portfolio auctions :) 

« Reply #52 on: May 30, 2010, 18:15 »
0
15 x earning is way to high, companies that are valued that high are much more deversified than a portfolio of microstock photos.

Maybe microstockgroup could branch out into portfolio auctions :) 

basic facts: PE is the price to earnings ratio , so a PE of 15 means the price is 15x current earnings -- the higher the ratio the RISKIER the stock. [in the dot com bubble PEs of 50 or more were common] in the case of Getty it has NOTHING to do with the RPI - it would be an indication of getty's worth to investors, and has NO direct connection to the size of getty's portfolio

s

michealo

« Reply #53 on: May 31, 2010, 04:16 »
0
15 x earning is way to high, companies that are valued that high are much more deversified than a portfolio of microstock photos.

Maybe microstockgroup could branch out into portfolio auctions :) 

basic facts: PE is the price to earnings ratio , so a PE of 15 means the price is 15x current earnings -- the higher the ratio the RISKIER the stock. [in the dot com bubble PEs of 50 or more were common] in the case of Getty it has NOTHING to do with the RPI - it would be an indication of getty's worth to investors, and has NO direct connection to the size of getty's portfolio

s

the higher the ratio the RISKIER the stock.

Not necessarily true, it can mean that investors value the company more than it's peers. Coca cola has generally traded at a higher PE than it's peers because it is seen as reliable ...

P/E is as mush a measure of sentiment as anything else

Also in the dot com bubble P/E were often infinite as they often had no earnings ...

« Reply #54 on: May 31, 2010, 05:09 »
0
15 x earning is way to high, companies that are valued that high are much more deversified than a portfolio of microstock photos.

Maybe microstockgroup could branch out into portfolio auctions :) 

basic facts: PE is the price to earnings ratio , so a PE of 15 means the price is 15x current earnings -- the higher the ratio the RISKIER the stock. [in the dot com bubble PEs of 50 or more were common] in the case of Getty it has NOTHING to do with the RPI - it would be an indication of getty's worth to investors, and has NO direct connection to the size of getty's portfolio

s

Sorry I wasn't more clear,  by "diversified" I didn't mean about a "diversity of a portfolio of pictures"
I was referring to what a company does, for example a company like GE does heavy engineering,airplane motors, finance, manufacturing etc. Earnings are spread over different sectors of the economy and globe.

Just as you say the dot com companies were over valued at 50x earnings I believe 15x is too high for a single microstock portfolio

« Reply #55 on: May 31, 2010, 09:48 »
0
In bubble dot.com ballon I saw P/E ratio bigger than 500 and more...
Today you have bunch of companies (worldwide) with P/E ratio above 50...

But 15x isn't too much, because calculation isn't only with last year earning, that is average estimated earnings for several years, provided that every year will be 50% lower than the previous year...
« Last Edit: May 31, 2010, 09:53 by borg »

« Reply #56 on: May 31, 2010, 16:38 »
0
In bubble dot.com ballon I saw P/E ratio bigger than 500 and more...
Today you have bunch of companies (worldwide) with P/E ratio above 50...

But 15x isn't too much, because calculation isn't only with last year earning, that is average estimated earnings for several years, provided that every year will be 50% lower than the previous year...

Maybe I miss understand you, but I don't agree with your calculation.

say I pay $15

for something that earns $1 i.e P/E = 15

1st year $1 then $0.50 the next year and so on

$1+0.5+0.25+0.125+0.0625 etc.    After 40 years you have a total of about $2   (oh and by the way the investment is now worth 0 is its earnings are zero)

 
Companies have a P/E ratio of around 15 because they generally increase earnings over time. (at least plan to)
 We're talking about something here where it is very unlikely to increase earnings. (without adding to the portfolio etc.)


« Reply #57 on: May 31, 2010, 18:50 »
0

Maybe I miss understand you, but I don't agree with your calculation.

say I pay $15

for something that earns $1 i.e P/E = 15

1st year $1 then $0.50 the next year and so on Companies have a P/E ratio of around 15 because they generally increase earnings over time. (at least plan to)
 We're talking about something here where it is very unlikely to increase earnings. (without adding to the portfolio etc.)

that's why PE isnt a useful concept for non-stockmarket - it's a snapshot stat that helps people decide whether to invest or not.  the earnings is what the company gives out as dividends -- so the PE of 100 can be fine if it's a tech stock that's increasing in prce - you're not buying it for the underlying value.   the contrarian style of stock buying would look for low PE as a hdege - if the stock doesnt go up, at least you have a good dividend.

f

vonkara

« Reply #58 on: May 31, 2010, 19:21 »
0
This is one of the most interesting discussion I have seen yet. I'll throw my rock in the pool... Why not selling the rights individually through Dreamstime by making publicity to all the microstock photographers.

