The supply of stock photography knows no limits! Today’s stock agencies offer huge image libraries and grow ferociously each month. Is stock photography becoming a commoditized product? What can photographers learn from other commoditized industries and be more successful?

At Stock Performer, we talk about this regularly with our users and we wanted to contribute to the conversation. This article aims to explore the commoditization of stock photography and compare it with other commoditized industries. Such comparisons help photographers generate revenue in today’s highly competitive market.

What is commoditization?

Let’s start off by looking at The Business Dictionary’s definition of Commoditization

Almost total lack of meaningful differentiation in the manufactured goods.

Commoditized products have thin margins and are sold on the basis of price and not brand.

This situation is characterized by standardized, ever cheaper, and common technology that invites more suppliers who lower the prices even further.

 The Business Dictionary (link)

Basically, a commoditized product is an oversupplied product which is difficult to distinguish from another in its category, thus pushing prices down. Think of all the isolated portraits on white! Or business people group pictures! Handshakes anybody!?

Cereal is a great example of a commodity product. There is very little difference between producers. Copyright Alexey Ivanov

Is stock photography commoditized?

From the definition above, it seems so. But let us look what some business leaders in the industry have to say:

Content is increasingly ubiquitous. So power resides with the consumer, not the provider.

Jonathan Klein, CEO of Getty Images (2007) (link)

We’re seeing a commoditisation of the market

 Gary Shenk, CEO of Corbis, said in an interview with BJP (2009) (link)

Photographers need to understand that the stock photography market is flooded

Phyllis Giarnese, Stock Photography consultant and former creative director at Getty Images (2009) (link)

As of today, the main agencies have millions of files on offer. Supply is very high. Here is an overview:

Ask yourself: what differentiates images on sale at one agency compared to those on sale at others? Especially considering that many of those images are identical due to non-exclusivity?

Based on these quotes and information one can safely conclude that the Stock photography market is commoditized.

What other industries are commoditized?

For our article we explored the following three industries: Smartphone manufacturers, Airlines and Specialty Coffee retailers. Here is a very short summary why each of these markets are commoditized

• Smartphones (hardware not software): Many smartphone manufacturers are finding it increasingly difficult to create differentiating factors on their hardware. If you disregard the operating system, you will notice that there really isn’t much difference between a Nexus, HTC or a Motorola. They lure customers by giving them the most hardware features at the best price. Read more here and here.
• Airlines: Remember the times when flying was luxurious? Well that’s over. Passengers now want to fly from A to B at the best price and they have plenty of airlines to choose from. Airlines end up competing on price as they cut down all the frills. Budget conscious customers force airlines to live on low-margins. Read more here and here.
• Specialty Coffee: You can get a good coffee at Starbucks, McCafe, Dunkin Donuts and a number of other places. There were about 500 such outlets in the US in 1989. In 2006 there were 24,000! Customers have a large choice but suppliers cannot always differentiate themselves enough to impose a higher price for a cup of coffee. Read more here.

And despite the challenges and bankruptcies faced by the players in these industries, some are very successful. For example:

• Smartphones? Apple
• Airlines? Easyjet, Singapore Airlines
• Specialty Coffee? Starbucks

Despite the strong price competition and lack of differentiation amongst smartphone manufacturers, Apple successfuly charges a premium for its products. Copyright Norman Chan / istockphoto

How do they succeed? How can they compete in the tough conditions of commoditized markets? What can we learn from them?

How companies succeed in a commoditized market

When looking at the companies in our case study we realized that it is possible to succeed in a commoditized market. If they did it, photographers can do it too. What are the key elements of their success?

• They cut costs to live off low-margins
• They focus on a specific market segment and are the best at it
• They innovate constantly to either differentiate their products and charge higher prices or to cut their costs and offer lower prices
• If premium, they provide great full customer experience, from selecting and buying all the way to owning the product

Read more on strategies for commoditized markets here, here or here.

While airlines like Lufthansa undergo difficult cost cutting programs, EasyJet’s efficient operations make it successful. Copyright Sung Kuk Kim / istockphoto

How can you become a more successful stock photographer?

The strategies mentioned above are essential for success in today’s commoditized stock photography market. With some adaptation, you can follow them and increase your success and money.

