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Author Topic: Shutterstock Q3 financials: revenue up but profits down  (Read 2733 times)

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« on: October 27, 2021, 17:53 »
+13
On Tuesday, Shutterstock announced their Q3 results and on several measures beat Wall Street's estimates. Stock ended up for the day. Today (Wednesday) there was some sort of anxiety and the shares ended at 117.44 (-$6.87  or 5.53%). In general, management's actions have kept Wall Street happy and that's still much higher than a year ago.

https://investor.shutterstock.com/static-files/086ac986-a1de-4ef2-bf06-3c177314a566
https://investor.shutterstock.com/news-releases/news-release-details/shutterstock-reports-third-quarter-2021-financial-results
https://www.fool.com/earnings/call-transcripts/2021/10/26/shutterstock-inc-sstk-q3-2021-earnings-call-transc/

Shutterstock didn't include PicMonkey's numbers yet.

The Enterprise Channel has apparently risen from the grave and grew by 17% ("... bookings momentum and great performance at Shutterstock Studios"). They noted increase sales commissions to go with the Enterprise growth.

Gross margin improved by another 0.7% - they noted a gradual return to paid downloads but said it didn't impact their gross margins (I assume because of the lower minimum royalties, but they didn't say why).

They changed their guidance for the end-of-year numbers including this comment "Revenue of $765 million to $770 million representing 14.75% to 15.5% annual revenue growth. ...annual margin expansion of 100 to 150 basis points above our previously provided range of 100 basis points of annual margin expansion."

Any time they talk about increasing gross margins by 1% to 1.5%, contributors should look out for reduced royalties - contributors are the cost of goods and thus need to be shrunk :)

They now have a FLEX subscription on the web site - think cut price on-demand packages (but you have to be careful to cancel as it will renew each month if not). You get 25 points per month - Images are 1, Videos are 8 and Music is 4. With no annual commitment, an image costs a buyer $2.76, versus $9.80 for an on-demand product. Not sure how a video for $22.08 will appeal to video contributors - compare that to $71.80 for an HD clip or $119 for 4K (with subscription).

From their support page, "FLEX 25 comes with no restrictions on image size or footage resolution, however, it currently excludes Select footage and PremiumBeat."

There was lots of frothiness about Creative Flow and its components - Shutterstock.AI...blah, blah...content organization...blah, blah...create and collaborate. Also larger and faster-growing TAMs (total addressable markets) including "... the $8 billion TAM for creative applications". They want to transform Shutterstock "...we should be able to accelerate our growth beyond the stock content market segment"

In the earnings call, questions were about slowdown of the growth rate and Stan deflected with some words about their data business to "... generate a pipeline around image recognition and data products, particularly for platforms that are building artificial intelligence models".

A question about Creative Flow was what users were asking for and how did this compare to competitors. Stan Pavolovsky's answer is primo content free corporate speak:

"So, if you can take millions of pieces of content and take that down to a handful based on recommendations, tied to our first-party data, that's an incredible win for our customers. And so the acquisitions we did as part of Shutterstock. AI in addition to our existing image recognition data is allowing us to launch these products with the recommendations, with content recommendations. And so that's really the kind of what we call the secret sauce to how we're transforming the company. But effectively. It's, we are moving into our customers' workflows with tools centered around storage, centered around planning, centered around image our editing, but we're doing it all with recommendations upfront."

They were asked about the new FLEX subscriptions and how those have performed and why introduce more. The CFO said that they were seeing increased "wallet share" especially from enterprise customers.

Another question was whether any of the other market "headwinds" - advertising, supply chain, etc. - were affecting Shutterstock's markets. CFO said not really.

And I've done a Q3 chart showing changes from a contributor perspective. Overall downloads are still down (they report them as up because they're comparing to Q3 2020, not all time) and royalties down on an all-time basis, but up 0.1% compared to Q2 2021. But compared to Q3 2020, even though the revenue per download rose nearly 11%, contributors' share (royalties) declined by 0.02%
« Last Edit: October 27, 2021, 17:56 by Jo Ann Snover »


« Reply #1 on: October 27, 2021, 19:45 »
+1
Interesting:

* Image library of approximately 390 million images.
* Footage library of approximately 23 million footage clips.
* More than 1.9 million contributors made their images, footage clips and music tracks available on
Shutterstocks platform, compared to over 1.5 million in the prior year

« Reply #2 on: October 27, 2021, 20:08 »
+2
Thanks for the report and analysis. It looks like they took a much bigger slice starting last year. I guess that is no surprise to contributors. I wonder if the % they take will go up in Q1 and then slowly drop through Q4 before jumping back up again or if it isn't that obvious.

I wonder if they are counting me in their 1.9 million contributors even though my port is turned off. I guess I am still contributing to their AI image learning stuff. Too bad we get nothing for that.

« Reply #3 on: October 28, 2021, 02:42 »
+3
On Tuesday, Shutterstock announced their Q3 results and on several measures beat Wall Street's estimates. Stock ended up for the day. Today (Wednesday) there was some sort of anxiety and the shares ended at 117.44 (-$6.87  or 5.53%). In general, management's actions have kept Wall Street happy and that's still much higher than a year ago.

https://investor.shutterstock.com/static-files/086ac986-a1de-4ef2-bf06-3c177314a566
https://investor.shutterstock.com/news-releases/news-release-details/shutterstock-reports-third-quarter-2021-financial-results
https://www.fool.com/earnings/call-transcripts/2021/10/26/shutterstock-inc-sstk-q3-2021-earnings-call-transc/

Shutterstock didn't include PicMonkey's numbers yet.

The Enterprise Channel has apparently risen from the grave and grew by 17% ("... bookings momentum and great performance at Shutterstock Studios"). They noted increase sales commissions to go with the Enterprise growth.

Gross margin improved by another 0.7% - they noted a gradual return to paid downloads but said it didn't impact their gross margins (I assume because of the lower minimum royalties, but they didn't say why).

They changed their guidance for the end-of-year numbers including this comment "Revenue of $765 million to $770 million representing 14.75% to 15.5% annual revenue growth. ...annual margin expansion of 100 to 150 basis points above our previously provided range of 100 basis points of annual margin expansion."

Any time they talk about increasing gross margins by 1% to 1.5%, contributors should look out for reduced royalties - contributors are the cost of goods and thus need to be shrunk :)

They now have a FLEX subscription on the web site - think cut price on-demand packages (but you have to be careful to cancel as it will renew each month if not). You get 25 points per month - Images are 1, Videos are 8 and Music is 4. With no annual commitment, an image costs a buyer $2.76, versus $9.80 for an on-demand product. Not sure how a video for $22.08 will appeal to video contributors - compare that to $71.80 for an HD clip or $119 for 4K (with subscription).

From their support page, "FLEX 25 comes with no restrictions on image size or footage resolution, however, it currently excludes Select footage and PremiumBeat."

There was lots of frothiness about Creative Flow and its components - Shutterstock.AI...blah, blah...content organization...blah, blah...create and collaborate. Also larger and faster-growing TAMs (total addressable markets) including "... the $8 billion TAM for creative applications". They want to transform Shutterstock "...we should be able to accelerate our growth beyond the stock content market segment"

In the earnings call, questions were about slowdown of the growth rate and Stan deflected with some words about their data business to "... generate a pipeline around image recognition and data products, particularly for platforms that are building artificial intelligence models".

A question about Creative Flow was what users were asking for and how did this compare to competitors. Stan Pavolovsky's answer is primo content free corporate speak:

"So, if you can take millions of pieces of content and take that down to a handful based on recommendations, tied to our first-party data, that's an incredible win for our customers. And so the acquisitions we did as part of Shutterstock. AI in addition to our existing image recognition data is allowing us to launch these products with the recommendations, with content recommendations. And so that's really the kind of what we call the secret sauce to how we're transforming the company. But effectively. It's, we are moving into our customers' workflows with tools centered around storage, centered around planning, centered around image our editing, but we're doing it all with recommendations upfront."

They were asked about the new FLEX subscriptions and how those have performed and why introduce more. The CFO said that they were seeing increased "wallet share" especially from enterprise customers.

Another question was whether any of the other market "headwinds" - advertising, supply chain, etc. - were affecting Shutterstock's markets. CFO said not really.

And I've done a Q3 chart showing changes from a contributor perspective. Overall downloads are still down (they report them as up because they're comparing to Q3 2020, not all time) and royalties down on an all-time basis, but up 0.1% compared to Q2 2021. But compared to Q3 2020, even though the revenue per download rose nearly 11%, contributors' share (royalties) declined by 0.02%

One of the main arguments why shutterstock introduced a new revenue structure was the alleged pressure on the industry as a whole from free image agencies like unsplash, pexels...

Nevertheless, the number of paid downloads has grown.

If you look at the revenue per download, you can see very quickly what it was all about. Which brings us back to shareholder profit - paid by the contributors.

