Would you say it is important to find a niche in the commercial marketplace?

Google my name.

Okay, here's some useful and friendly advice:

It's great that you want to 'up your game' in terms of technical quality - that should be everyone's goal whether they want to make money from their images or not. A big problem for you, as I see it, is that you're doing so by making imagery that has minimal commercial value and then trying to add it to the catalog of an agency that specializes in commercial imagery. See the problem here? You're currently heading down a long road where, at the end, your image-making skills will be much better than they are now, but you'll be really frustrated by your high rejection rate and low earnings - you'll undoubtedly be one of those who says "Microstock isn't worth it - too much effort, too little pay. There's no way anyone can make money doing this.", and that's not a place where you want to be.

The challenge will be to have a royalty structure that maximises the payout to contributors, while still providing enough cashflow to sustain a professional agency. Maybe a fixed percentage in addition to a regular distribution of profits in proportion to income earned?

Whatever the case is would need to be written in black and white without a "we can change it at our discretion" type clause.

I would think the exact reverse to be better. Why not create a new breed of agency that is totally transparent to its investors, where commission rates vary on monthly/weekly/daily basis according to revenue and expenses? Saturday and Sunday are low-selling days, so you could have those as 0% commission days at startup or when you're saving for a special project (e.g. upcoming seasonal promotion). Need cash to upgrade systems? Uh oh, we have to reduce commissions. Want to reward the patience of contributors or celebrate a milestone? Wooyay, it's a 100% commission day!

Wow, those are are really bad - no way they're gonna command premium pricing.
I was expecting something to compete with Blend, or maybe even select images from Blend.

Early prediction: Agency will fail even worse than E+.

actually I calculated it out.  and with the lower credit costs for non-exculsive images at iStock, iStock will actually be making LESS off my images when I cancel exclusivity.
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Yes, that's known by anyone who's taken the time to examine the ins-and-outs of iStock. I think it's even been mentioned a few times on this forum - guess not everyone was paying attention.

Fwiw David, enjoy the pats on the back, because I think you've made a big error in judgment. Sorry to see you go.

Ditto.
You're actions aren't monumental, but your overreaction is.

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Here some comparisons:
- Approx. 4 out of 10 non-exclusives will lose 25% (a quarter) of their monthly earnings.
- The vast majority of non-exclusives, 9 out of 10 will at least lose 15% of their iStock income.
- According to the poll 1 out of 267 non-exclusives stays at 20%.

Throwing out percentages like this doesn't give as good a picture as you might think - it's akin to the monthly earnings percentages thread that circulates around this place: It may be interesting to scan, but it doesn't really tell you anything. Let's put some dollar amounts to this data. With reference to the chart in this thread, here's what the poll results look like now:

142 non exclusive contributors which split into: (omitting contributors who are staying even, for clarity)
New               Number of
Commission   Contributors   iStock Income           Income Lost
15%                39.4%             $0 to $398                  $0 to $99
16%                28.9%             $424 to $2,650            $85 to $530
17%                22.5%             $2,816 to $9,010         $422 to $1352
18%                5.6%               $9,540 to $35,775       $954 to $3,578
19%                2.8%               $37,763 to $352,450    $1888 to $17,623

Breaking it down like before, but a little differently:
- Approx. 4 out of 10 non-exclusives will lose less than $99 per year.
- Approx. 5 out of 10 non-exclusives will lose between $85 and $1352.

45 exclusive contributors which split into: (omitting contributors who are staying even, for clarity)
Old                 New                Number of
Commission   Commission   Contributors    Income                      Income Lost
30% to 40%    25%               28.9%               $0 to $4141                 $0 to $1,552
35% or 40%    30%               17.8%               $4,969 to $15,900       $621 to $3,975
40%                35%               6.7%                 $18,550 to $69,563     $2,319 to $8,695

Breaking it down:
- 47% of exclusive contributors will lose less than $3,975 per year.
- 7% of exclusive contributors will lose between $2,319 and $8,695.
- 53% of exclusive contributors will lose $0.


