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Why Photodisc is a Deadbeat
Posted By Jim Pickerell On July 25, 2007 @ 4:17 am In Legal Matters | 1 Comment
A number of Photodisc  photographers have become increasingly upset at the non-payment of royalties for almost two years — and Getty is in a legal situation where it can’t do much to resolve the problem. A little history is important here.
When PhotoDisc, Inc. started back in the early 1990s, the owners went to the Seattle-based stock agency Weststock to get some of the early images they used in their product. Weststock had a large stable of photographers who had been offering their images to customers on a RM basis. The owners of Weststock — Rick Groman and Mark Karras — went to their photographers, told them about this new opportunity to sell images on disk, and asked if they would let some of their images be used in this way.
Some photographers said they didn’t want any part of this business model, but a number agreed to produce images that Weststock could supply to Photodisc. By contract, Photodisc would pay Weststock a royalty on each disc sold, and Weststock would pay the photographers a percentage of what they received.
Everything went along fine for several years as Photodisc grew, Getty Images purchased them , and Getty was now the company paying Weststock. Photographers continued to receive monthly royalty checks. Then in 2000, Weststock was sold to Sheldon Marshall’s GlobalState Holdings. As a result, Getty was required to pay future Photodisc revenues to Global State, and it became GlobalState’s responsibility to pay the photographers their royalties. For a while everything continued to move along smoothly, and the photographers continued to be paid.
GlobalState, also known as Convergence, had three divisions: ImageState, VideoState and MusicState. Marshall’s partners eventually became dissatisfied with his management, threw him out and renamed the company ImageState . Getty was now obligated to send the royalties generated by the sale of Photodisc images to ImageState. The photographers continued to receive payments, but often not in the timely manner their contracts stipulated.
The new operators of ImageState continued to have problems; they plowed huge amounts of cash into the company to try to upgrade technology and make the company competitive with the industry leaders. Despite these efforts, ImageState began to fall deeper into debt. As the debt mounted, payments to the image creators became much more erratic; presumably, the little money coming in was being used to keep the doors open. Meanwhile, Getty Images continued to pay the Photodisc royalties to ImageState on a regular monthly basis as required by contract.
In spring 2006, ImageState filed for bankruptcy, and Sheldon Marshall re-entered the picture . At this point Sheldon is executive chairman of Heritage Partners. His company acquired the assets and brand of ImageState. From what we can determine, he has taken over no portion of the royalties that Getty has been regularly paying to ImageState, which have been shared with the photographers who created the images.
Many photographers say they have not received any payments from Photodisc for more than two years. Their images are still on Gettyimages.com and on CDs that Getty is marketing. Many of these images were very good sellers for a number of years, and it seems highly unlikely that all sales would instantly stop, but the photographers have absolutely no way of knowing which images, if any, have been licensed. Getty knows, but can’t tell, given the terms in its contracts with Weststock/GlobalState Holding/ImageState. Sheldon Marshall is not telling.
The royalty share that photographers agreed to way back in the 1990s was very low and helped establish the precedent for the 20 percent share of RF sales that is the industry standard today. Part of the argument back then was that Photodisc had huge production and marketing costs, and thus could not afford to pay the traditional 50 percent to the image creators.
Over the years, the cost argument changed quite a bit when the RF people started selling images online, much of the hard goods cost was eliminated, and the massive mailings of CD catalogs were no longer needed to generate sales. Online search and delivery became the overwhelmingly preferred way for customers to buy RF images. Nevertheless, the standard share to the image creator remained the same.
On the other hand, even 20 percent is better than 0 percent, which is what some Photodisc photographers are getting today.
[tags]Getty Images, Photodisc, ImageState, Jim Pickerell[/tags]
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 Photodisc: http://creative.gettyimages.com/source/frontdoor/DefaultRFImages.aspx?brandID=2
 Getty Images purchased them: http://www.businessweek.com/bwdaily/dnflash/september/nf70917b.htm
 ImageState: http://www.imagestate.com/AboutUs/AboutUs.aspx?sect=1
 Sheldon Marshall re-entered the picture: http://www.abouttheimage.com/2006/05/sheldon_marshall_returns_to_imagestate.html
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