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Author Topic: Are creators compensated when enterprise customers get FREE comp use?  (Read 12117 times)

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« on: February 22, 2014, 14:11 »
0
Can anyone tell me if creators are compensated for the images provided to enterprise customers for FREE comp use?

Shutterstock announced that it had $68 million in gross revenue in Q4 2013 and that approximately 15% (approximagely $10 million) was to large organizations they refer to as enterprise customers. They believe that enterprise customer sales may eventually generate 20% to 25% of gross revenue.

When asked during the investor conference call what causes these large organizations to pay more than the standard subscription rate Thilo Semmelbauer, President & COO said, it's a combination of the license and the rights they get, the indemnification, the service, as well as the functionality that we provide. So as an example, agencies use a platform where they can download what's called comps for free. Comps are sort of full resolution files without watermarks that they can use in their discussions with clients in their workflow. And until their clients decide yes we want to use this image they're actually not paying for that.

So now, when they do license that image it's going to be in the hundreds of dollars per image. So that's a very different type of workflow that's very suited to the agency market. And I won't go through all the other categories but it's an example of how we've customized our offering for publishers, large corporations, agencies. And the price point for the image varies based on some of those suites of things.

Shutterstock says they had 100 million paid downloads in 2013. Are the images that were downloaded for free comp use included in that number, or are they on top of that number?

If they are in addition to the 100 million does anyone have any idea how many were downloaded for comp purposes?

Assume that a big advertising agency downloads 1,000 images for comp purposes and eventually pays a license fee to use 50 of those images.

Assuming that the normal subscription download royalty is paid for each free comp use download, how is it determined what percentage of the total fee paid by the advertising agency is allocated to the 50 images that were actually used?

Shutterstock says it pays out about 28% of gross revenue in royalties, but is a lower  percentage paid to those whose images are only used as comps and a much higher percentage to those whose images are actually used?

Does the enterprise licensing become more of an RM model rather than a pay-per-download RF licensing model? Will the business move more toward an Alamy model with the fee charged enterprise customers is based on use?

One of the advantages for creators of the subscription pricing model was that customers were encouraged to download a lot of images because they didnt have to pay extra for each image downloaded. Thus, creators received a very low royalty, but made it up in volume. With the enterprise system customers still get to download all the images they want, but the price they pay depends on who they are, how they use the images, and how many images they end up using.

Will there be any way to track those images that were downloaded for free comp us, or do we trust that customers will tell us when they make any future use even if it is months or years down the road?


« Reply #1 on: February 22, 2014, 14:45 »
+3
As far as I know - and there is zero transparency on the license terms for the SOD licenses - you don't get paid anything unless your image is one of those eventually used.

People have told stories about Alamy licensees not paying for usages until someone noticed the publication and then realized they hadn't been paid so I would be very surprised if there were not cases of "inadvertent" uses that didn't get compensation for the contributors.

It's another of those "trust us" situations where contributors have no idea what's happening, when, with whom or under what terms. I don't like it, but having complained about these terms since SODs were introduced and seen only generalized answers about how each deal is different so we can't possibly tell you about the license terms, at this point I conclude that I can leave SS or put up with it.

Until there's some sort of DepositPhotos-like scandal uncovered, I've decided to put up with it. I don't like it, but I think I can live with it for now.

« Reply #2 on: February 22, 2014, 14:49 »
+4
Hi Jim,

I know that you also put this question to the team.   Feel free to correspond with me directly on the topic.  I've spoken about our licenses and comps in the forums in the past. 

First, the number of "paid downloads" does not include comps. 

Here's a paraphrased version of my prior explanation in the forums on the topic of comps and preview images:

Unwatermarked comps are common in stock image licensing. Traditionally, buyers who were purchasing an RM or RF image would request a comp or preview image for layout and evaluation purposes because of high per-image costs and the direct relationship between the license fee and actual usage. This has been a common practice at leading stock agencies, primarily because advertising agencies and major publishers continue to work this way.  Comps do not include a usage license.

When Shutterstock provides unwatermarked comp images, they are only provided to trusted large accounts that pay higher prices than other Shutterstock customers. We do track comp usage and comps are not offered through the subscription model. As a result, contributors receive higher royalties when a customer licenses an image for usage; the pricing of images licensed to these customers can be in the hundreds of dollars. Contributors receive a corresponding royalty based on their earnings tier (up to $120 or more per download).
 