Although there are far more independents than exclusives, it's clear that exclusives stand to lose more from this than independents. Assuming the poll data is valid, it might be possible to make a broad statement: While 50% of independents will lose up to $1350 per year in this deal, 40% of independents will be minimally affected by it, losing less than $100. Nearly 50% of exclusives will lose up to $4000, almost 3 times the amount of independents in a similar income bracket.

Taking a step back, the majority of income losses shown here are in the chump change category - not even a few hundred dollars per year. While some lost income amounts to the same as losing a performance bonus in a white collar job, it's only the full-time independents earning $70k+ who are losing significant cash, and they make up less than 2% of the respondents. Full-time exclusives (earning $70k+) aren't going to lose anything. How's that for spin?

I'll take it one step further.
If we know the value of a redeemed credit at each level, you can work out the royalties needed in order to maintain your commission level. You can calculate what royalties you'll need to jump up a level, too. Here's another handy dandy chart:

Level          Commission   Redeemed    Royalties Needed    Royalties Needed
                                       Credits Req'd      to Maintain              to Promote
IndyBase                15%               -                       -                               $398
IndyBronze             16%           2,000                 $424                         $2,650
IndySilver               17%         12,500               $2,816                         $9,010
IndyGold                18%         40,000               $9,540                       $35,775
IndyDiamond          19%       150,000              $37,763                     $352,450
IndyBlackDiamond  20%     1,400,000            $371,000                             -

Bronze                   25%           2,000                    -                              $4,141
Silver                     30%         12,500                $4,969                       $15,900   
Gold                      35%         40,000              $18,550                        $69,563
Diamond                40%       150,000              $79,500                      $742,000         
Black Diamond        45%    1,400,000            $834,750                              -


So if you're currently at Gold level, you'll need to earn $18,550 per year to maintain that commission rate - if you earn $69,553 you'll jump up to Diamond level. If you're an independent and iStock comprises 40% of your total microstock revenue, then you'll have to be earning about $94k to "earn" a 19% commission, and about 928k to get 20%.

This month is looking good for me, too - a little early on to say it, but September should be a BME. As far as buyers leaving iStock goes, that just ain't gonna happen.

I think you really need to ask yourself why it is there is nobody - and I mean nobody - who is a full-time stock photographer and exclusive at Fotolia. You can be fond of all the things you've mentioned, Matt, but when it comes down to the bottom line you are selling yourself short. More short than you think is possible.

I believe he received the highest number of votes in a recent across Canada poll as to who was the greatest Canadian.  I well remember the Marathon of Hope back in my early teenage years.  He's a true inspiration.

Nope, he came in second. Tommy Douglas - father of the publicly-funded universal health care system - came in first. But yeah, it's hard to find a Canadian who doesn't know who Terry Fox was.

This marks the first and only time I've actually seen proof that a license was purchased for 25c.

I didn't say ALL of the keywords the inspector said were wrong were in fact wrong, I'm just trying to point out that if a buyer wants a photo of an oil refinery then they'll search for "oil refinery", not "oil". In fact, one of your images of a worker standing by an oil refinery has "oil refinery" as its top keyword, and it's sold more than 400 times (#4485847). Seems to me like it's doing okay.
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Well, it isn't really conceptual.  I mean there is a word for what is there, and that's 'oil refinery'.  Since that works, there's no need for words like 'oil' or 'gas'.

That's not quite true.
If a buyer enters the search words 'engineer oil refinery', iStock's engine translates it to 'Engineer AND Oil (Fossil Fuel) AND Refinery' - not having 'oil', 'gas', ... together with 'refinery' would mean that the image wouldn't be found. Sure, the image would be found if the buyer put quotes around "oil refinery" or just searched for 'oil refinery' on its own, but I don't think it's wise to assume make any assumptions about how buyers think - it's better to cover all the bases.