« Reply #4 on: October 28, 2021, 03:22 »
+2
Which brings us back to shareholder profit - paid by the contributors.
The moral is, every Shutterstock contributor should also be a shareholder  ;)

« Reply #5 on: October 28, 2021, 05:46 »
+4
Thank you for your very detailed report. SS growth is slowing down. it is happening quicker than I thought. Next quarters will be interesting. Many contributors have exited the place and their content is selling at competitors. I thought they would start the decline in 3 to 4 years. seeing this numbers it might be less than a year that they will fall from leadership . At that time Mr Oringer might have sold all of his shares. He made a great move for himself , those that stayed at SS made a bad one with dwindling sales that could get them much more on other sites.

« Reply #6 on: October 28, 2021, 08:02 »
+2
Yet, almost two million folks, including myself, still feed them thus paying for their fancy cars, yachts and mansions...

H2O

« Reply #7 on: October 28, 2021, 09:42 »
+6
As soon as you get shareholders involved in any company where the business model is a co-operative model, you can kiss goodbye to being paid fairly.

I know Shutterstock was never set up as this model, but in effect, that's what it is and this is the same across the microstock market.

The reality is, they along with Getty/iStock, 123RF, DepsitPhotos have all operated this model, they are like 18th Century Mill Owners in the UK, once they had bought production in house, they consistently cut the wages of the employees, until they were dirt poor, while they lived in wacking great mansions.

Even when they went on strike these were broken up by the local militias; and no unions, in many ways this is very similar to today, except they use regressive imposed at will contracts.

The avarice of those who believe they are clever running these companies to the detriment of the artists is something that should be legislated against.

I'm not sure how this should be done, to make it fair across the board, but it does seem to me that the shareholder model is severely broken.

The other problem is of course that the size of the microstock market flies under the radar for most Governments, it's the large Tech Companies that draw all the attention, and lets face it most of these companies working practices are appalling and in some cases slave labour.

Personally, I believe that Shutterstock along with Getty in the long run are finished, talent always votes with it's feet.

« Reply #8 on: October 28, 2021, 11:44 »
+2
Many contributors have exited the place and their content is selling at competitors.
The competitors didn't sell my photos very well. Anyway personally I slowed down the pace of taking and uploading photos. Every time I want to take a photo, I think about 10 cents that I will probably get for it. :(

« Reply #9 on: October 28, 2021, 11:46 »
+7
What we have is a commodity market. 1.6 million contributors chasing 2 million customers and competing in a world where some suppliers are providing free product. Any commodity market is about volume and low margins. It doesn't matter if you are a private company or a public one. If you aren't making money then that's a problem and revenue without profit is unsustainable.

From my reading of the results, Shutterstock is desperately looking for ways to tweak the product cycle and improve margins. That explains the big focus on AI. If customers are going to be persuaded to pay for product when there is a bunch of free stuff on the market then there has to be added value and that comes from everything they put around the images and video. The better that package is then the more they can charge.

Paying the contributors less is obviously another way of improving margins, however, they have already done that once and they need to be careful not to kill the supply of product by doing it again and again. Many, if not most, contributors could probably walk away if they had to.

In my case, stock is a very small part of my income. I like the money but I don't do it for the money. I do it for other reasons and that works for me. The financial aspect is not going to get better for the vast majority of contributors and if that is the main reason people do it then they need to start looking elsewhere.

« Reply #10 on: October 28, 2021, 12:01 »
+4
So basically, take the 10 cents you make from your picture and put it into Shutter Stock. It may become 13 cents in a year. Hurray I guess.

« Reply #11 on: October 28, 2021, 13:01 »
+4
1.6 million contributors
How many of 1.6 million contributors are contributors with just one photo like this one https://www.shutterstock.com/g/Silvina+Andrea+Cupayolo It would be interesting to know how many active contributors on SS.

« Reply #12 on: October 28, 2021, 15:01 »
+1
1.6 million contributors
How many of 1.6 million contributors are contributors with just one photo like this one https://www.shutterstock.com/g/Silvina+Andrea+Cupayolo It would be interesting to know how many active contributors on SS.

They want to promote we have the biggest inventory and the most contributors thus we are best in the business mindset...

« Reply #13 on: November 02, 2021, 21:31 »
+2
As soon as you get shareholders involved in any company where the business model is a co-operative model, you can kiss goodbye to being paid fairly.

I know Shutterstock was never set up as this model, but in effect, that's what it is and this is the same across the microstock market.

