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Author Topic: IS subscription scheme not as good as I thought.......  (Read 6542 times)

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« on: April 04, 2008, 21:04 »
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Now that I've had time to consider this scheme further, I'm afraid my conclusion is that it is not as good as I first thought.  Yes, it is much, much better than DT or StockXpert, but it nonetheless could be detrimental to earnings.

The clue is given in the IS post by kkthompson where he confirms that subscription credits will be priced at less than 38c (and geopappas subsequently compared that pricing to SS on another thread).

At present credits are priced maximum at 10 credits for $13 ($1.30 each) or cheapest at a bulk buy 1500 credits for $1450 (96c each).  Non exclusive commission is 20% of these levels, or 26c to 19c.  Note that 19c is a 26% discount compared to 26c.

If subscribers can get credits at 38c or less, WHY ON EARTH WOULD ANYONE NOT BECOME A SUBSCRIBER?  We have to assume that all customers will become subscribers unless they are completely stupid.

Under subscription sales, photographers get a fixed 19c minimum payment per credit spent.  This means that all the 26c payments disappear.

Doesn't sound a lot, but in a worse case scenario this represents a drop in income of up to 26%.

Let's consider percentages for a moment; when something drops 26% it results in 74%.  To get back to 100% that 74% has got to grow by 35%.

So in this example, a photographer has got to increase sales by 35% just to stand still.

Clearly this is an extreme example.  And can be offset by a) increased sales from the subscription scheme b) occasional payments from the 'free lottery ticket'.

Because subscriptions are going to be so much more attractive to buyers than 'per credit' packages, I am going to have to assume that all my present 26c payments will drop to 19c payments.


« Reply #1 on: April 04, 2008, 21:27 »
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Under subscription sales, photographers get a fixed 19c minimum payment per credit spent.  This means that all the 26c payments disappear.

Because subscriptions are going to be so much more attractive to buyers than 'per credit' packages, I am going to have to assume that all my present 26c payments will drop to 19c payments.
This is incorrect and fails to consider the very nature of the subscription model. Aren't you the one that points out Yuri's SS analysis all the time? 19c is the minimum, 26c payments will not disappear, and much larger ones are more likely. Most of the time subscribers don't use their full subscriptions, and in those cases the payments are likely to be much higher than 19c.

iStock's new subscription model is a much different take on how the other agencies do it, so I know the analysis will take some getting use to (it caught me very off guard) . I've been running some numbers, because of an angry client phone call (pm me if you don't understand this part) and it actually looks very advantageous to the photographers. Time will tell, but perhaps more thought is need before making such conclusions as "all present 26c payments will drop to 19c payments", because the financial analysis doesn't appear to support this.

« Reply #2 on: April 04, 2008, 21:37 »
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Yes, I understand your points completely - what I've described above is very much a 'worst case scenario' where all present payments are 26c and all future payments drop to 19c.  Of course the real world doesn't work like that and the 'free lottery ticket' arrangement of all unused credits per day being treated as 'spent' is an unknown quantity that could make a huge difference to the numbers.

But it remains the case that subscriptions are going to be so attractive in terms of pricing, that there is a real likelihood of the present 26c payments disappearing and being replaced with '19c plus a share of unused credits'.

You are probably much more of a mathematician than I am, and to correctly assess the expected income from the new scheme needs either expert knowledge of 'unused credits' from subscription schemes or some major assumptions for those credits.

It is quite clear that the scheme will work to huge advantage IF subscribers typically spend a lot less than their daily allowances (fingers crossed).
« Last Edit: April 04, 2008, 21:42 by hatman12 »

« Reply #3 on: April 04, 2008, 21:40 »
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If subscribers can get credits at 38c or less, WHY ON EARTH WOULD ANYONE NOT BECOME A SUBSCRIBER?

Because he may not need that many images a day?  The credit packages can be used during one year.  I believe this is the case of buyers of smaller packages.

The "1500 credits for $1450 package" buyer will use about 4.2 credits a day on average during the year.  Roughly he would need 7 of these packages a year to get 30 credits per day (to compare with one example in IS). That would mean 7 x $1450 / 365 = $27.80 per day, against $10 of the subs package.  For these heavy users, the subs prices are of great interest.

Given that in most of my sales I've been getting more than 22c per credit, so IS is making more than 1.10 per credit, they sell more "300 credits for $325.00 packages" and below instead of the expensive packages. Of course it doesn't mean they use that during one full year, but if they used that in two months then it would be more interesting to buy the big "1500 credits for $1450 package" instead.

However, I've started a concern about subs packages being sold at a per day basis (observe that this is how IS exemplified them).  So a casual customer who would  buy 2 M-size images, instead of buying a "10 credits for $13.00 package" would buy a "30 credits for $10 subs package" and get six images instead.  Therefore the photographer would not receive 26c per credit, but the 19c minimum.