Based on our research, a successful photographer strategy should follow these guidelines:

Cut costs and increase your margings

• Review your workflow and reduce all cost points.
• Pass the price pressure on to your suppliers, make up artists, models, etc… Find new ones to work with at a better price.
• Partner with other photographers to share ressources and equipment.

Focus your talent on a segment and be the best

• Invest your time and ressources into your specialty area. You can never be the best at all areas, so choose your strength and compete on it.
• Niche: produce content which is rare but with a healthy demand. Such content can be sold at agencies with higher prices.
• Premium: Invest in high value productions. Get experienced and qualified models, rent out excellent locations, ensure your pictures offer high value. Competition is lower in this segment. Sell them at agencies with higher prices and increase your margins.
• Basic: Produce basic images, isolated on white or similar, but in a cost-efficient way and in large quantities. Sell these on agencies with lower prices and generate revenue on quantity.

Scale production to better cope with low margins

• Outsource parts of your workflow to allow you to produce more than you would on your own.
• Get an assistant and produce more without compromising quality.
• Find new markets to sell your work and generate new income streams. Your images can also be sold outside the stock agencies, think about art sites, prints, mugs and more!

Innovate wherever you can

• Use any skills you have to innovate.
• You might have the skills to build hardware cheaply or to program software to automate parts of your workflow.
• Innovate to develop creative lighting or post processing techniques which set your images apart.

Choose a strong agency well suited to your style

• Your success depends on your agency’s success. Partner with an agency which provides good revenue, innovates and has a good customer experience.
• Choose an agency well adapted to your type of work. If you are a premium photographer, sell on higher priced agencies, because you will sell. If you shoot more basic items, then compete on price on lower priced agencies.

A cup of coffee is more or less the same everywhere, and yet coffee shops like Starbucks can justify their high prices. Do the same with your photography! Copyright Brian Jackson

Conclusions

Just like Starbucks, Apple and EasyJet have strong competitors, you too have to fight against tough competition.

You can choose to go the Apple way and produce innovative, high value imagery and sell it at higher prices, or go the EasyJet route and establish a very efficient production workflow creating simple but great images at a low price.

The stock photography industry has commoditized, pick your strategy, react and work hard!

We’d love to hear your opinions. Please join the conversation writing a comment here, on our Facebook or Twitter pages.

The big news is that Bruce Livingstone will keynote. We’re super chuffed to have the Godfather of microstock opening the conference!

The other big change is that, following popular demand, we’ve expanded the program to cover not just photography, but also vidoegraphy and illustration. There’s now three sessions which split up into the three different media types (and sometimes a fourth for agency topics).

Quick Facts

Dates: November 16-17, 2013, with a Photowalk and Opening Reception on Friday 15th.
Location: andel’s Hotel, Berlin, Germany (same great venue as last time)
Price: Tickets start at €249 +VAT for April – May, then rise. Use coupon code MD2013 for 20% off.
What: Two+ days of business, technical and inspirational knowledge from the experts of our industry.

What’s New

Masterclassses! We’ve re-jigged the workshop to make it more interactive and instructor-led. To mark the difference we’ve renamed it ‘masterclasss’, and replicated it to video and illustration too.

More Portfolio Reviews! We’ve done the same with the portfolio reviews. There’s now one for photos, one for video and one for illustration. The portfolio review was the most popular session last time.

Product demos! This time we’ll also have hardware manufacturers exhibiting their products in the enlarged and enhanced exhibition. So far RED Digital Cinema and Wacom have already confirmed, and others are still in negotiation. Come and demo a RED camera for yourself!

More for agencies and service providers too! The exhibition now features real booths for better communication with attendees. The awesome PitchFest is returning with higher expectations for entertainment value in the pitches! And the Agency Workshop returns, rebranded to the Agency Masterclass, featuring educational sessions from the industry’s leading experts in today’s key industry topics.

More great sponsors! Shutterstock has given us amazing support with this event taking the Platinum sponsorship spot. It’s been great working with them again.  Depositphotos and ProImageExperts lead a who’s who in microstock list of other generous supporters helping make this conference bigger and better for us microstockers.

Register Soon!

Tickets are at the cheapest price for April and May, after which they start rising. If you use the coupon code MD2013 you’ll get an extra 20% off.

Get your tickets now and don’t miss this amazing event!

Register Now!

And don’t forget to Like us on Facebook to keep updated with speaker announcements, program updates and all conference news.  See you in Berlin!