The reality is, they along with Getty/iStock, 123RF, DepsitPhotos have all operated this model, they are like 18th Century Mill Owners in the UK, once they had bought production in house, they consistently cut the wages of the employees, until they were dirt poor, while they lived in wacking great mansions.

Even when they went on strike these were broken up by the local militias; and no unions, in many ways this is very similar to today, except they use regressive imposed at will contracts.

The avarice of those who believe they are clever running these companies to the detriment of the artists is something that should be legislated against.

I'm not sure how this should be done, to make it fair across the board, but it does seem to me that the shareholder model is severely broken.

The other problem is of course that the size of the microstock market flies under the radar for most Governments, it's the large Tech Companies that draw all the attention, and lets face it most of these companies working practices are appalling and in some cases slave labour.

Personally, I believe that Shutterstock along with Getty in the long run are finished, talent always votes with it's feet.

Agreed. my thoughts exactly. If they were as important as amazon they'd never get away with paying so badly. Even contributors from developing countries protested about the new2 low rates. In my country we would lobby our MPs but I guess you cannot do that in America because the politicians are somehow supported by tech companies Totaly corrupt and should be illegal.

« Reply #14 on: November 03, 2021, 04:11 »
+6

 If they were as important as amazon they'd never get away with paying so badly.

Amazon is known for paying their employees extremely poorly.

« Reply #15 on: November 03, 2021, 08:20 »
+6
Contributors are not employees.
They're non-exclusive suppliers and can walk away at any time.
All this talk of writing to politicians and unions is rubbish - the truth is as a supplier its entirely your choice whether to accept the terms or not.

« Reply #16 on: November 03, 2021, 08:29 »
0
Ever since Ronald Reagan the Union's have lost their power.


Uncle Pete

  • Great Place by a Great Lake - My Home Port
« Reply #17 on: November 03, 2021, 10:46 »
+1
Contributors are not employees.
They're non-exclusive suppliers and can walk away at any time.
All this talk of writing to politicians and unions is rubbish - the truth is as a supplier its entirely your choice whether to accept the terms or not.

Good Luck, I've never had success trying to explain these facts to people. Microstock, is not a charity or welfare agency.

Anyone who wants, can leave and do something else, if they don't like the system or the payments, or some other part of the business. I don't like the amounts, earnings or percentages I get from stock photos, but I choose to do what I want, and that means only I decided to continue.

"The first nationally known union busting agency was Labor Relations Associates of Chicago, Inc. (LRA) founded in 1939 by Nathan Shefferman." By the way, From 1960 to 2000 the percentage of workers in the United States belonging to a labor union fell from 30% to 13%. Please note the dates, it's not poor old dead Ronald who did this when he wanted the airlines to be able to fly. The air controllers strike would paralyze the country, business, and harm everyone.

"The cause for American jobs sent abroad isnt just corporate leaders who didnt know what they were doing. It was Big Labor, too, which turned companies into a welfare agency." Unions, regulations, and bad corporate decisions. Talk about what killed American industrial companies.

Restated, it was Unions demanding higher wages, Politics and meddling by the government, and bad business management. All three had a significant part in the fall, driving business offshore, not just one of them.



« Reply #18 on: November 03, 2021, 12:00 »
+1
"The cause for American jobs sent abroad isnt just corporate leaders who didnt know what they were doing. It was Big Labor, too, which turned companies into a welfare agency." Unions, regulations, and bad corporate decisions. Talk about what killed American industrial companies.

Restated, it was Unions demanding higher wages, Politics and meddling by the government, and bad business management. All three had a significant part in the fall, driving business offshore, not just one of them.



Exactly.
Unions are making hard, if not impossible, for newcomers to compete against union members on the job market.

Unions are denying young people the choice and the chance to gain the experience necessary for their carrier growth. Instead, these people are increasing the ranks of the unemployed.
This is a selfish attitude synonym with "f.u and keep your hands off my stack".

Unions are a powerful lobby, working hand in hand with the politicians who are willing to trade union votes against a union pseudo-monopoly on the job market.

From this point of view, there is no difference between an union and a corporation lobbying politicians for favorable regulations. Only the lobbied party is different.
« Last Edit: November 03, 2021, 12:09 by Zero Talent »

« Reply #19 on: November 03, 2021, 13:07 »
+3
"The cause for American jobs sent abroad isnt just corporate leaders who didnt know what they were doing. It was Big Labor, too, which turned companies into a welfare agency." Unions, regulations, and bad corporate decisions. Talk about what killed American industrial companies.