Best,

Scott
« Last Edit: February 22, 2014, 14:52 by scottbraut »

ShadySue

  • There is a crack in everything
« Reply #3 on: February 22, 2014, 15:10 »
0
People have told stories about Alamy licensees not paying for usages until someone noticed the publication and then realized they hadn't been paid so I would be very surprised if there were not cases of "inadvertent" uses that didn't get compensation for the contributors.
It's not ony Alamy - I heard exactly the same from someone who works in a Scottish editorial RM agency. Whenever there is an event which they have covered, they sent photos out to relevant publications, and at least once she accidentally found one of her own images in a publication, and had to chase up for payment. That model is necessary for that market, and there will be deliberate or accidental 'incidents' of this sort, and presumably 'twere ever thus.

Shelma1

  • stockcoalition.org
« Reply #4 on: February 23, 2014, 06:22 »
+12
I've worked in large ad agencies my entire career. Art directors there have had access to large unwatermarked "previews" from Getty, for example, for a long time. Though there's potential for abuse, I haven't seen it happen. (I'm not saying it never happens, just that i personally haven't seen it.)

Most of the art directors I've worked with avoided iStock and Shutterstock because they couldn't present work to clients with small watermarked images. This new policy gives Shutterstock the opportunity to compete with the large RM agencies and also gives our work the opportunity to be seen and licensed by companies that would never have considered it before.

I guess I feel comfortable with it because it's the "normal" way of interacting with stock houses for those of us in the ad industry, and because I see huge potential for us to make much more money from a single sale.
« Last Edit: February 23, 2014, 10:04 by Shelma1 »

« Reply #5 on: February 23, 2014, 06:53 »
+2
I guess I feel comfortable with it because it's the "normal" way of interacting with stock houses for those of us in the ad industry, and because I see huge potential for us to make much more money from a single sale.
+1

« Reply #6 on: February 24, 2014, 11:13 »
+1
Indeed and I was delighted the other day to get a tasty $68

« Reply #7 on: February 24, 2014, 11:23 »
+9
Thanks for the information Scott.

It seems to me that a lot depends on how frequently these comps are downloaded, Im well aware that RM agencies supply free comps for layout and evaluation purposes. Of course those companies are not also offering a companion subscription product that could be used as an alternative to giving free comps.

In your case I dont understand why the buyers who want comps are not required to also purchase a subscription. In that case they could download as many full sized images as they want for comp use and any other use they might want to make of those images in the future. In such a case the people whose images were only used for comp purposes would receive some compensation.

When agencies first started providing free comp images, it was usually pretty much guaranteed that once they showed the layout to the customer the image would eventually be licensed unless for some reason the whole project was killed.

It is my understanding that today when advertising agencies present their designs for a project they often present 5 or 6 different versions, using different images, to give the customer a choice. Customers love choice. Customers love to think they know more than the agency or designer about what will sell their product. In such situations everyone knows that many of the versions presented will never be used. They were created solely for the purpose of giving the customer options. From the photographers point of view those whose images are not eventually licensed are just helping the one whose image is licensed for free.

It is also generally believed that a high percentage of the images downloaded through subscriptions are never actually used in a project. They are used for comp purposes, or planning purposes, or sometimes just reside on a hard drive in case they might be of some use to the art director in the future. As far as I know no one has any idea what percentage of total downloads these images might represent because there is no tracking of uses.

The big question is the percentage of comp images given away for free compared to the number that are actually licensed. If 50% of the comp images that are downloaded are actually licensed for the big money you are talking about then maybe it is not a big issue. At least the people whose images were not used had a reasonable chance of making a big sale.

But, if only one out of 100 free comp images delivered actually result in a sale then it seems to me that a lot of photographers are being treated unfairly by allowing their images to be used for free without any reasonable chance of compensation.

I dont understand why you feel no need to compensate image creators when their images are downloaded for comp use. It would seem to me that once you make one of these big sales you could set aside a portion of that number to pay the $0.25 to $0.40 to all those whose images were used for comps on the project before you calculate the portion of the remainder that should be paid to the creator whose images was actually used. That use would not have existed if the comp images were not also available.