Elnur currently has over 64,000 photos in his Shutterstock portfolio placing him in the top 10 Shutterstock portfolios by size.  At Depositphotos he has over 76,000.  He added over 25,000 photos to his Shutterstock portfolio in the last 12 months alone.

What makes Elnur’s amazing productivity even more impressive is that he does it while maintaining a demanding full-time job as a finance manager for BP.  Not only that, he’s extremely active in three Russian-language microstock forums, regularly speaks at industry conferences and runs a Russian-language Facebook group about microstock.

Microstock Portfolios

Elnur shoots primarily still life, but also has a healthy dose of travel and model shots in his portfolio.  Much of his portfolio is the low-hanging-fruit of stock photography – basic items isolated on white and simple travel landscapes – but Enlur more than makes up for it by doing it well and in very high volume.  He acknowledges that his RPI isn’t as high as most contributors shooting business lifestyle, but argues RPI is almost irrelevant and it’s overall income that matters.

He distributes widely, supporting new and small microstock agencies, and contributing to some non-microstock agencies too.

Top microstock portfolios: Shutterstock, Fotolia, Dreamstime, iStockphoto, Depositphotos, 123RF, BigStock

How Does He Do It??

Elnur works with a small team of people he contracts directly to help with processing, keywording and distribution. The shooting is done by himself and an assistant photographer.  He’s fast, very systematic, and puts a lot of effort into ensuring his processes are efficient.

His travel takes him away from home a lot so he has set up remote access to his computers so he can keep his microstock business running while away. He makes good use of software utilities to automate much of his workflow, and delegates much of the repetitive work to his employees.

Most of all, he consistently works hard.

Personal Information

Microstock Expo 2011, Berlin. (left to right) Giorgio Fochesato, Josh Hodge, Pavel Orekhov, Elnur Amikishiyev, and Tyler Olson

Elnur is based in his native Azerbaijan, specifically in the city of Baku, though his travel for BP takes him to many different places for long periods of time. He speaks Russian in addition to his native Azeri, and thanks to extended periods in the UK also speaks English perfectly.

At Microstock Expo in 2011 Elnur was asked why he continues with his day job when he has a great career as a full-time microstock photographer.  His answer, in typically detailed form, was that what he learns from his job at BP helps his microstock business, and that the pressure of running two careers simultaneously keeps him sharp and focused.

Elnur Online

Elnur previously maintained an English-language microstock blog, About Microstock, but it hasn’t been a priority and so hasn’t been updated for a long time.

He also sells photos directly via his Baku Photos website, which he admits fell victim to his microstock success, though he’s committed to reviving it.

He’s active on Facebook with a personal account (allows subscriptions) and business page, on LinkedIn (only for his BP job), and a little on Twitter (mostly in Russian).

Speaking

Elnur speaking at the 2009 STOCKinRUSSIA conference. Copyright Pressfoto.ru

Elnur spoke twice at the STOCKinRUSSIA conference, the second of which was where I first met him.  I was already familiar with his blog and his microstock success, but his presentation was very clear and entertaining.  I later invited him to speak at Microstock Expo where he outlined how his microstock business fits in with everything else in his life in the Lifestyle Design session.

Elnur’s presentations are humorous for both his jokes and the sheer scale of his numbers.  And there’s always a lot to learn from his processes and strategies – the business that has him generating many thousands of commercial images each month while maintaining a demanding day job.

Their established base of video-buying customers also buy photos, so unlike most new opportunities for microstock photographers, Pond5 can deliver instant results.

And who can go past 50% royalty rates?!?!

Pond5 Background

Pond5 is based in NYC, launched in 2006, and is headed up by CEO Tom Bennett (LinkedIn), and Dana Tower (LinkedIn) who is ex-VP of Marketing at Getty Motion and ex-Director of Market Development at Corbis Motion. (“Motion” is a broader, more accurate term used at traditional agencies for what we in microstock call video or footage)

Pond5 didn’t add photos until 2011.  At that time they established a partnership with 123RF to instantly get their collection to a respectable size – around 7 million photos at the time. They’ve since opened for direct submissions of photos, and switched partners from 123RF to YAYmicro, Pixmac and FeaturePics. The Pond5 FAQs tell you how to have Pond5 remove duplicates if you already have content with those agencies when you upload directly to Pond5.

