Note: This is a pretty long post - so don’t say you didn’t warn you. But I would really like to get your feedback on this article.

2008 will be remembered for the housing and mortgage market meltdown, but will it also be the year of the stock photography market crash? There’s no doubt in my mind the industry has been in a “bubble” for the past few years. I see similarities between the “internet bubble”, the current housing market meltdown and the state of the stock photo industry. All were fueled by cheap money and speculation - mixed in with a dose of “irrational exuberance”. Of course, I’m not an economist, so this may be an over simplification. But here goes…

First what do I mean by “cheap money“? In the traditional sense, it’s the availability of easy credit and low interest rates. It also is the willingness of investors to fund new unproven ventures based on the speculation of a nice payoff - Irrational exuberance follows closely behind.

During the dot-com bubble, almost anybody with a website and a business plan could get venture capital. It didn’t seem to matter if no one could explain how some of these companies would become profitable. Of course as soon as a few went public, the founders and their investors became quite wealthy- thus rush was on. As we are now well aware, the housing market had a similar problem. Just about anybody could get a mortgage. This worked out okay when housing values were skyrocketing and interest rates were low. But when interest rates started increasing, and people couldn’t refinance at a lower rate, they had to sell the house they couldn’t really afford. As the supply of houses went up, the market got more competitive. So if you can’t sell you default on your loan. The oversupply of houses drives down prices, etc… We know what happened to both markets.

But what are the similarities to the stock photo industry?
To put things in perspective, let’s take a look at how the current “bubble” was created. It probably started earlier but I’ll pick it up in about 2003. The industry as a whole had the same favorable conditions as everybody else, “cheap money”. Getty Images had proven, that you could make money by consolidating the fragmented stock industry (i.e. Buying up other companies) and capitalizing on economies of scale. So by 2003 we already have three big players in the industry Getty, Corbis, and Jupiter Media - all well financed, all making money (Corbis might not have been making money, but they realized they could). Alan Meckler, CEO of Jupiter Media in an interview from 2006 said this:

“October 2003, about 6 months after our first image purchase. I could not believe the profit margins-I was hooked and saw several openings that Getty and Corbis had missed. We are now executing on those openings.”

The Internet helped create a boom in stock photo sales. It became easy for an art director to, find an image, download a thumbnail and us it in a layout. Once the client saw the comps. They were already sold on the stock image in the layout. Not to mention it was much cheaper than hiring a photographer to shoot a new image. Business was booming.

They were not he only ones benefiting, many photographers had discovered they could make better money exclusively shooting stock photos than they could doing assignment work. This fact remained a well-kept secret from most commercial photographers. This was fueled by the perception that “stock shooters” (particularly Royalty free shooters) were “sell outs”. By selling their copyright, they were dooming their future income and killing the assignment business in the process. This may have been true at first, but that quickly changed. Most photographers were keeping their copyright and being paid royalties on each sale. Even if the royalty percentage was lower than it was in the past, volume more than made up for it. I had a photographer reveal to me that he had passed one million dollars in royalty revenue for the year 2004 (his third year shooting royalty free stock) better than he’d ever done as a busy commercial photographer. Over the next few years , however, photographers started seeing their RPI (return per image) drop considerably. What happened?

One of the great things about the market at the time was the fact that images became dated in a few years. Styles and technology changes created a need to refresh images about every three years or so. In addition overall market for stock photography was still growing. So the demand continued to outpace the supply of images. By 2003 the major stock houses were already licensing images online. Before then however, the majority of stock was still being produced on film and needed to be digitized. This still represented a lot of time and resources for the agencies and the contributors. Back then, the time it took from “click to check. (From photo-shoot to your first royalty check) could take a year or more. Several of these factors combined kept the supply of images in check. Prices for stock photos, even RF, continued to be relatively stable even increasing a bit. Things were about to change.

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