I don't know if it change the copyright, maybe not. But if yes, then the OP is able to set a price for each images. And... I would be able to get some pics myself maybe lol. Even Dreamstime could get into this maybe

RacePhoto

« Reply #59 on: July 05, 2011, 12:30 »
0
Yes, I know, it's been a year. Anyone know what happened?

Anyone have a change in their opinion of what a MS collection is worth? Maybe by the photo, even if there are some that have never sold and never will?

Or maybe based on annual sales for the total collection, the number of photos, isn't important, is it? If I have 200 pictures and make $100 a year and someone else has 2000 photos and makes, $100 a year, isn't the number of images irrelevant?

Agencies have dropped sales and dropped commissions since this thread was started. Would that indicate to anyone that the value isn't growing? :D

I'll stick with 2 times the annual earnings, same as any other business. Easy enough and still a risk for the buyer, easy way our for the owner. Sell means letting go and taking what one can get, walking away. You buy a shoe store you get the same thing. Shoes (inventory), the business and the customers.



Hi Microstockers,

Due to changes in personal circumstances, my partner (business) and I are thinking of selling our stock portfolio of almost 10,000 images. How do we begin to try to put a price on this given the fluctuations in sales and revenue and lack of clear understanding on what the future might bring.

Can anyone point us in the right direction. We believe we have a strong portfolio and it does generate a good income each month.

The portfolio is probably best seen here : http://shutterstock.com/g/eastwestimaging

Appreciate any bits of advice.

Phil (for EastWest Imaging)

lagereek

« Reply #60 on: July 05, 2011, 13:07 »
0
Youre right its been a year and much has happend. With the exeptions of SS and DT, the entire Micro industry seems to wobble. I doubt very much there is anything in buying any port right now.

RacePhoto

« Reply #61 on: July 05, 2011, 13:29 »
0
Youre right its been a year and much has happend. With the exeptions of SS and DT, the entire Micro industry seems to wobble. I doubt very much there is anything in buying any port right now.

OK how about selling? ;)

I think part of the reason for a revival was the high dollar quotes and future earnings optimists vs the reality that there's no guarantee and things are a risk for the buyer at best.

It might be that the sorting out period is much more serious now and we shouldn't keep seeing new agencies entering the market. I said that two years ago, that anyone getting in now, is too late. Some others have pointed out that 4-5 years ago was already too late.

Same for artists and sellers. It's not as easy as it was, plus reviews have changed, commissions have dropped, outlets have dropped, competition has increased, so that buying an old photo means the future sales are even more at risk based on duplication and newer versions of the same materials.

I wouldn't want to be buying anything, and for the potential seller, it might be a good time to cash out for what you can get, before the value drops even more.

lagereek

« Reply #62 on: July 05, 2011, 14:20 »
0
Youre right its been a year and much has happend. With the exeptions of SS and DT, the entire Micro industry seems to wobble. I doubt very much there is anything in buying any port right now.

OK how about selling? ;)

I think part of the reason for a revival was the high dollar quotes and future earnings optimists vs the reality that there's no guarantee and things are a risk for the buyer at best.

It might be that the sorting out period is much more serious now and we shouldn't keep seeing new agencies entering the market. I said that two years ago, that anyone getting in now, is too late. Some others have pointed out that 4-5 years ago was already too late.

Same for artists and sellers. It's not as easy as it was, plus reviews have changed, commissions have dropped, outlets have dropped, competition has increased, so that buying an old photo means the future sales are even more at risk based on duplication and newer versions of the same materials.

I wouldn't want to be buying anything, and for the potential seller, it might be a good time to cash out for what you can get, before the value drops even more.

Selling?  well maybe. Just dont know whos going to pay? remember, certain agencies have managed to get themselves into trouble and with a reputation of not beig trusted, etc, and as you say commissions have fallen. Getty is but a fading memory of its former glory, at the moment nothing seems to work out for them and thats true, irrespective of what some will say.

However you might be right, cashing out now before the ships are sinking and at least get something?

« Reply #63 on: July 06, 2011, 11:10 »
0
You can't look at it with random specs like 50% drop per year.  Especially with evidence to the contrary with other portfolios.

Bottom line is that you have to treat this as if you were securitising it as you would with any other revenue stream.  You would essentially take a forecast, lets say you make 1000 this year, and lets assume that you lose 10% each year.  So your cash flows would be:

1000
900
810
736 + 2230 (this is (736 / 1.1) /0.30 assuming that the drop in revenue is 30 percent after 4 years

Then, you take each year and take the present value to today's date.  The rate you use will be the rate that the party wishes to earn on the investment they are making by buying your portfolio.  I wouldn't discount that by more than 15% personally, given a good portfolio can really produce stable returns for a decent period of time

so

1000/1.15
900/1.15^2
810/1.15^3
(736+2230)/1.15^4

This is really just basic finance and could be interpreted other ways and the numbers change based on your assumptions, but discounting at 50% is really shorting yourself badly and well, if you are going to get ripped off, let someone else do it, don't help them

All that said, you need to find a buyer and negotiate the terms

This is basically how a private equity would undertake a business like this. Certain types of investors have a set IRR at which they invest (others) money. They would discount the cashflows at a rate and see what they can pay you above their internal IRR target. Agreeing port life, decrease of performance, royalty in(de)creases in the future, etc. would be the key issues here, once you have found the buyer of course.

Once agreed the inputs for the model theyll stick to what the financial model says. Sometimes they buy bargains, sometimes they make terrible mistakes....

Investing at 15% IRR is difficult, there arent many business giving that money, if it wasnt that difficult everyone would have wonderful retirements, no? I think only one person in the world has been able to invest money at those rates in the long term and that is W. Buffet. Madoff tried, but he didnt quite make it ;). Looking for a 15% IRR for this kind of business is way too high. Where we find risk others find something pretty stable. 15% IRR usually relates to business with development risk, that means you still have to make the thing start moving. For a business with already "steady" cashflows a 10% IRR would be more likely the target. 

RacePhoto

« Reply #64 on: July 06, 2011, 13:00 »
0
Since I have no clue I went and looked it up.

Internal Rate of Return (IRR) is a type of return on investment formula used to measure profitability of investments. It is calculated on an annual basis and can be used to determine the interest rate at which an investment begins to make more money than its costs.

Something simple which I was ignoring. If I buy someones collection for $X that's money which isn't just sitting, it could be earning somewhere else. So the return is not just how much someone would make selling licenses for photos at 10-15% but also minus the cost of having that money tied up, instead of invested somewhere else.
 If someone makes 10% on Micro and could make 5% somewhere else, the profit is only 5%, not 10%!

Good points, thanks for bringing up some of these calculations. It's not just as simple as someone buys the rights to 2000 photos for $4000 and waits two years to start making money back. There's also two years of losing 5%, which means, it's going to take longer to start making a profit on the investment.

I also don't like the bulk collection valuation. 2000 photos for $? which is per photo. Some have never sold and will never sell, so what is the buyer getting? Inventory and dead weight, fluff or padding? I'd say the price would need to be based on earnings history, not the number of images involved. And considering that, the potential value is going down right now, not up.

« Reply #65 on: July 07, 2011, 11:06 »
0
Ok, Ive done a very quick example of a port valuation. Please take into account I have tried to make it really simple, it is not perfect but gives an idea.

I would advise to copy it to your own spreadsheet and not to edit this one. This way more people can use it. If people start messing around with it, delete formulas, etc, it will be useless.

https://spreadsheets.google.com/spreadsheet/ccc?hl=en_US&hl=en_US&key=tnsligbHBOIcRGoE0b7Uhcg#gid=0

I have included the following inputs and made the following assumptions.

There is no cost to maintain the port in the sites.

No tax calculations involved.

No financed (leveraged ) buying.

Valuation for 5 years. After that all the port can produce is an upside for the buyer.

Royalty increase. you can use the one (+ or - ) you think is more likely to happen across the sites where you have your port.

Discount rate for NPV: this is an internal value of the buyer. It can be used a risk free rate or the rate at which a company on average puts its money or average cost of capital or other. NPV is a way of comparing investments and of knowing if the investment will add value to the company, positive value, or substract it, negative value.

Portfolio degradation: yearly decrease of performance of a port if we stop uploading.

First year revenue: doesnt need explanation ;)

Port value: use this cell to guess the value of your port that makes the IRR reach a certain level. If you think someone would be inteersted of buying your port with this assumptions and targeting a 10% IRR, put values in this cell untill you get the desired 10% IRR.

IRR and NPV: dont touch this cells unless you want to increase or decrease the years of analysis. For a good description go wiki them :)

« Reply #66 on: July 07, 2011, 11:46 »
0
Interesting spreadsheet. I suppose portfolio degradation and royalty increases/decreases are unknown factors. Does that mean in the end it is a best guess?  ;D

My theory for valuing my own portfolio was taking yearly revenue and multiplying it by the number of years you thought it would take to rebuild it. Not as statistically savvy, but it sounded fair to me.


« Reply #67 on: July 07, 2011, 12:05 »
0
Interesting spreadsheet. I suppose portfolio degradation and royalty increases/decreases are unknown factors. Does that mean in the end it is a best guess?  ;D

My theory for valuing my own portfolio was taking yearly revenue and multiplying it by the number of years you thought it would take to rebuild it. Not as statistically savvy, but it sounded fair to me.

Yep, its a guess or it is based on your historical data, or data you or the buyer have access to. The more data you have the easier you can convince someone future will behave like past ;), those would be key factors to negotiate. But hey, its only an example, nothing else.


 

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