While it’s often disputed by competitor agencies, Pond5 is the leader in microstock video licensing in the eyes of most non-exclusive video microstockers.  As a result of both their selling power and their set-your-own-price policy, they have attracted the largest collection of stock video footage, or “motion”, of any microstock agency.

Pond5 Details

What’s Different about Pond5?

In addition to being video specialists, Pond5 also has audio (which, of the top microstock agencies, is only available at iStock), After Effects templates, and 3D projects. This makes it the most complete single-site microstock agency in terms of file formats (Envato being the non-single-site exception).

The set-your-own-price policy has worked well to attract videographers who want the convenience of microstock distribution without the low prices.  They’ve retained that policy with photos, including the option to have the reviewer suggest a price for you.

Extended Licenses are absent at Pond5, which is perhaps the only negative aspect from the contributor perspective. There’s no specified reproduction limit, product resale rights are not formally available, and the standard license includes 10 seats. These do not compare well.

Verdict

License issues aside – and let’s face it, for most of us, they are – Pond5 looks very attractive for microstock photographers.

If you haven’t uploaded to Pond5 because you don’t shoot video and only have stills, now is the time to submit!

Pond5 know what they’re doing in microstock and have an established buyer base.

By setting your own prices and earning the super-high 50% royalty rate, you’ll earn much more from a direct sale than through any of their partner programs.

They’ve also made it easy to submit.  Simply post a hard drive with a release spreadsheet, or FTP your files in the usual manner.  And importantly, submission is straight forward at Pond5 with release management and bulk matching tools.

The only thing standing between you and regular royalty payouts from Pond5 is the simple step of sending your files.

You can register with Pond5 here.

Having been in business since 2009, the Spanish-born microstock agency Photaki is approaching veteran status.

But having enough profits for the agency itself to survive doesn’t mean it will be profitable for contributors to submit.  Hopefully this review will give you the information you need to make a well-informed decision for yourself.

Photaki Background

Like the majority of microstock agencies, Photaki started out as a collection of online images before switching to the microstock business model.

The original collection consisted of photos of the local area pooled by a group of photographers in Malaga, Spain, way back in 2001.

In 2009 it switched from Rights Managed licenses to a fully fledged microstock agency and changed the name from AndaluciaImages to Photaki.

The team is small and multi-skilled, allowing them to achieve a lot without spending too much money.  And that’s important when your strategy involves undercutting the market on prices and paying super-high royalties.

Traction has been slow since Photaki launched as a microstock agency, and that’s how the team likes it.  Steady and sustainable growth is their objective.

Photaki Details

Cool Features

If you have 150 approved files and 70% or higher approval rate, you can set your own prices.

Photaki allows buyers to browse photos on a map, which is not something we haven’t seen before in microstock, but it’s not common and very useful for photo buyers in the travel industry.

Most microstock agencies will allow new contributors with very large portfolios to submit all their files at once by posting in a hard drive or DVDs with a release spreadsheet. Photaki have formalized this program to encourage more microstockers to contribute.

Contributors get a sub-domain portfolio which can be customized (change colors). While not so useful for those committed to stock, it’s popular with the ‘less stocky’ contributors that seem to like and do well at Photaki.  Photos from Flickr can also be imported for display (not for sale) in the portfolio.

Issues to Consider

Photaki have worked hard to clear up the issues that arose from switching to the microstock business model and changing the primary language of the site to English.

Most of these issues have now been resolved, so while the site isn’t as slick as some of the big-team microstock agencies, it’s functional and ready to get on with the business of selling photos.

The biggest issue for me is the inclusion of unlimited print runs and multiple seats in the standard license.  The cheap licensing of the microstock business model works because buyers get only very limited rights.  Including Extended License rights in the standard license makes it easier for agencies to sell while eliminating the lucrative Extended License opportunity for contributors.

The translations of the license agreements into English – which came way too long after the English-language website was launched – are full of grammar errors and confusing language. As a buyer this would concern me. As a contributor I wonder why they haven’t had a native English speaking lawyer properly draft these most critical legal agreements.

Low prices are great for customers and high royalties are great for contributors. But neither is helpful for an agency, especially when combined. Competition among microstock agencies is fierce, so having healthy margins – not to mention the motivation of healthy profits – makes the difference between languishing and sustaining meaningful growth.