If, in fact, there is no end use in a significant percent of the cases where comp images are downloaded youve got a bigger problem.

According to my calculations if just a little over 50% of your 2013 revenue came from subscription then well over 90 million of your total 100 million downloads were subscription sales. The royalties may be small, but to the contributors the volume is very important. Another 7 million or more downloads probably came from Image On Demand sales leaving very few unit sales for enterprise and video. Jon Oringer says that enterprise may end up being 20% to 25% of your total revenue. The odds of making an enterprise sale are very long for the contributor. Rather than focusing on the chance of making enterprise sales most contributors will count on volume for their continued growth.

Shelma1

  • stockcoalition.org
« Reply #8 on: February 24, 2014, 11:42 »
+1
The reason ad agencies don't get stock subscriptions is because they don't pay for the images themselves...their clients do. The cost of licensing the image is included in the budget for the work being produced. Smaller graphic design shops may buy subscriptions, but the large agencies who negotiate the big extended licenses for their clients do not.

Ad agencies will simply go back to Getty and Corbis if you charge them for comp use or try to force them into a subscription. They can get access to images there for free.
« Last Edit: February 24, 2014, 11:48 by Shelma1 »

« Reply #9 on: February 24, 2014, 11:48 »
0
Are the free comps only for the "sensitive use" buyers?

Shelma1

  • stockcoalition.org
« Reply #10 on: February 24, 2014, 12:06 »
+1
No, they're for current employees of established ad agencies with active, real email addresses at the agency they work for, and the agency/employee has to be accepted by/have a prior agreement with the stock house. I don't know all the details because I'm a writer, not an art director. So I've never had that access. Only certain employees (art directors, studio managers, art buyers) do.

« Reply #11 on: February 24, 2014, 12:20 »
+2
The reason ad agencies don't get stock subscriptions is because they don't pay for the images themselves...their clients do. The cost of licensing the image is included in the budget for the work being produced. Smaller graphic design shops may buy subscriptions, but the large agencies who negotiate the big extended licenses for their clients do not.

Ad agencies will simply go back to Getty and Corbis if you charge them for comp use or try to force them into a subscription. They can get access to images there for free.

Well said.

I have to say I am perfectly relaxed about my images being used for comps in this way, especially when they result in a big sale __ they're always such a nice surprise! I trust SS to know the industry and understand the needs of their important clients.

« Reply #12 on: February 24, 2014, 13:34 »
+1
The practice goes back forever. I used to buy stock occasionally from stock agencies and they would send me a whack of transparencies. We paid for what we used (and returned the transparencies). It's the way the business operates and to not allow ad agencies to download comps would be counter productive.

« Reply #13 on: February 24, 2014, 15:05 »
+4
I'm not saying agencies shouldn't be allowed to download comps. But given that Shutterstock is primarily a subscription company, I think they should develop some way to compensate the contributors for every download instead of saying we'll compensate you for some downloads and not others.


« Reply #14 on: February 24, 2014, 15:10 »
+1
...But given that Shutterstock is primarily a subscription company...

I think that's an outdated view of them, especially when you consider revenue breakdown over the last year or so. About 40% of the revenue is coming from subs. I think you're seeing a transition into something other than just a low price subs agency.

I'm not concerned about unwatermarked comps as long as SS is keeping a watchful eye out for abuses of the system.

shudderstok

« Reply #15 on: February 24, 2014, 15:12 »
+1
The practice goes back forever. I used to buy stock occasionally from stock agencies and they would send me a whack of transparencies. We paid for what we used (and returned the transparencies). It's the way the business operates and to not allow ad agencies to download comps would be counter productive.

yes this practice does go back forever, but way back when your agency actually had people that worked with people, not some computer dealing with another computer and there were controls in place more or less. i think this practice is bad news. if i can give my clients a very low res image for layouts then so can SS. why not give them an image for layout purposes at 72dpi and 600 X 400 or tops 1200 X 800 saved at 50%, it's enough for layout and can't be used and if they want the image then they have to pay for it. lets not forget this practice way back when was managed much more so than today, and there is a prevention that seems SS is not applying.
this sounds like a total free for all if you ask me, absolutely no way to manage this free layout package.