Am I right?  It's late here and I'm sleepy.  :)

Regards,
Adelaide
« Last Edit: April 04, 2008, 21:42 by madelaide »

« Reply #4 on: April 04, 2008, 21:52 »
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Yes Madelaide, that's my concern - that all the present 26c payments get replaced with 19c payments.  But as yingyang points out, all the unused credits get treated as 'spent' - that is the unknown quantity.

The problem (for me, anyway) is that I just don't know where all the subscriber profits come from; yes, Yuri has given some calculations and assumptions for SS, but it remains the case that we really don't know if SS's profit comes from 'completely unused days' or 'partial days'.  Remember that photographers get no benefit from 'completely unused days' at IS (or SS).

bittersweet

« Reply #5 on: April 04, 2008, 22:24 »
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However, I've started a concern about subs packages being sold at a per day basis (observe that this is how IS exemplified them).  So a casual customer who would  buy 2 M-size images, instead of buying a "10 credits for $13.00 package" would buy a "30 credits for $10 subs package" and get six images instead.  Therefore the photographer would not receive 26c per credit, but the 19c minimum.

As far as I can tell, the limits are daily, but they have to commit to subscribing for at least a month. There will be no one-day subscriptions being offered. I expect that the "casual customer" will still be doing a per image purchase.

Also, I'm sure the varying levels of subscriptions will have varying levels of discount. The "worst case scenario" will likely not always play out as such, but like everything else, we'll just have to wait and see.

« Reply #6 on: April 05, 2008, 00:38 »
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I've purchased subscriptions in bygone years.

1.  No matter how hard you try you never download your full allotment.  Even when you make it a point to try.

2  You download images you "might need some day" because you have downloads still available and you figure "use them or lose them".  So a lot of images that get downloaded never actually get used.

3.  You'll see larger downloads for the same reason.  So instead of a .19 XS, you'll get a .38 S or better.

I think this has real potential.

harry

« Reply #7 on: April 05, 2008, 08:58 »
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I find this great. Come on now- we all expected to get ripped off! They could have done it! Just the fact that they gave us a debateably good deal is incredible and shows we re valued, and that microstock companies are competing for our love. Its a great day for us.
« Last Edit: April 05, 2008, 09:03 by harry »

lisafx

« Reply #8 on: April 05, 2008, 09:24 »
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Many thanks to Hatman, Yingyang and Madelaide for running the math on this and sharing your thoughts and conclusions.  As a very poor math student, the whole thing has been way over my head and I haven't known what to think. 

After reading all of your well considered and explained scenarios the fog is lifting :)
Sounds like it is definitely not the disaster I at first feared.  I have to admit I am relieved. 

« Reply #9 on: April 05, 2008, 11:59 »
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Let me add that I never saw this as a total disaster.  I give my four thumbs up (yeah, using my feet too!) for makings subs credits according to image size.

I'm just trying to figure out the consequences of the current model.

I know that in general subs buyers are unable to use all their daily limit, so we may see that extra share.  I just want to be the lucky person who sells one single image to the 480-credit-a-day subscriber.  ;D

Anyway, one of the scenarios they gave - 30 credits a day - is not so unrealistic.  That's just 6 M-sized images or 3 L-sized ones, and it's monthly cost is US$300.  (For you SS contributors: how those daily limits compare with an similar SS packages price?)

If subs plan is all on monthly basis and above, it will be probably a very good commitment.  But if they make "one-day subs" or "one-week subs", then we may lose the sales from the smaller (and more profitable) credit plans.

I guess it will takea while before we see the result of the new model, because there will still be a lot of credits around.  But there is good potential in it.

Regards,
Adelaide

« Reply #10 on: April 05, 2008, 13:03 »
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Anyway, one of the scenarios they gave - 30 credits a day - is not so unrealistic.  That's just 6 M-sized images or 3 L-sized ones, and it's monthly cost is US$300.  (For you SS contributors: how those daily limits compare with an similar SS packages price?)

The lowest SS plan is $199 for 25 images/day.  As you are aware, on SS though, a buyer can download the largest image sizes that are available.

« Reply #11 on: April 05, 2008, 14:20 »
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The lowest SS plan is $199 for 25 images/day.  As you are aware, on SS though, a buyer can download the largest image sizes that are available.
Which is exactly the same package we have in StockXpert, right?  In DT you have $90 for 10 images a day.

So what would make someone buy a $300 package instead in IS and only be able to dld 30-XS or 15-S or 6-M or 3-L or 2XL images per day, instead of dlding up to 25 images at their maximum resolution in other sites (or even a very reasonable 10 images in DT for 1/3rd of the price)? 