One of the key ideals of Photaki is that small microstock agencies prevent the dire consequences of oligopoly, hence it’s in the interests of contributors to support them. It’s the classic “help us to help you”.  That makes sense, but clashes with the strategy of under-cutting the top agencies on price.

Verdict

Photaki is clearly a serious microstock agency worthy of consideration for adding to your microstock distribution.  The business has demonstrated longevity and the ability to resolve problems with the business.

The need to support small microstock agencies for the health of the market is a fair argument, but I recommend we request two critical issues be addressed before we support Photaki as our agent for market balance.  These are the inclusion of Extended License level rights in the standard license and the poor translation of the license agreement.

If you’d like to join me, leave a comment below with a link to one of your microstock portfolios (so Photaki can see what’s at stake). State that you’d like to see the rights and license issues addressed (and/or any others) before you submit your portfolio.

Insiders tend to shake their heads when reading mainstream press articles about their industry.  In microstock and broader stock photography, we’re no exception.  It must be difficult for journalists to get it straight when constantly reporting on industries that are not their own.

So in the interests of more accurate and more interesting mainstream press coverage of our industry, here are my top 8 tips:

Tip 1: Avoid this Angle: Easy Money

People love reading articles with promise of how they can earn an easy side income and potentially turn their hobby into a thriving business.  Affiliate link spammers and cheap ebook pushers know it.  As do agency PR reps.

The rags-to-riches stories of hobbyists with a consumer-grade digital camera making 6-figure incomes were plausible back in 2004.

Since then the market has moved on.  The people profiled in those articles have either given up or upgraded their skills and equipment and now produce professional grade stock photography.

Examples:  StarTribune.  USAToday.  NYTimes.

Tip 2: Avoid this Angle: Amateurs Taking Food Off the Professionals’ Table

Broadband Internet and digital photography came of age around the same time.  It’s no great surprise that there was a re-distribution of wealth and income in the stock photography market at the same time.

Many stock photographers were heavily impacted, seeing their revenues falling rapidly.  They had to adapt or move along, and they were understandably unhappy about it.

An entire generation of professionals being so displaced always makes for a good story. But in stock photography, this story is so last decade.

Example:  BBC.

Tip 3: Avoid this Angle: David vs Goliath

Silicon Valley has given us a taste for stories of new technology stealing markets from behemoth, laggard corporates.

Microstock agencies were a great example of ‘David’, played as amateur photographers bitter from rejection at the hands of Goliath, who was played by old school suits who refused to adapt. No prizes for guessing whose PR talent ‘prompted’ those articles.

Examples:  CNN.  SmartMoney.

Tip 4: Avoid these Common Factual Errors

“New”.  Referring to microstock as “a new market” or a “new business model” is no longer accurate.  Given the microstock business model arrived in 2001, it’s as new as the iPod.

“$1 prices & 20 cent royalties”.  Nobody will argue that microstock pricing is simple, but oversimplifying throws everything out.  Both those numbers can be lower but the averages are now much higher.

“Royalty Free is free of royalties and/or rights”.  The term is more than confusing – it’s outright misleading. Take care that you understand what it really means.

Tip 5: Understand the Agendas

Microstock agencies play up the ‘David’ angle and push their latest website feature as ‘game-changing’. They’ll also drag out their latest media-darling contributor to testify that they’re earning a “high 6-figure sum” from the agency.

Traditional agencies push the ‘taking the food off the table’ story and tout their latest website feature or pricing strategy as enabling them to compete with the “growing discount alternatives” (they mean microstock agencies).

New businesses all have the secret formula to “disrupt” the industry and fix everything that, in their eyes, is broken with the current market. They’ll tell you that thanks to them the market will be unrecognizable in three years (in reality they’ll disappear well before that).

Microstock contributors will tout their freedom of lifestyle and the meritocracy of the microstock business model. They’ll also complain about agencies dropping royalty rates.

Traditional stock photographers will tout the superior quality of their content and either state that there’s no money in stock photography anymore, or that their revenues are holding thanks to their superior quality.  They’ll also complain about agencies dropping royalty rates.

Tip 6: Start Your Research Here

Read this introduction to microstock first to get oriented.

I know it’s boring but take the time to understand what Royalty Free actually means.

There’s also a complete list of microstock agencies, profiles of prominent industry figures, and reviews galore.

Tip 7: Consider these Angles

To criticize is easy, so let’s explore some real and current angles that won’t read like promotional pieces:

• Revolution / Disruption – for business and tech-business publications, stock photography is up there with digital music and ebooks as an example of a market transformed by technology. Switch out David vs Goliath and instead explore displacement, adaption strategies, crowdsourcing, the long tail, amateur professionals, survival by acquisition, and content volumes.
• Quality and quantity – microstock found a market for crap photos, then learned how to produce and sell quality. Today more photos hit the market each month than the total quantity available at most businesses 10 years ago.
• 3D – currently in its infancy; will 3-dimensional photos and video be the next technology wave to redistribute income and wealth?
• Mobile stock – how long will the current fashion of mobile-phone created & edited photos last?  Will Facebook’s Instagram or Google’s Snapseed become a threat to the current stock photography business, or will they be locked out by Getty Images like Flickr?

Tip 8: Some Interesting and Knowledgeable People to Interview and Quote

These are some of the most quotable people in the market:

And I’m always happy to discuss the market and answer questions myself.

I hope that helps.

But if you haven’t, or it’s been a while, it’s time to take a look at how far picWorkflow has come.

Not only is it now much more than an uploading service, it’s also got something for everyone, including agencies!

Uploading

The primary service of picWorkflow is file uploading, replacing the now closed iSyndica and LookStat services.  It’s free to upload to some agencies, and 1 cent (US dollars) per file per agency for the others with 3 months of storage included.  There’s also a free version of the service with up to 100 uploads per month and 7 days storage.

This service is great for those with limited bandwidth and those who distribute widely. It supports photos, illustrations and video and works with every serious microstock agency.  You can get your files into picWorkflow by FTP, a Flash-based web uploader, or an Adobe Lightroom plugin.

Security is particularly tight, requiring a master password to decrypt stored agency credentials. While sharing login credentials is a deal-breaker for a few contributors, and agencies don’t like it, there were no major issues with iSyndica nor LookStat, and so far none with picWorkflow either.

Analytics

User feedback told Robert that analytics weren’t the top priority, so they’re still very basic.  They show portfolio sizes and some quality checks on metadata.  The analytics will expand and improve in future, but it’s a difficult task given agencies don’t support it and there are so many agencies to support. If you’re wanting an automated way to track your earnings balances, Robert’s picNiche toolbar does that and is free.

Keywording

The keywording service allows images and video to be keyworded by picWorkflow.  You offer the price you want to pay from 15 cents per file and set the quantity of keywords you want.  The results vary in speed and quality based on how much you offered.  You supply the title (and any necessary details like location) and they’ll supply the description and keywords.

The picWorkflow keywording staff are remunerated based on how well they do, so the best earn a lot of money.  There’s currently a waiting list of people wanting to become picWorkflow keyworders!

Retouching

The most recent addition to the service offering is full retouching services. The services are provided by partner JaincoTech but seamlessly integrated into the picWorkflow system.  You can pick from a menu of development and retouching tasks. They each have set prices that are competitive with similar service providers.  This addition makes picWorkflow an almost end-to-end service for microstock contributors.  Be sure to check out the demos of the retouching services.

Backup Storage

You can permanently store your files with picWorkflow as an additional backup.  It’s hosted in the super-reliable Amazon AWS service.  It costs 1 cent per photo for three months, or 1 cent per 22MBs for video or extra large photos.

Sponsored Uploading for Microstock Agencies

For $100 per month microstock agencies can make uploads to their site free for all picWorkflow customers.  Depositphotos are doing this as you can see in the top graphic above. This is a great way for agencies to increase their ingestion rate, particularly if they’re new and/or small in size.  According to Robert this drastically increases the quantity of uploads an agency receives. There’s also other sponsorship opportunities and services available for agencies within picWorkflow.

Insights Galore

One of the benefits of doing so much for so many is the quantity of data picWorkflow generates.  And Robert uses it to share a lot of insights into the market via the picWorkflow blog.  Check it out and I guarantee you’ll learn something helpful.

Who’s Using It?

Robert reports a variety of contributors use his service, each in different ways.  At the top end, Andres Rodriguez uses it primarily for the uploading service. At the other end of the spectrum many beginners use it to help navigate the complexities of microstock keywording and retouching, as well as streamlining their file distribution.  All the services are independent, so each microstocker can use just the services they need.