« Reply #16 on: February 24, 2014, 15:18 »
0
The practice goes back forever. I used to buy stock occasionally from stock agencies and they would send me a whack of transparencies. We paid for what we used (and returned the transparencies). It's the way the business operates and to not allow ad agencies to download comps would be counter productive.

yes this practice does go back forever, but way back when your agency actually had people that worked with people, not some computer dealing with another computer and there were controls in place more or less. i think this practice is bad news. if i can give my clients a very low res image for layouts then so can SS. why not give them an image for layout purposes at 72dpi and 600 X 400 or tops 1200 X 800 saved at 50%, it's enough for layout and can't be used and if they want the image then they have to pay for it. lets not forget this practice way back when was managed much more so than today, and there is a prevention that seems SS is not applying.
this sounds like a total free for all if you ask me, absolutely no way to manage this free layout package.

I understand that when these 'special license' deals take place, with the bigger clients, then you do get "people working with people". That's partly why the prices are much higher, for the service the client receives.


Shelma1

  • stockcoalition.org
« Reply #17 on: February 24, 2014, 15:28 »
+3
The practice goes back forever. I used to buy stock occasionally from stock agencies and they would send me a whack of transparencies. We paid for what we used (and returned the transparencies). It's the way the business operates and to not allow ad agencies to download comps would be counter productive.

yes this practice does go back forever, but way back when your agency actually had people that worked with people, not some computer dealing with another computer and there were controls in place more or less. i think this practice is bad news. if i can give my clients a very low res image for layouts then so can SS. why not give them an image for layout purposes at 72dpi and 600 X 400 or tops 1200 X 800 saved at 50%, it's enough for layout and can't be used and if they want the image then they have to pay for it. lets not forget this practice way back when was managed much more so than today, and there is a prevention that seems SS is not applying.
this sounds like a total free for all if you ask me, absolutely no way to manage this free layout package.

Ad agencies have been using the Internet to search for/download for comps/etc. for years. Really, it's only new to Shutterstock. Anyone with images on Getty has had this option with their images for quite a while.

They only make this available to large, reputable companies. For example, when I worked at Young & Rubicam, art directors had access to these images, but when I worked at smaller shops with fewer than 100 people they did not.

why can't they use smaller images? The question is: why would they, when they can get large images from Getty? all this does is put Shutterstock (and our images) on the same playing field.

Shelma1

  • stockcoalition.org
« Reply #18 on: February 24, 2014, 15:30 »
+1
The practice goes back forever. I used to buy stock occasionally from stock agencies and they would send me a whack of transparencies. We paid for what we used (and returned the transparencies). It's the way the business operates and to not allow ad agencies to download comps would be counter productive.

yes this practice does go back forever, but way back when your agency actually had people that worked with people, not some computer dealing with another computer and there were controls in place more or less. i think this practice is bad news. if i can give my clients a very low res image for layouts then so can SS. why not give them an image for layout purposes at 72dpi and 600 X 400 or tops 1200 X 800 saved at 50%, it's enough for layout and can't be used and if they want the image then they have to pay for it. lets not forget this practice way back when was managed much more so than today, and there is a prevention that seems SS is not applying.
this sounds like a total free for all if you ask me, absolutely no way to manage this free layout package.

I understand that when these 'special license' deals take place, with the bigger clients, then you do get "people working with people". That's partly why the prices are much higher, for the service the client receives.

True. The art buyer gets on the phone with a rep and negotiates terms.

shudderstok

« Reply #19 on: February 24, 2014, 16:00 »
+1
The practice goes back forever. I used to buy stock occasionally from stock agencies and they would send me a whack of transparencies. We paid for what we used (and returned the transparencies). It's the way the business operates and to not allow ad agencies to download comps would be counter productive.

yes this practice does go back forever, but way back when your agency actually had people that worked with people, not some computer dealing with another computer and there were controls in place more or less. i think this practice is bad news. if i can give my clients a very low res image for layouts then so can SS. why not give them an image for layout purposes at 72dpi and 600 X 400 or tops 1200 X 800 saved at 50%, it's enough for layout and can't be used and if they want the image then they have to pay for it. lets not forget this practice way back when was managed much more so than today, and there is a prevention that seems SS is not applying.
this sounds like a total free for all if you ask me, absolutely no way to manage this free layout package.