The only real advantage IS I can think of is the quality of (most of) their exclusive contributors.  Unless there is something very outstanding in their search tools, or other site tools, to make life much easier for the heavy user - is there such a thing?

Regards,
Adelaide

« Reply #12 on: April 09, 2008, 01:22 »
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i'm not sure how many buyers will accept day by day system -- doesnt seem ike IS really thought this thru -- do they really expect buyers to spend part of EVERY day selecting images?  even if the buyer's workflow included searching for new images every day, are they still going to work weekends?  certainly the SS stats show drops on weekends

single day use it or lose it just doesnt make any sense;  if IS doesnt change it, then the discussion will be moot since there will too few subscribers t omatter

steve

bittersweet

« Reply #13 on: April 09, 2008, 01:28 »
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if IS doesnt change it, then the discussion will be moot

Doesn't change what? None of the specific plan details have been released yet. Assuming that they threw this together with little thought is a bit naive. They've stated that it has been in planning for the better part of a year.

So far every radical change that istock has gone through --even the ones I didn't necessarily agree with at the time -- has meant more money in my pocket at the end of the month.

Whether you like istock or loathe them (many folks here seem very antagonistic about them), you have to give them some credit for continuing to pioneer new territory in the world of microstock.

DanP68

« Reply #14 on: April 09, 2008, 01:31 »
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I share a lot of Hatman's concerns. 

While the IS plan looks great compared to other mixed sub/credit plans, I just don't have a good feel for how this will truly play out.  YingYang makes a compelling case, but I think he is being optimistic.  And regardless of how positive the increase is for contributors, who can say how it will compare to the SS raise which we haven't even seen yet?

I can't imagine going exclusive at this point in time.  There is too much flux taking place in a still evolving market place.

« Reply #15 on: April 09, 2008, 13:20 »
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 ====Assuming that they threw this together with little thought is a bit naive. They've stated that it has been in planning for the better part of a year.


first, they HAVE been describin g this as a day to day system

  why naive?  more like realistic -- do they REALLY think buyers are going to use the site EVERY day including weekends?  how many people need images every day?  and what happens when you need more than your allotment one day, but none for the next week?   the timesacle is just too short.  a subscription neeeds frexibility.   

like others, i've had mixed feelings about past changes, but i dont get too concerned - it's their business - if they improve we both prosper; if they dont , i have other places to sell.  so far no MS has made an exclusive offer that's worth it for me to abandon all others.

s

« Reply #16 on: April 09, 2008, 17:18 »
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  why naive?  more like realistic -- do they REALLY think buyers are going to use the site EVERY day including weekends?  how many people need images every day?  and what happens when you need more than your allotment one day, but none for the next week?   the timesacle is just too short.  a subscription neeeds frexibility.
I think you're missing the whole point of a subscription service. iStock is planning on people not needing images everyday because that is how they will make their money. It is NOT a per day subscription. Also, the part you quoted was talking about something different from what you're talking about.

Translation Error?

« Reply #17 on: April 09, 2008, 19:41 »
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It is NOT a per day subscription.

I'm not so sure... I asked about that in their forum, and this is what I got from Rogermexico:
Quote
Your subscription gets you a daily credit limit - x number to use for x number of days at x dollars.

So it seems one will not be required to subscribe for a month.  Ok, maybe just one day won't be allowed either, but am I wrong in my interpretation?

Regards,
Adelaide

« Reply #18 on: April 09, 2008, 20:02 »
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I'm not so sure... I asked about that in their forum, and this is what I got from Rogermexico:
Quote
Your subscription gets you a daily credit limit - x number to use for x number of days at x dollars.

So it seems one will not be required to subscribe for a month.  Ok, maybe just one day won't be allowed either, but am I wrong in my interpretation?
Yes I think you're reading too much into his basic statement. They came out and said specifically that there will be no 1 day subscriptions. They didn't say weekly subscriptions were out the window, but I highly doubt that will be an option.

Consider it this way. 1 day subscriptions would destroy the profits for iStock. They're going to be making their money from the unused credits on days like Saturday and Sunday. People that would want 1 day subscriptions are the type of buyers that would use most or all of the credits, which would cause iStock to actually lose money on the deal.  It is in iStock's best interest to have longer subscription lengths, not shorter ones.

Roger was giving you the basic formula. I think you're reading too much into it.

« Reply #19 on: April 09, 2008, 20:03 »
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Yes, it's something like a 1 or 3 or 6 month or something subscription.  You get your credit everyday, and if you don't use it, they don't roll over.

« Reply #20 on: April 10, 2008, 18:53 »
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They came out and said specifically that there will be no 1 day subscriptions.

I didn't read that. They could be more clear in their explanation. The thread was contaminated by a side discussion and I gave up following it.

Regards,
Adelaide


 

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