What Do You Think?

I’m not actively shooting at the moment so I haven’t made much use of picWorkflow myself.  But I’d like to hear and share opinions from those who are in the comments.  If you’re using any parts of picWorkflow, what do you like about it and what would you change?  And do you find it value for money?

Check out picWorkflow here.

With the update to image level parameters earlier this year, Dreamstime started calculating royalties based on the value of the transaction ‘after’ referral costs. This means all Dreamstime contributors earn less for sales to buyers who were referred, and even less if they themselves were referred.

I programmed this policy into the royalty calculator I published yesterday so you can see just how much this impacts your royalties.

No other microstock agency pretends that their referral program is a cost to be shared with contributors.  It’s a marketing cost, and like all other marketing costs, it’s an expense of the agency, not the contributor.

As a direct result of this policy, I have removed all the referral codes in the links to Dreamstime from my blog.  If you spot any I’ve missed, leave a comment on this post with directions to the link.

By doing this, and publicly sharing that I’m doing so, I hope to achieve 4 things:

Avoid Making Microstockers Earn Less

The entire point of Microstock Diaries is that it helps microstock contributors earn more.  If I don’t achieve that, I have no audience, which means no revenue and no reason to be.

Dreamstime’s new policy means anyone who has clicked on my Dreamstime referral link before registering as a contributor in the past three years is now earning less than they would had they not clicked my referral link. I can’t do anything about them, but I can avoid doing it to more people.

Ensure Confidence in Me and the Links from My Website

If my readers know they might penalize themselves by clicking my referral links, they will obviously avoid doing so.  And that would be pretty drastic for me.

So by removing the referral code from my Dreamstime links I can declare that there’s no disadvantage to using any links across Microstock Diaries.  Sharing that I’m doing so also lets my readers know I value their readership and confidence.

To be clear, this is no big personal sacrifice. My Dreamstime referral earnings will not instantly disappear by removing my referral links.  They just won’t grow.  They’ve actually been in constant decline for the past two years anyway, and now represent less than 10% of my top referral income generator.

Discourage Other Microstock Agencies from Doing the Same

Microstock agencies all keep a pretty close eye on each other.  If others see no downside to Dreamstime’s policy, they may implement the same policy themselves.

So by publicly calling out Dreamstime on this policy and demonstrating that it causes both negative publicity and a reduction in inbound links, I can help give other microstock agencies a counterpoint to consider.

Encourage Others to Stop Using Dreamstime’s Referral Program

The day Dreamstime introduced this policy the amount of money they pay out in royalties probably dropped by a good 5%.  That’s going to look very appealing to other agencies considering the same policy.  The only way we can discourage them is to demonstrate a big downside to the policy.  To do that requires more than just one blogger removing referral codes.

So I encourage you to consider removing any affiliate codes from your links to Dreamstime, and let people know about it. Ask the bloggers and forum owners you know to do the same – they probably don’t want to disadvantage their readers any more than I want to disadvantage mine.

If you’re using the Dreamstime Facebook app, consider that while you might earn referral income when your friends click through your links, your royalty will be lower. You could instead use the Facebook app of Shutterstock, Fotolia or Depositphotos, all of whom pay referral fees out of their marketing budget, not your royalties.

[Update 2012-07-15: Dreamstime have responded in the comments below stating that only 'buyer' referral costs reduce royalties, in contrast to the policy on their website.]

[Update 2012-07-16: Dreamstime have announced that as of today they will cover 100% of their referral program costs, reversing this policy. The announcement is here, but the policy is yet to be updated. When it is I will restore my Dreamstime referral links.]

[Update 2012-07-19: The policy has been updated and I have restored my referral links]

With the help of a smart programmer I’ve created a series of royalty calculators that explore credit-based sales at some of the top microstock agencies.

There are currently calculators for Fotolia, Dreamstime and iStockphoto. I may add more in the future.

Why?

The purpose of these calculators is to clarify the process of royalty calculations. Some calculation policies border on the sneaky side, so I’m hoping to help raise awareness and understanding of those too. But it’s really about having a fully informed relationship with your microstock agency.

