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Author Topic: Getty revenue declining: Shutterstock and Fotolia to blame  (Read 29911 times)

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« Reply #1 on: September 05, 2013, 10:20 »
0
That's not surprising, but it paints a rather gloomy picture. Thanks for posting.

« Reply #2 on: September 05, 2013, 10:33 »
+12
Just more proof why they came in and slashed our commissions. They are desparate. The pieces are starting to come together and they can't hide it anymore.

« Reply #3 on: September 05, 2013, 10:37 »
+14
Its great to see real financial information. Now the photographers have much better insight into how agencies are performing and how that might affect their income.

Now that istock has slashed their prices so drastically, it will be interesting to see 3rd quarter results.

I am surprised to read that the premium market is supposedly half of their creative returns. So this is the market that Offset will be moving into. And Fotolia has high end collections as well. And then there is stocksy...

What I also dont understand is why they are just blaming the decline on SS and Fotolia and not looking more closely to what Getty did to themselves.

Interesting times.
« Last Edit: September 05, 2013, 10:46 by cobalt »

« Reply #4 on: September 05, 2013, 10:59 »
+11
So it looks like they were expecting an up swing in the third quarter but Moody doesn't agree. I have to agree with Moody here as I have never seen a company run so poorly as GettyImages. I mean they don't even have to create the content all they have to do is sell it and not shaft the artist at the same time. Fire the management and start over I say!

« Reply #5 on: September 05, 2013, 11:01 »
+13
oooh Yuri could you please plug the hole on the Titanic!

« Reply #6 on: September 05, 2013, 11:07 »
+4
oooh Yuri could you please plug the hole on the Titanic!

yes the professional is listening to your concerns and will rescue you/getty/world, get a chair just in case it takes too long ;D

« Reply #7 on: September 05, 2013, 11:09 »
0
I am on life support could you please hurry!

« Reply #8 on: September 05, 2013, 11:12 »
+14
To me the most telling statistic is how leveraged the company is.  As I understand these things, first H&F and then Carlyle saddled Getty with increasing amounts of debt to finance their purchases of the firm.  So Getty goes from a leverage of 1.5 before the H&F acquisition to 3.2 afterward, and then from 6x when Carlyle buys it to 7.1 in June.  That's less and less sustainable, and is a combination of declining revenues and increased debt.  I'd say both are self-inflicted; SS and others are just getting the benefit of disastrous decisions by Getty and its past and present owners.

« Reply #9 on: September 05, 2013, 11:30 »
+3
To me the most telling statistic is how leveraged the company is.  As I understand these things, first H&F and then Carlyle saddled Getty with increasing amounts of debt to finance their purchases of the firm.  So Getty goes from a leverage of 1.5 before the H&F acquisition to 3.2 afterward, and then from 6x when Carlyle buys it to 7.1 in June.  That's less and less sustainable, and is a combination of declining revenues and increased debt.  I'd say both are self-inflicted; SS and others are just getting the benefit of disastrous decisions by Getty and its past and present owners.


We can blame SS & Fotolia for driving the price of our assets down and keeping them down for over 8 years so that they can gain market share. The margin has been so high that I am sure they could have raised prices and done the same thing.

I agree with your post, the most disgusting aspect is that the guys on the top make sure they benefit no matter how the cookies crumble.

Leverage exists when an investor achieves the right to a return on a capital base that exceeds the investment which the investor has personally contributed to the entity or instrument achieving a return.

Snip

Leverage at Getty was about six times when Carlyle bought the company in 2012 and rose to about 7.1 times as of June 30, according to Moodys. Leverage increased to 3.2 times in 2008 from less than 1.5 times when Hellman & Friedman purchased the company, according to Moodys. Leverage increased during Hellman & Friedmans ownership after a 2010 dividend.

We believe long-term leverage will be high because of Gettys private-equity ownership, history of special dividends and aggressive financial policy, Standard & Poors analysts wrote in a March 26 news release.

http://www.businessweek.com/news/2013-09-04/caryle-group-s-getty-images-ratings-on-review-for-cut-by-moody-s

« Reply #10 on: September 05, 2013, 11:46 »
+8
We can blame SS & Fotolia for driving the price of our assets down and keeping them down for over 8 years so that they can gain market share. The margin has been so high that I am sure they could have raised prices and done the same thing.

Driving the price down?  Not my experience at all.  When I joined, SS was paying .20 per subscription download and there weren't many options for anything else.  Now they pay almost twice that, not counting all the on-demand and other non-sub sales.  They did it by raising prices and royalties to match.  As far as I know they haven't raised prices since the financial meltdown in 2008.  To raise royalties without raising prices would be to cut their share, which I can understand their unwillingness to do.  And I can see and hear some of where their share goes, in all the advertising they do on radio, on podcasts and on blogs.  They think that'll draw more customers, and I'm willing to believe they're right.

(I won't defend Fotolia.  They have cut my royalties several times, which is why I stopped uploading there.  I don't know if there is room for them to raise prices, nor do I particularly care.  They're a small contribution to my bottom line.)

