There has been some discussion about this in this thread after Yuri supposed the amount to be under 20% and later Scott Braut from Shutterstock stepped in to correct him saying it was 25%-30%.  Scott's statement confused the matter a bit using the words 'in general' and talking about % net revenue, not gross.

For the record, the effective royalty rate we pay our contributors varies based on product type, customer usage, currency exchange rates and other factors.  In aggregate, it is generally in the range of 25%-30% of net revenue, not the 20% rate that was previously suggested.

Anyhow, I took a look at the IPO offering data again and took a good look at the numbers.

Shutterstock states the gross revenue for the last three years are as follows
2009 - 61.1M
2010 - 82.9M
2011 - 120.3M

As their income is the sale of our images, that is what I'll consider as the starting point of what they take in.. or what they sell our images for. 
The IPO doesn't state what they pay out in royalties.  The only hard number they provide is cost of revenue which includes royalties

Cost of Revenue.    Cost of revenue consists of royalties paid to contributors, credit card processing fees, image and video review costs, customer service expenses, the infrastructure costs related to maintaining our websites and associated employee compensation, facility costs and other supporting overhead costs. We expect that our cost of revenue will increase in absolute dollars in the foreseeable future as our revenue grows.

That's not accurate enough

What they DO however state, in hard facts - within a paragraph of text mind you is the increase in royalties year over year
2009 -> 2010 :

Contributor royalties increased by $6.7 million, or 41%

2010->2011 :

Royalties increased $10.8 million, or 47%

If we know the percent they increased and the amount they increased we can then know what the actual royalty payout figures were in those years.. and they are...
2009 - 16.3M
2010 - 23.3M
2011 - 33.8M

So if the gross revenue is divided by the royalties paid out, we get (on average)
2009 - 26.7 %
2010 - 27.7 %
2011 - 28 %

.. I guess Scott wasn't too far off after all

It looks like the royalty % was in the ballpark we always thought it was. Well most people thought it was a bit lower, because of the subs, for which they speculated that we get around 15% from.

I hope Yuri will chime in with his math. Although I find your calculations logical and in fact correct.

Great work Leaf. Of course those numbers are an average across all contributors. Contributors with sales over $10K (like Yuri for example) will actually enjoy significantly higher percentages than those. Yuri does have a habit of pulling numbers out of a hat and, because it is Yuri, people think it must be gospel ... so then another 'microstock myth' is perpetuated, forever to be re-quoted by newbies.

Leaf, I think you're over-thinking it.

From Page 10:




That leads us to an easy calculation



The next question is...at what level are the majority of the contributors?

edited: I added an average column to get average royalty % combined at all three levels

I think the problem with this calculation is that you also have to consider the extended licenses and on-demand purchases.
For extended licenses we are getting paid $28, their revenue per download (including all licensing types) is still $2.05 in 2011, so in that case (by your numbers) we are getting 1365% royalties.  Obviously that's not the case because of subscriptions but I don't think knowing the revenue per download tells us much about our royalties.

I should also point out, based on these numbers, there is absolutely no incentive for Shutterstock to allow contributors to grow their portfolio.

"Quality vs. Quantity"   

Yes, but keep in mind, we are dealing with averages.  At the lower level, how many EL's are you realistically getting?  Enough to boost that 12% royalty to 20%?  I don't think a reasonable person can make that assumption.  My guess would be closer to 15%

When the extended licenses payout 1000%+ according to your chart a few licenses go a long way.  From my numbers when comparing 25-a-day download to extended licenses,  I am getting about 15% extended licenses... or 1/6 of my earnings are from extended licenses

That said, I don't think my calculations were very complicated.  In the IPO they stated their gross income.  They stated the growth of the royalties paid out each year along with the %'s, from that one can easily figure out the actual royalties paid out each year, thus the % royalties paid out each year.