By changing the values and seeing the results, you can see the impact of each part of the royalty policy. You can try to match the royalty amounts you see in your earnings reports, and compare the difference in royalty of a different price, a different level or a different exclusivity status.

Once you understand how it works and can see the impact of different options, you can make better informed decisions.

Best Guess

As the disclaimer says, the calculators are not officially supported and may not be 100% accurate for all settings. This primarily relates to the complications of different currencies (detailed below), as most other calculation policies are fully disclosed. But to be safe, don’t go mounting any legal cases or defaming an agency based on the results of these calculators.

If you can see any inaccuracies or believe the calculations are done differently, let me know via the comments for this post.

Real Royalty Rates

One point of the calculators is to contrast the difference between the royalty rates the agencies promote and the real royalty rate.

What is a “real” royalty rate?

A royalty rate is supposed to be the percentage received by the contributor from the amount paid by the customer. That’s what I’m calling the “real” royalty rate, and that’s what the calculator calculates.

So what are the royalty rates promoted on the agency websites?

Agencies definitely use those numbers in the royalty calculation, but with all the other stuff their policies throw in, the end result doesn’t always match the figure they promote. The calculators show you those rates too.

No Subscriptions?

For now, I’ve left out subscription calculations and agencies that are predominantly subscription based. Subscriptions are more about the royalty ‘amount’ than the royalty ‘rate’ but it might be something fun to explore later.

Currencies – The Ultimate Complication

Calculating currencies made my brain hurt. I almost left out currencies from the calculators altogether.

It’s extremely difficult to guess how they’re calculated for each agency. Do they calculate the currency exchange for each sale and pay royalties accordingly, or do they always calculate royalties in the base currency based on the quantity of credits? If the former, do they use fixed exchange rates, or if not, how often do they update it?

Fotolia’s fixed credit value makes it easier, but they complicate it by paying contributors in various currencies too.

In the end I’ve set Dreamstime to always calculate the royalty on the price of the equivalent transaction in US Dollars, and iStockphoto calculating the royalty from whichever purchase currency is used. This seemed to fit best to the amounts I saw in my own earnings reports, and explains why there’s so many different royalty amounts at iStockphoto. If someone can set me straight on how this works, I’ll update the calculator.

Your Conclusions

Rather than tell you my conclusions I want to hear what you think. What surprises you most about the numbers you see in the calculators? How can you use what the calculators show you in the decisions you make about distribution, pricing, and exclusivity?

Check out the calculators here. There’s no comments on the calculator page, so come back to this post to share your thoughts.

Where some microstock agencies require an expensive Extended License for certain rights, others include those rights in their standard license.

What’s worse is that those rights are also provided as part of subscriptions (all microstock agencies apply their standard license for subscription sales).

So a customer who may have bought an extended license, generating $20 – $100 in royalties for the contributor, instead buys on subscription where the contributor gets just 25 – 37 cents.

Veer: Victim of Contributor Ignorance?

This all could have come out when Veer introduced their subscriptions late last year.

There was an uproar when they announced their plans, and contributors opted-out in droves.

The primary complaint was the royalty rates, but also highly criticized was the decision to include Unlimited Print Run rights for subscription sales.

Veer eventually removed those rights in order to convince contributors to opt back in, but they were justifiably confused. They weren’t proposing anything that wasn’t already being done at Fotolia and 123RF, as you can see in this Extended License rights table.

For some reason none of this came to light. Admittedly this is the sort of thing a microstock blogger could have pointed out.

Extended Licenses at 25-cent Royalty

So while the Veer subscription is now in line with the rest of the industry, Fotolia and 123RF continue to include in their subscriptions the same rights which require an Extended License purchase at other agencies.

Extended Licenses for 25 cents at Fotolia, up to 40 cents at the highest level (nobody is currently at that level).

And Extended Licenses for 36 cents at 123RF.

BigStock doesn’t have subscriptions, but includes Unlimited Print Run rights in the standard license, when the image is “not the primary focus of the design”. Minimum royalty is 50 cents.

What are You Going to Do About It?

We microstockers, as a community, are known to be extremely tolerant of agency antics when the agency has strong selling power.

And BigStock, 123RF and certainly Fotolia have that.

So the vast majority of us will do nothing.

And that’s ok.

This is just something to keep in mind when reviewing your subscription royalties at Fotolia and 123RF, particularly during slow EL months.

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