After reading about Shutterstock’s IPO plans on APhotoEditor , a comment in the ASMPstock Yahoo group caught my attention. Member Stephen Walker posted:
Do I read this correctly to say that micro and traditional RM, RF are growing at a pretty good clip? Micro more so!
I am back in college now finishing my Business and Commerce degree and have become fascinated with personal business models. Photographers can choose to participate in the current market conditions with a new business model of a mix of micro and traditional RM, RF OR complain on how it used to be. I see these numbers as a strong indicator of growth and positive for stock shooters (emphasis mine).
The crowd sourcing of the micro world is weeding itself out and as always the good shooters rise to the top. Micro is about high-quality, high-quantity shooting. That is not for all shooters. In this model you’ll make your money in volume. Traditional is all about high quality and production. Your choice!
The Wrong Conclusion
In my opinion, Walker has come to exactly the wrong conclusion. First, a big part of the APhotoEditor report was pulled from the mention of a BBC Research report in the Shutterstock S-1 filing with the SEC. That report, prepared in 2008, predicted that the size of the market for stock photography would exceed $5 billion in 2013. I’m not sure where they got their numbers, but I think they have no basis whatsoever in reality.
I estimate that the worldwide market for still images and illustration in 2011 was $1.445 billion. Put stills and video together, and I think they will be less than $2 billion at the end of 2012. (Read my story on the Stock Photo Market Size  to see how I got to those numbers.)
Yes, the revenue generated by microstock is growing compared to the higher-priced rights-managed (RM) and royalty-free (RF) images. Much of that growth is due to microstock providers raising their prices, not because they are selling more images.
Shutterstock Raised Prices to Grow
Shutterstock had a lot of growth in unit sales in 2011, but a good part of that was because it was taking market share from its competitors. iStockphoto’s unit sales dropped. iStock grew revenue because more of its sales were from images in its higher-priced brands, but many of those uses are now more expensive than RM. So how much more can iStock raise prices?
Shutterstock generated 58 million downloads of its images in 2011. Sounds like a lot of demand. These downloads generated $120.3 million in revenue. That averages out to $2.07 per image downloaded. (Shutterstock managed to round this number to $3.00 in its S-1. New math?) Shutterstock has 35,000 contributors. So, on average, the annual gross sales of a contributor’s images is $3,429.
Shutterstock doesn’t tell us the royalty percentage they pay contributors, but my estimate is that it is around 20 percent or a little lower. Thus, a contributor would earn, on average, under $700 per year and have 543 images in the collection. Of course some of the top producers who concentrate on shooting subject matter that is in very high demand — and do it very well — earn much more than this.
Success in Microstock
I have been able to identify a number of the top microstock sellers. I believe that today there are more microstock contributors who earn in excess of $100,000 annually than any who earn this amount producing RM or traditional RF. Many who are successful at microstock are production companies, not individuals working alone.
Anyone who knows anything about microstock has heard of Yuri Arcurs. Yuri has images with everyone. He recently launched his own site — PeopleImages.com  — and earns in excess of $4 million a year. But, Yuri has a staff of more than 100 and huge overhead on top of that. Are there individuals ready to compete at this level?
It is also interesting that more than 350,000 photographers and illustrators have applied to Shutterstock to become contributors. Only one out of every ten has been accepted, and the requirements to become an approved contributor are becoming tighter and tighter.
Legally Licensed Use
People keep saying that more and more images are being used on the Internet, and therefore, demand will continue to grow. But, is this increased usage by paying customers, by individuals taking their own pictures, or by people who are stealing images?
PicScout  offers a service to search professional sites for images and compare them with the databases of image distributors to determine if each use was legally licensed. PicScout reports that 85% of the images it finds were either never licensed or are being used beyond the terms allowed in the license.
I estimate that in 2011, between 125 and 150 million images worldwide were legally licensed for use. A little over 1% of those were licensed as RM. Approximately 2% were licensed at traditional RF prices, and the rest came from microstock companies.
Overall, in the last couple of years, there has been very little growth in the number of images licensed. Companies like Shutterstock have seen a big jump in units licensed. But such increases are mostly at the expense of other companies, which either go out of business or see sales declines, rather than due to growth in total images licensed.
In 2007, Getty Images earned $560 million from its Creative Stills collection (RM and traditional RF). Based on gross revenue figures released recently , I estimate that this division generated about $200 million in 2011.
Lessons in Supply and Demand
And yet the number of images that photographers continue to produce and make available for licensing grows at an astronomical rate. So, as a business major, Stephen Walker should ask himself if it makes sense to train for a profession where:
- There is a huge oversupply compared to demand
- The microstock business has matured, and overall demand is growing at a very slow pace
- There is absolutely no way to control the supply
- Supply will continue to grow unabated regardless of demand
- The prices customers are willing to pay for the product will continue to decline as it becomes easier for customers to find a cheaper substitute that will satisfy their needs just as well
- Distributors take the lion’s share of revenue generated, and the contributor’s share keeps decreasing
Taking a Hard Look at Stock
This is not complaining about how it used to be. It is about taking a hard look at the potential for earning a living as a photographer. If photography is just your hobby, fine. Have fun. You’ll make a little money. If you support yourself in some other way, and are just looking for a fun way to earn some extra income in your spare time, great.
But if you are looking for a way to support yourself, think carefully. Sure, there will be a few people who do very well, but it likely will be because they are very smart, with great business skills and a lot of luck, rather than due to the quality of their photography. And even then, the odds are against them.
In the future, those who want a career in photography should look for staff positions (few and far between) or assignment work where they are guaranteed a fee up front for the work they produce. Think of stock as entertainment and a supplemental income.