It might be useful to remember that iStock started as a free image exchange, then went to a broader sales model.  They kept raising prices over the years, even as they cut my share of the selling price.  Now they've raised them too high and lost sales, or maybe the two are unrelated.  But they're facing declining revenues even as their debt skyrockets, and that's a recipe for disaster.

« Reply #11 on: September 05, 2013, 12:19 »
0
They say that the price of Getty debt fell to 95c on the dollar. Doesn't that mean that the market is pricing in a default?

I may have misunderstood, as I am not a money-man, perhaps someone who understands the arcane byways of high finance could clarify that.

« Reply #12 on: September 05, 2013, 12:20 »
+4
We can blame SS & Fotolia for driving the price of our assets down and keeping them down for over 8 years so that they can gain market share. The margin has been so high that I am sure they could have raised prices and done the same thing.


Driving the price down?  Not my experience at all.  When I joined, SS was paying .20 per subscription download and there weren't many options for anything else.  Now they pay almost twice that, not counting all the on-demand and other non-sub sales.  They did it by raising prices and royalties to match.  As far as I know they haven't raised prices since the financial meltdown in 2008.  To raise royalties without raising prices would be to cut their share, which I can understand their unwillingness to do.  And I can see and hear some of where their share goes, in all the advertising they do on radio, on podcasts and on blogs.  They think that'll draw more customers, and I'm willing to believe they're right.

(I won't defend Fotolia.  They have cut my royalties several times, which is why I stopped uploading there.  I don't know if there is room for them to raise prices, nor do I particularly care.  They're a small contribution to my bottom line.)

It might be useful to remember that iStock started as a free image exchange, then went to a broader sales model.  They kept raising prices over the years, even as they cut my share of the selling price.  Now they've raised them too high and lost sales, or maybe the two are unrelated.  But they're facing declining revenues even as their debt skyrockets, and that's a recipe for disaster.


You are confusing the IS greed and contempt for contributors with market dynamics which are two different things. IS contempt for contributors who are also buyers can not be underestimated.

This is where we have all been naive, while we were in a financial meltdown since 2006, SS was thriving, gaining market share and the cash was rolling in.  During this time we did not hear a word of this from Jon, he kept SS's profitable success hush hush. He could have raised sub prices but chose not to so that he could gain lion size market share by keeping prices for customers down at the expense of it contributor's increasing production expenses. While the price of producing images rose for contributors our sub compensation has not changed for over 8 years.

Do you remember what type of images were coming in to the micro sites when the sub prices were .20C.  Let me remind you. Yuri was still shooting blurry poorly lit lizards in his back yard in 2005. This is Jon Oringer's port on SS and the majority of contributors did not even reach this level of quality. http://www.shutterstock.com/portfolio/search.mhtml?gallery_username=shutterstock&page=27.

The bar has been raised substantially since 2004 without Commensurate compensation.

If you earned a .38 royalty in 2008 we did so by substantially raising the quality of our images and shooting HCV work. 

The quality and content bar continues to rise as well as the costs to produce those assets, the sites benefit from all of this without incurring any of the expenses to produce those images. 
« Last Edit: September 05, 2013, 12:29 by gbalex »

« Reply #13 on: September 05, 2013, 12:25 »
+1
To me the most telling statistic is how leveraged the company is.  As I understand these things, first H&F and then Carlyle saddled Getty with increasing amounts of debt to finance their purchases of the firm.  So Getty goes from a leverage of 1.5 before the H&F acquisition to 3.2 afterward, and then from 6x when Carlyle buys it to 7.1 in June.  That's less and less sustainable, and is a combination of declining revenues and increased debt.  I'd say both are self-inflicted; SS and others are just getting the benefit of disastrous decisions by Getty and its past and present owners.

I thought saddling acquisitions with debt was standard operating procedure for private equity firms.

Driving the price down?  Not my experience at all.  When I joined, SS was paying .20 per subscription download and there weren't many options for anything else.  Now they pay almost twice that, not counting all the on-demand and other non-sub sales.

That's still a very small increase considering it could be 10 to 100 times more.

« Reply #14 on: September 05, 2013, 12:42 »
+1
Just more proof why they came in and slashed our commissions. They are desparate. The pieces are starting to come together and they can't hide it anymore.

Either that, or they are now getting in worse and worse shape *because* they came in and slashed commissions.

Risky strategy to keep on cutting what they pay suppliers in the hope that it'll make iStock/Getty more sustainable.  The opposite could be true.

Ron

« Reply #15 on: September 05, 2013, 12:49 »
0
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« Reply #16 on: September 05, 2013, 13:03 »
+3
They say that the price of Getty debt fell to 95c on the dollar. Doesn't that mean that the market is pricing in a default?

I may have misunderstood, as I am not a money-man, perhaps someone who understands the arcane byways of high finance could clarify that.


It means that you can buy Getty debt, from those who currently hold it, at a discounted rate (reflecting the risk it entails). I think when you buy the debt you are also buying any income from interest on the debt.

It basically means the lender has already accepted that it will likely lose money on the debt and is willing to accept a small loss now to avoid risking a bigger loss in the future.

You can currently buy Greek debt for about 40c on the Euro ... but you might get a 'haircut' instead!

http://online.wsj.com/article/SB10001424127887323297504578579111798293062.html

« Reply #17 on: September 05, 2013, 13:06 »
+2
To me the most telling statistic is how leveraged the company is.  As I understand these things, first H&F and then Carlyle saddled Getty with increasing amounts of debt to finance their purchases of the firm.  So Getty goes from a leverage of 1.5 before the H&F acquisition to 3.2 afterward, and then from 6x when Carlyle buys it to 7.1 in June.  That's less and less sustainable, and is a combination of declining revenues and increased debt.  I'd say both are self-inflicted; SS and others are just getting the benefit of disastrous decisions by Getty and its past and present owners.


Some of that debt was for H&F's dividend recapitalization - payback for H&F when they couldn't sell Getty as quickly as they'd hoped. See the following discussions here from a few years ago

http://www.microstockgroup.com/general-stock-discussion/photos-from-gettyimages-direct-to-thinkstock-ouch/msg194494/#msg194494
http://www.microstockgroup.com/istockphoto-com/hf-presses-on-with-$4-billion-getty-images-sale/msg262167/#msg262167

« Reply #18 on: September 05, 2013, 13:10 »
+1
They say that the price of Getty debt fell to 95c on the dollar. Doesn't that mean that the market is pricing in a default?

I may have misunderstood, as I am not a money-man, perhaps someone who understands the arcane byways of high finance could clarify that.


It means that you can buy Getty debt, from those who currently hold it, at a discounted rate (reflecting the risk it entails). I think when you buy the debt you are also buying any income from interest on the debt.

It basically means the lender has already accepted that it will likely lose money on the debt and is willing to accept a small loss now to avoid risking a bigger loss in the future.

You can currently buy Greek debt for about 40c on the Euro ... but you might get a 'haircut' instead!

http://online.wsj.com/article/SB10001424127887323297504578579111798293062.html


That's what I thought. It seems that Getty has finally discovered the secret of how to make yourself unsustainable: borrow beyond your means.

« Reply #19 on: September 05, 2013, 13:12 »
+3
To me the most telling statistic is how leveraged the company is.  As I understand these things, first H&F and then Carlyle saddled Getty with increasing amounts of debt to finance their purchases of the firm.  So Getty goes from a leverage of 1.5 before the H&F acquisition to 3.2 afterward, and then from 6x when Carlyle buys it to 7.1 in June.  That's less and less sustainable, and is a combination of declining revenues and increased debt.  I'd say both are self-inflicted; SS and others are just getting the benefit of disastrous decisions by Getty and its past and present owners.

Great post.

Of course, as most of us here on MSG are currently owed money by IS/GI ... then we too are amongst their creditors (whose position is considered insecure). That's a reminder to make sure you always cash out as soon as you can.

Just think how much IS/GI owe Yuri & Co from week to week. Just as well 'Professionals deal with professionals'.

« Reply #20 on: September 05, 2013, 13:16 »
+3
If instead of paying out "special dividends" they had actually made a huge investment in the company itself - technology, marketing and hiring the best team - where would they be now?


« Reply #21 on: September 05, 2013, 13:18 »
+9
Has anyone else noticed that Getty's falling revenue (and discounted debt) all seems to have occurred in the last few months ... since a certain Yuri Arcurs went exclusive?

PDWP!

« Reply #22 on: September 05, 2013, 13:26 »
+1
To me the most telling statistic is how leveraged the company is.  As I understand these things, first H&F and then Carlyle saddled Getty with increasing amounts of debt to finance their purchases of the firm.  So Getty goes from a leverage of 1.5 before the H&F acquisition to 3.2 afterward, and then from 6x when Carlyle buys it to 7.1 in June.  That's less and less sustainable, and is a combination of declining revenues and increased debt.

Does that mean that the indebtedness went from 6x earnings to 7x earnings in six months? Was that the result of additional debt being taken on, or a result of the earnings declining so that the ratio between earnings and debt changed? If it is the latter, then the ratio will continue to increase until (or unless) they can start to grow their income.

And if you have borrowed 7x your earnings and you are paying, say 4% interest, then wouldn't more than 20% of what you earn will be going into interest repayments?

« Reply #23 on: September 05, 2013, 14:15 »
+12
Has anyone else noticed that Getty's falling revenue (and discounted debt) all seems to have occurred in the last few months ... since a certain Yuri Arcurs went exclusive?

PDWP!

Since they kicked out Sean, Rob, Alex and encouraged others to leave after the Getty Google Drive disaster???

Maybe the public outrage among the artists, who also happen to be buyers is affecting the bottom line? Just a little bit???More than a little bit? Lost social network marketing and personal recommendations?

Of course not...it is all SS and Fotolia...who else...

« Reply #24 on: September 05, 2013, 14:24 »
+7
Has anyone else noticed that Getty's falling revenue (and discounted debt) all seems to have occurred in the last few months ... since a certain Yuri Arcurs went exclusive?

PDWP!

I wonder if Yuri is second guessing his decision right about now. He should.


 

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