I don't really think microstock has destroyed anything at all.  It just exposed a formerly huge weakness in traditional stock---the extreme difficulty of photographers without inside contacts getting into high-paying stock, no matter how hard they tried.  I believe both the founders of IS and SS were in that category.  They basically invented micro as an answer to that huge entry barrier of traditional stock, which they tried to get into but weren't allowed to (and they're called "failed photographers" by the traditionals; I wish I could be a failure like them    ).  Now we're just seeing the results of that wall coming down.  I think if anything is destroying the traditionals, it's the market itself.  They blame micro, but it's the market that decides.  Macro is trying to fight micro, but rather than doing that they need to reinvent themselves in order to survive; the old ways aren't going to cut it anymore.  High-paying commercial photography will be around for a long time, but it's going to be even harder to break into.  Thus, microstock will have to suffice for us lesser mortals.

As far as an Istockphoto price increase, I'm surely hoping for one.  However, I hope it's a true increase and not just another redesign of sizes (what...xxxsmall for 5 cents?)

"We have made tremendous progress expanding beyond our traditional creative stills imagery business on our way to becoming a complete digital media company," said Jonathan Klein, co-founder and chief executive officer. "During the last few months, we have re-engineered search with the launch of the new gettyimages.com, cemented our leadership position in the fast growing entertainment imagery business, expanded our multi-media and editorial footage offerings, launched an innovative new web-resolution product, entered the music industry, and launched our new Soundtrack digital music service. We are seeing tremendous growth in many parts of our business, have excellent potential in large addressable markets for music licensing and consumer, and are realistic about the challenges as we lead our industry forward through a time of change and opportunity."

Revenue increased 5.5 percent to $208.9 million from $197.9 million in the third quarter of 2006. Excluding the effects of changes in currency exchange rates, revenue grew 2.1 percent. Revenue growth came from increasing licenses for editorial and micropayment imagery, digital asset management, photo assignments, and publicity distribution. This growth was partially offset by lower revenues in the company's traditional creative stills business.

As a percentage of revenue, cost of revenue was 26.9 percent, compared to 25.4 percent in the prior year due to changes in the composition of the company's royalty free business. Other royalty free revenue is growing fast and has a lower gross margin than the traditional single image royalty free collections.

Selling, general and administrative expenses (SG&A) totaled $84.0 million or 40.2 percent of revenue for the third quarter of 2007, compared to $73.6 million or 37.2 percent of revenue in the third quarter of 2006. The increase over the prior year is directly attributable to recently acquired companies, the impact of changes in foreign exchange rates and investments that the company is making in areas that will drive future growth. The company undertook a restructuring during the quarter to reduce certain expenses resulting in a charge of $4.2 million.

Income from operations was $39.8 million. Excluding the restructuring charge of $4.2 million, income from operations was $44.0 million or 21.1 percent of revenue in the third quarter of 2007 compared to $54.2 million in the third quarter of 2006.

Net income for the third quarter of 2007 was $25.7 million with earnings per diluted share of $0.43, or $0.47 excluding the restructuring charge, compared to $37.3 million and $0.62 in the third quarter of 2006.

Cash balances were $303.0 million at September 30, 2007. During the quarter, the company paid down $40 million on its senior credit facility from existing cash balances leaving $80 million outstanding. Net cash provided by operating activities during the third quarter of 2007 was $56.9 million.

Business Outlook

The following forward-looking statements reflect Getty Images' expectations as of November 1, 2007. The company currently does not intend to update these forward-looking statements until the next quarterly results announcement.

For the full year 2007, the company expects revenue of approximately $850 million. This implies revenue of approximately $210 million for the fourth quarter of 2007.

The company expects full year diluted earnings per share of approximately $2.10, which includes about $0.10 per share for non-recurring items, comprised of the costs associated with a terminated acquisition in the first quarter of 2007, professional fees associated with the stock option review in the first and second quarters, and the restructuring charge in the third quarter. Excluding these items, the company would have expected diluted earnings per share of approximately $2.20.

Assuming fully diluted shares of approximately 60 million for the fourth quarter and the full year, the implied guidance for diluted earnings per share for the fourth quarter of 2007 is $0.48.

For 2008, the company expects revenue of approximately $900 million. "

"Net income for the third quarter of 2007 was $25.7 million with earnings per diluted share of $0.43, or $0.47 excluding the restructuring charge, compared to $37.3 million and $0.62 in the third quarter of 2006."

ie: Net income fell from $37m to $26m, a drop of 30%.  And EPS fell from $0.62 to $0.47, a drop of 24%.

horay to the rise of Microstock

Actually i think photos were way overpriced in teh past and that microstock is here to stay. Although prices were low at the beginning...i believe in the years to come, prices will rise but not to the traditional stock level...

I'm curious, why some here celebrate the losses in macrostock?

Regards,
Adelaide

Well, given that I know people who have been in macro for so many years and now get paid less and less for their work, I don't see the funny side of it.

Regards,
Adelaide

Having said that, I have spent some time looking at the collections offered by Getty, Corbis and Jupiter, and I must say that I am surprised by the high percentage of poor quality snapshots.  For years, these macro houses appear to have been 'clubs' where one can get a 'seat' through the 'who you know' route, or by having enough money to be able to buy a few Hasselblads or Bronicas.  I'm afraid that 80% of those photographers simply won't make the grade in the microstock world.

Very true but very sad.  If they complain about it, it's probably them that dug their own graves through their own complacency.  SS and IS simply helped to open the gates of something that was technologically destined to come crashing through eventually anyway---the free market flood which was being held back by elite attitudes of the big stock houses.  I admit that micro prices have never impressed me, but the volume has usually made up for the low $.  Hopefully midstock will become a viable wave of the future.  It seems to have a lot of promise, if done correctly.

Because I both buy and sell images I spend a lot of time going through new uploads especially at iStock and what I see is some real pro work coming through especially in the past few months.

It's no doubt that some of these guys and gals are joining up with microstock. Some of the old trad photographers work is no better than what can be had at the micros and I'm sure that hurts. But, there are the pros and then there are the pros and you can tell the difference. The real pro work will kick some of us where it hurts, myself included.

The trads will continue to lose money but some of the trad photographers won't. They will continue to kick ass with their stunning work.

I saw the iStock announcement. But how much up the prices are with current ones?

vphoto