Ad agencies have been using the Internet to search for/download for comps/etc. for years. Really, it's only new to Shutterstock. Anyone with images on Getty has had this option with their images for quite a while.

They only make this available to large, reputable companies. For example, when I worked at Young & Rubicam, art directors had access to these images, but when I worked at smaller shops with fewer than 100 people they did not.

why can't they use smaller images? The question is: why would they, when they can get large images from Getty? all this does is put Shutterstock (and our images) on the same playing field.

absolutely true, but i also think GI is established in controlling our work pro-actively. i know the difference in my statements are night and day. GI always shows who the client is, what the image was used for etc. IS and the micros just show you sold an image with almost no accountability.

« Reply #20 on: February 24, 2014, 16:41 »
+3
absolutely true, but i also think GI is established in controlling our work pro-actively. i know the difference in my statements are night and day. GI always shows who the client is, what the image was used for etc. IS and the micros just show you sold an image with almost no accountability.

Do GI provide that level of detail for RF sales ... or are you actually comparing RM sales on GI with RF sales everywhere else?

At least SS provide real-time data of sales (and a nice little map on where the sale occurred). I thought you had to wait several weeks or months to find out if you sold any images on GI today?

Anyway, I'd trust SS over GI all day long. GI's accounting systems are all over the place as we know from the multiple cock-ups and clawbacks at IS and the PP. They make you wait nearly 2 months to tell you what sales you made ... and then they get it completely wrong.

« Reply #21 on: February 25, 2014, 10:53 »
0
Jo Ann.  Is only 40% of Shutterstock's revenue coming from Subscriptions? A little over a year ago they said that in a conference call that 60% was from Subscriptions, but recently I've been hearing that it is "about 50/50." If the subscription business has really declined to 40% that a much more rapid transition to "Image On Demand" than I thought. In the recent conference call they said Enterprise was about 15% of revenue and Video about 5% to 6%. That would make Image On Demand 40% of the business. Does everyone agree that the way the revenue breaks down based on the royalty statements they are receiving?

Thanks for all your comments.

« Reply #22 on: February 25, 2014, 11:09 »
0
Jo Ann.  Is only 40% of Shutterstock's revenue coming from Subscriptions? A little over a year ago they said that in a conference call that 60% was from Subscriptions, but recently I've been hearing that it is "about 50/50." If the subscription business has really declined to 40% that a much more rapid transition to "Image On Demand" than I thought. In the recent conference call they said Enterprise was about 15% of revenue and Video about 5% to 6%. That would make Image On Demand 40% of the business. Does everyone agree that the way the revenue breaks down based on the royalty statements they are receiving?

Thanks for all your comments.

I can only look at my own numbers, and obviously if you're looking at number of downloads vs. $$ the picture is very different, but for me - and I think I've seen some other contributors posting here in the monthly sales threads showing similar numbers - it's been a pretty steady shift away from subscription revenue towards the SOD and OD category. But who posts here is a small subset of SS total contributors.

The other factor to consider is that I'm earning their top rate and the effect of the SOD/OD increase is greatest there. Also, I don't do video so I have no input there.

« Reply #23 on: March 01, 2014, 17:52 »
+4
I guess the real question is should comps be considered a use? You technically are using them to sell something to a client and make money. Is it really any different than making a Powerpoint presentation. At the end of the day, I'm sure nothing will change because they are used to getting comps for free, but it seems like they probably should be charged.

« Reply #24 on: March 01, 2014, 18:21 »
+4
I guess the real question is should comps be considered a use? You technically are using them to sell something to a client and make money. Is it really any different than making a Powerpoint presentation. At the end of the day, I'm sure nothing will change because they are used to getting comps for free, but it seems like they probably should be charged.

It's not even "technical" - these people are making money off of our photos even if they end up not being in the final product.  They're used for ideas, as sales tools, maybe even as models to be copied. They allow a project to be approved and work to begin.   And the agencies make money too, ina sense, because they tell customers that this wonderful free comp service comes as part of a subscription.

We only get paid for a "sale",  and the agency defines what constitues a "sale", and for any other uses, we get nothing.

It's just another way agencies have learned to profit from our work without paying royalties. 


 

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