Microstock photography represents a new business model
Seattle Times technology reporter
Headquarters: Calgary, Alberta
Founder and CEO: Bruce Livingstone
Contributing artists: 35,000
Available images: 1.6 million
New business: Now offering stock video clips
Kelly Cline's photographs pop up all over the place — in grocery stores, on Web sites, even splashed on the wall of a supermarket in Serbia.
Cline, who lives in West Seattle, takes pictures of food and sells them online through iStockphoto, a division of Seattle-based Getty Images. Her shots of hand-pressed olive oils, cheeses and California strawberries are available for anyone to purchase, and the response is so strong that Cline said she expects to make about $70,000 this year.
"I've never made this much money before," said Cline, 38.
Cline is part of a wave of change hitting the stock-photography industry. The business used to consist of high-end photographs that were licensed to advertising agencies, book publishers and other companies for hundreds, or even thousands, of dollars apiece. Those photos often ended up in catalogs, brochures or magazine advertisements.
Now, Web sites such as iStockphoto sell images online for between $1 and $15, opening up stock photography to a new audience.
The result: Stock photos are showing up on Web sites and blogs, and small businesses with limited advertising budgets are suddenly interested.
The new business model is often called "microstock photography," and it could be categorized as a form of the so-called user-generated content (think YouTube) sweeping the Web.
With sophisticated digital cameras now less than $1,000, even amateur photographers can break into the business, submitting their pictures to microstock photography Web sites and collecting a small commission for each image sold.
It's not a big industry. Microstock photography contributes less than 10 percent of Getty's sales. The company won't disclose an actual figure, but in 2006 it had $807.3 million in total sales.
There are only four or five serious competitors, and Getty's iStockphoto division is by all accounts the 800-pound gorilla.
But business is growing fast, and some say they expect this to be its breakout year.
"We're just now seeing people look at the model and say, 'Hey, this is really successful,' " said Bruce Livingstone, iStockphoto's founder. "This is the year we're going to see a lot of competition."
Livingstone is widely acknowledged as the father of the microstock-photography industry. He started iStockphoto in Calgary, Alberta, in 2000 by giving his own images away online.
Soon, designers and other photographers joined and began trading images with each other.
Livingstone began charging money in 2001 to cover the costs of hosting the Web site, and iStockphoto has been profitable ever since. Now, it has about 35,000 contributing artists and 1.7 million images available.
Its big break
IStockphoto's big break came last year, when it was acquired by Getty for $50 million. Getty zeroed in on iStockphoto in 2005 when it began researching microstock photography. By the fall of that year, Livingstone was talking acquisition over breakfast in Madison Park with Getty Chief Executive Jonathan Klein.
"We thought it had tremendous potential," Klein said. "It encouraged and supported people's creativity around making stuff. There was no question that over time there would be demand for more and more images."
IStockphoto fit in with Getty's strategy of offering images at every price point for every customer budget.
Still, Getty was known for high-quality, high-end images, not the cheap photographs iStockphoto specialized in. So instead of integrating the company into Getty, Klein opted to keep iStockphoto separate and allow it to grow in Calgary; it now has 56 employees.
Livingstone is a rising star within Getty's management. Earlier this month, Getty's board promoted him to senior vice president and agreed to spend $1.2 million acquiring two small companies he owns.
Klein said he has big plans for Livingstone to drive Getty's growth in other areas of the company, but he won't say what.
One thing is for certain: Getty wants to expand iStockphoto's business model to new areas.
Some estimates place the entire stock-photography market at about $2 billion worldwide. There's little chance of the microstock segment taking over the market, said Andy Goetze, an independent analyst tracking the industry.
"It is still a long, long way to go until iStockphoto will count for $100 million of Getty Images' overall revenues, if ever," he said.
But there's no question that iStockphoto is eating into Getty's business. Customers who were once willing to spend hundreds of dollars on a Getty image are now finding a decent image on iStockphoto for much less.
"There are people that are moving to the lower end of the market and buying images," said Mike Roarke, an analyst tracking the company at McAdams Wright Ragen in Seattle.
"Depending on how far you take this, has this created a totally different dynamic within the stock-photo business — or is it going to?"
But Klein estimates that the customer overlap is only about 15 percent. In other words, he thinks that 85 percent of iStockphoto customers would never have ordered from Getty Images. And Getty can seize that opportunity to sell more expensive images to the customer.
Sites like Google Images also present a challenge to the entire industry. If you wanted a picture of a rose, for example, you could find dozens of nice shots on Google's image site.
Using those images without permission from owners could amount to copyright infringement, but it's done anyway.
"The amount of people right now who buy images, it's a very small part of the iceberg," said Oleg Tscheltzoff, co-founder and president of Fotolia, an iStockphoto competitor with customer-service operations in Lynnwood.
"Ninety percent of people who use images are stealing them every day."
Tscheltzoff isn't worried about competing with Getty. The microstock business has big potential and there's enough space for several players, he said.
Another competitor, Tim Donahue of BigStockPhoto.com, says the market is nowhere close to saturation.
"I don't think that we're even near 50 percent of the market yet," he said. "I don't think everybody knows that this is an alternative."
How it works
About 100,000 people visit iStockphoto's Web site daily. It's free to join, and about 100,000 people do so every month.
IStockphoto sells its images on a credit system, where each credit costs $1.20 (the price drops to 96 cents when you buy in bulk).
It costs one credit to buy a small, low-resolution image that might be best for a blog. The largest images print out to about 11 inches by 16 inches and cost 15 credits.
Once you buy an image you can use it up to 500,000 times. For more than 500,000, additional permission is needed from Getty.
Photographers generally receive between 20 and 40 percent in commission from a sale. For some, that amounts to a couple of hundred dollars a month.
A handful make enough to quit their day jobs. IStockphoto's top-selling photographer expects to make at least $100,000 this year.
Getty is bringing some of iStockphoto's best-selling photographers into its overall business, which means they could make hundreds of dollars on one sale. Food photographer Cline is one of them.
She has nearly 1,400 images on iStockphoto and has sold about 69,000 downloads. She met her husband on the site's photographer forums.
"It's the most satisfying job I had ever had in my life," said Cline, who used to work at a printing company.
"I can't imagine going back to an office. I think it would probably kill me."
Kim Peterson: 206-464-2360 or email@example.com
Copyright © 2007 The Seattle Times Company