Restated, it was Unions demanding higher wages, Politics and meddling by the government, and bad business management. All three had a significant part in the fall, driving business offshore, not just one of them.



Exactly.
Unions are making hard, if not impossible, for newcomers to compete against union members on the job market.

Unions are denying young people the choice and the chance to gain the experience necessary for their carrier growth. Instead, these people are increasing the ranks of the unemployed.
This is a selfish attitude synonym with "f.u and keep your hands off my stack".

Unions are a powerful lobby, working hand in hand with the politicians who are willing to trade union votes against a union pseudo-monopoly on the job market.

From this point of view, there is no difference between an union and a corporation lobbying politicians for favorable regulations. Only the lobbied party is different.

It never goes well because of human flaws. If you study the industrial revolution in the 18th century in the Netherlands, you see the end of working from home, very poor working conditions in industry, abject poverty, child labor for very young children. During that time, the first Socialist parties and later trade unions arose and living conditions improved.
If you give big companies, rich people complete freedom, things often go wrong. Taxes are avoided, employees are poorly paid etc.
If you give trade unions too much power, things often go wrong too. Some kind of balance is best.
In the Netherlands you have consultations between the representation of employers and the representation of employees (trade unions). Not always perfect, but the least bad solution I think.
We are indeed not employees. And as long as we are so many, offer so many products and actually compete against each other, our wages will of course not go up.
« Last Edit: November 03, 2021, 13:12 by thijsdegraaf »

« Reply #20 on: November 03, 2021, 13:21 »
0
It never goes well because of human flaws. If you study the industrial revolution in the 18th century in the Netherlands, you see the end of working from home, very poor working conditions in industry, abject poverty, child labor for very young children. During that time, the first Socialist parties and later trade unions arose and living conditions improved.


Actually, that's a well-known fallacy and a speaking point repeated ad-nauseam by Marxists and Neo-Marxists, who only look at the world through a class-warfare lens.

Marx himself wrote that in Das Kapital. But he used 30 years-old data to "prove" his point, forgetting to mention that when he was writing that, the working conditions were significantly better than what he described in his "masterpiece".

The fact is that the working conditions got better because of competition, not necessarily because of unions.
Company owners simply realized that it's more expensive to replace and train new employees than to improve working conditions.

Unions, very much like all other (pseudo)-monopolies, are blocking the competition, the progress, and the prosperity of the masses.

That's very much valid today as it was valid 2 centuries ago.
« Last Edit: November 03, 2021, 13:30 by Zero Talent »

« Reply #21 on: November 03, 2021, 13:36 »
+2
You look at the unions in your own country I think.
In the Netherlands, the power is less great. Trade unions and employers' organizations often come to the government with joint advice.
Like I said, not everything is perfect. But a consultative body for both parties is not bad in itself.

Capitalism has drawbacks, socialism has drawbacks.
What you write about Marx is indeed correct, but that is no reason not to want to learn from history.
« Last Edit: November 03, 2021, 13:43 by thijsdegraaf »

« Reply #22 on: November 03, 2021, 13:42 »
+1
You look at the unions in your own country I think.
In the Netherlands, the power is less great. Trade unions and employers' organizations often come to the government with joint advice.
Like I said, not everything is perfect. But a consultative body for both parties is not bad in itself.

Don't get me wrong. I am not necessarily against Unions, but rather against the Unions being in bed with politicians and lobbying for regulations meant to weaken the labor market competition, in exchange for votes.
« Last Edit: November 03, 2021, 13:49 by Zero Talent »

« Reply #23 on: November 03, 2021, 13:48 »
+1
It is not at all mandatory to be a member in the Netherlands.
When I worked in construction as a technical draftsman, I was not a member.
When I became a teacher, I did sign up as a member, because at that time there was a lot of cutbacks in education. But that too was voluntary. I think half of my colleagues were not members.

« Reply #24 on: November 03, 2021, 13:52 »
0
No, it is not at all mandatory to be a member in the Netherlands.
When I worked in construction as a technical draftsman, I was not a member.
When I became a teacher, I did sign up as a member, because at that time there was a lot of cutbacks in education. But that too was voluntary. I think half of my colleagues were not members.

Yes, I mixed that up. Being a Union member is not mandatory in The Netherlands, indeed (hence my edit, while you replied).
Correct me if I'm wrong (again), but companies above a certain size are mandated to host a union (works council) and grant union leaders special status.
« Last Edit: November 03, 2021, 13:58 by Zero Talent »


 

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