Quote from: Ed on August 23, 2012, 16:11

Yes, but keep in mind, we are dealing with averages.  At the lower level, how many EL's are you realistically getting?  Enough to boost that 12% royalty to 20%?  I don't think a reasonable person can make that assumption.  My guess would be closer to 15%

When the extended licenses payout 1000%+ according to your chart a few licenses go a long way.  From my numbers when comparing 25-a-day download to extended licenses,  I am getting about 15% extended licenses... or 1/6 of my earnings are from extended licenses

Leaf - that actually makes it worse. If 1/6 of all revenue is based on extended licenses (that would be 16.67% of ALL sales at an average of $2.05 per sale) that would mean that subscription sales actually bring contributors LESS on a percentage basis than what I indicate in my chart.

Think of it this way (playing devil's advocate)

If 1/6 of your portfolio is ELs, then you are earning less than the 16% average royalty (perhaps 11-12%) on 83% of the sales because 83% of your sales relate to subscriptions.

Think of it this way (playing devil's advocate)

If 1/6 of your portfolio is ELs, then you are earning less than the 16% average royalty (perhaps 11-12%) on 83% of the sales because 83% of your sales relate to subscriptions.

You're still wrong.
You can't take average sales prices and take them to compute royalty percentages of specific downloads.

If you knew the average sales price for subscription downloads (and I guess this number is not anywhere in the public documents) then you could calculate the average subscription royalty.

Quote from: leaf on August 23, 2012, 16:29

mine is 52 cents
so if you use dirkr's method and Ed's number method we get
52 cents per download / 2.05 rev. per download for SS
25% royalties for me

Shouldn't that be .52 divided by 2.57 or 20%?

They say that average file cost is under $3, so the maximum average they could pay a contributor is 30%. But, who has a $1 RPD on SS? The reality seems a lot closer to 20% with a $.50 RPD.

Quote from: leaf on August 23, 2012, 17:00

Where are you getting the 2.57 from?

It was $2.05 + your $.52 average RPD for the total cost of an average sale. I don't know what the average RPD is, but I can't imagine it is over 70 cents. Probably closer to 50 cents (maybe below).

The $0.52 is part of the $2.05, no need to add it.
SS states in their filing with the SEC (that Leaf has linked to in the opening post) that their average sales price per download in 2011 was $2,05. And out of this average we receive our royalties.

Quote from: cthoman on August 23, 2012, 17:05

Quote from: leaf on August 23, 2012, 17:00

Where are you getting the 2.57 from?

It was $2.05 + your $.52 average RPD for the total cost of an average sale. I don't know what the average RPD is, but I can't imagine it is over 70 cents. Probably closer to 50 cents (maybe below).

The $0.52 is part of the $2.05, no need to add it.
SS states in their filing with the SEC (that Leaf has linked to in the opening post) that their average sales price per download in 2011 was $2,05. And out of this average we receive our royalties.

Agreed.

I'll try and state what I originally said a bit clearer.
In the IPO they clearly stated that
 * Gross revenue in 2011 was 120.3 million
 * Gross royalties paid to artists in 2011 was 33.8 million

I'm not sure how you can twist the numbers to say anything other than a 28% overall payout.  Even if you have a different way of calculating the figures, what is wrong with this method?

I'll try and state what I originally said a bit clearer.
In the IPO they clearly stated that
 * Gross revenue in 2011 was 120.3 million
 * Gross royalties paid to artists in 2011 was 33.8 million

I'm not sure how you can twist the numbers to say anything other than a 28% overall payout.  Even if you have a different way of calculating the figures, what is wrong with this method?

Because artists get a portion of the "cost of revenue" (reported as 45.5 Million) not gross revenue.  I suspect the difference in gross royalties paid of 11.7 million relates to whatever the reviewers earn from reviewing images as well as other components of that number that we don't know about.

Edited for clarity: Gross revenue can include much more than what they are selling for images.  We don't know if they are subleasing office space, we don't know what their revenue is on exchange rates, we don't know what their affiliate agreements state (or if the affiliates pay a franchise fee of sorts).  Additionally, you have to understand that this includes BigStock.

  "Shutterstock," "Bigstock" and "Big Stock Photo" are registered trademarks or logos appearing in this prospectus and are the property of Shutterstock, Inc. or one of our subsidiaries. All other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners.