What is happening with the stock footage agencies? |
This question keeps coming in these days that , based on artists’ feedback, most if not all contributors see a massive decline in their sales/licensing performance. It basically means that if contributors experience this, then agencies also suffer to license content to customers.
What can be behind it?
Several theories were born recently saying that it’s search algorithm change, no marketing efforts by the agencies, lower demand, higher competition, subscription sites, economy is going into recession even bad management but this refers to Pond5 only and probably some other things. Obviously, only one of them is enough to start seeing some decline but in this case it looks like that we have a bit of a combo of them.
There is one thing that almost everyone agrees. The drastic and sudden change and downfall which happened in April 2019.
What happened in April 2019?
There was a core update in the Google search algorithm in March 2019 (https://moz.com/google-algorithm-change) which probably started showing its effect around April. It might have changed things as basically all of a sudden every agency started to drop in April.Then just as usual after any major changes, things started to come back to normal but recovery process stucked in at some early stage and didn’t go further since then.It probably won’t be any better or hopefully worse. I guess, this change had a short-term effect on sales but then it normalized.Altough, the performance keeps going lower and lower.So, it’s not the core update that’s causing the decline.
What other reasons can be here?
Obviously there is huge dilution in footage content which means higher competition but it doesn’t happen from a month to another. It’s a long term effect which results steady but slow drop in sales. So, this sudden change probably isn’t coming from this point.
No marketing efforts by agencies?
The only company which is “just” a stock media agency and their earnings is publicily available is Shutterstock. (ticker SSTK on the NYSE). Their earning reports can be checked here : https://investor.shutterstock.com/
Let’s have a look into this a bit. 2019 compared to 2018.
– Revenue increased 4%
– Net income decreased 63% with Earnings Per Share 0.57 compared 1.54
“This decrease is primarily due to a reduction in income from operations during 2019 caused by higher spending in performance marketing initiatives and higher general and administrative expenses, largely attributable to investments made across cyber security, data science and analytics, and technology spend and a gain recognized in 2018 on the sale of Webdam of $27.6 million, or $0.78 per diluted share, net of tax, partially offset by a 2018 impairment charge of $4.9 million, or $0.14 per diluted share, net of tax, related to our long-term investment in SilverHub Media Limited.
Adjusted net income per diluted share of $1.23 decreased by $0.34, as compared to $1.57 for the full year 2018.”
Taking into account every detail in the report, the net income decrease is cc.22% which is still significant but definitely looks better than 63% drop and their overall revenue increased which means that they sold more content or sold more effieciently. Also SSTK clearly states that they spent extra on marketing, cybersecurity which is great and we can assume that it happens in the case of Adobe Stock and Pond5.
But we can only assume it, if the management is good (or at least not bad). In the case of Pond5 several posts showed up saying that the CEO of Pond5 (Jason Teichmann) and the overall management aren’t good, at all.Well, it’s hard to say what in the background is but it really looks like that they aren’t the best picks for their roles. Way too many bad decisions made by them in the last 2 years and they lost a lot of (if not almost all) their high and well-deserved reputation. Obviously that reputation was built by the former management, lead by the former CEO, Tom Bennett.
Adobe is also on the stock exchange but their revenue from Adobe Stock is integrated into the Digital Media section which includes many more elements so it’s not really possible to see the exact numbers made by stock media licensing but overall Adobe is doing really well and actually the only major agency that was able to show growth in this huge drop season.
So, in this case Shutterstock and Adobe is spending on marketing but we can’t be really sure that Pond5 does that or not…and if it does how good those marketing efforts are.
Maybe the subscription sites are the real evil?
Any time I read about artists having clips on subscription platforms they say that “it’s only a small portfolio of my old and crappy clips that wouldn’t sell anywhere, anyway” and “I make a decent amount of money by licensing my content under sub plans”. It translates to me that these marketplaces have almost only shitty clips which they sell for peanuts but they sell a ton of them.
1. If they sell that many, then those clips aren’t that bad at all and have commercial value (and might sell at normal price, too) but the market being targeted by these agencies doesn’t want to or can’t pay more or the market just overall wants to pay less.
2. There is a market for crap content and people are willing to pay for it and the demand is getting lower for higher priced quality material.
3. People just simply download anything because…HEY it’s unlimited.
Where can be the reality?
Artists also say that these subs don’t have effect on their potfolio that sell at higher prices. If that’s true then Nr.1 and Nr.2 are out, simply because they make sales at regular prices so the demand still exists for normally priced quality content.
So, my guess is that people just download like crazy because of the unlimited cornucopia.
Plus, subs are targeting developing countries and low or no budget productions which goes against any good business practices.Businesses should primarily focus on areas where the money is, not where isn’t. On the other hand, businesses should focus on areas where the growth is. In this twisted World the real growth is where money isn’t. In the hope of a potential high demand (growth) for cheap, I mean very cheap content (because the money isn’t there) , agencies will heavily undercut each other…and the market they are targeting is far from loyal and far from a so called good customer concept. It all goes against common sense.
At this point, according to artists’ experience regular and sub marketplaces can go well beside each other but if people will upload their better, newer content to those sub sites (and they will because people are just like this) even larger productions will move there and use those sites. It will mean more customers and more money for the agency and possibly somehwat more money for the individuals in the short term but in the long run only the agency will benefit from this situation because of the massive dilution of clips. Individals will be hidden in the sea of clips and won’t make downloads not even for 50 cents. Agency win, customers win, artists, who actually make it all possible to license, lose.
Not to talk about the classic online thief fact that so called “paying clients” will download content with an unlimited plan then just simply resell them and make money with stolen content until they’re caught. This way customers will be using illegal content in good belief while the original artist won’t make any money. Only the thief and the agency will make money…and let’s be honest many agencies wouldn’t hurt itself to get the stolen material being removed.It doesn’t really matter for them which clip is downloaded they just want the money for the subscription. Corporate greed is unstoppable. This scenario is a win for the agency (if the credit card used for the payment was real) and a lose for the customers and for the artists, not to talk about that this scenario can easily shake this whole and not very strong industry because of lost trust and credit. Agencies, even if they wanted to, won’t be able to stop the thievery from the unlimited plans. Customers will migrate back to the more expensive but trusted sites but it takes time…way too much time.
If you’re an artist/contributor or an existing or potential customer and are reading this, please think about twice before you let your content into these sites or subscribe to these services. Don’t undervalue your (artist and customer both) content in this crazy way. While sub sites can be ok but unlimited or close to unlimited plans are the killers of this industry.
But we aren’t at that point just yet, so the actual current drop in sales probably not coming from here.
It might be interesting that agencies communicate Unlimited plans to the buyers and when they talk to contributors they say that these aren’t unlimited because subscribers are being monitored and if they download too many (whatever this means) clips, agencies won’t allow them to do that. So, it’s Unlimited or not? This thing just stinks right from top to toe…but whatever we call these plans the actual content creators make peanuts.
So what else?
Let’s get back to April 2019. That’s the tax season in the US. That might have been the point when US potential or exisitng customers realized that this year isn’t that shiny and they started to cut expenses. Obviously it’s an industry which provide absolutely non-essential products so it’s a perfect point to start cutting costs.
What could be behind it?
The Trade War probably started to make its first impacts on the US and uncertain market conditions crawled into businesses. The first signs of recession because of the forming US stock market bubble which is by now about to pop in any moment, alongside with the high and rapidly increasing prices in the US, altogether might have caused this quick change. It wasn’t a quick process but it happened quickly just like businesses started to realize when faced their tax reports that bad things are happening and more coming…and honestly, which business wants to invest more into making new content when basically anything can happen, anytime.Under a dark, sinsiter sky the thunder can come in any moment. The Trade War early impacts brought the biggest enemy of businesses and it’s uncertainty and inconsistency. This basically can halt all spendings.
Because the real buying power of this industry has always been the US the lack of US customers is painful. Pond5 was always a US heavy agency, Shutterstock could go furher and deeper and establish a strong European and even Asian market base. Adobe bought Fotolia which is now Adobe Stock but Fotolia was very strong in Europe and South-America but can’t be negligible in the US and Asia.
Let’s see what we have.
Increasing revenue but decreasing income. It means that even they sell slightly more but they have to spend a lot more to make sales, probably because of decreasing natural demand from the US. While the agency makes slightly more, the individuals make significantly less because of content dilution.
It basically could mean that SSTK isn’t really a growth stock anymore or at least not under these economical conditions. That’s why it’s not a surprise that Jon Oringer the CEO of Shutterstock stepped just a couple of days ago. He made SSTK big and hopefully it will grow further but honestly speaking it will be very hard to find someone that can fill his role.Anyhow, this is not good news, at all.
It’s also on the stock exchange but their revenue from Adobe Stock is integrated into the Digital Media section which includes many more elements so it’s not really possible to see the exact numbers made by stock media licensing but overall Adobe is doing really well and actually the only agency that was able to show growth in this huge drop season.
I guess, first of all because this company is huge. About 100 times bigger than SSTK, based on market cap and probably 500-800 times bigger than Pond5.
Second, because Fotolia was very well established in Europe and the Trade War doesn’t really have an impact on Europeans (yet). Simply because everything is already way overpriced in Europe and they are simply used to it. 20% more tariffs on this, 25% tariffs on that…in Europe people already paid 30-40% more for everything so they aren’t much effected, but in the US prices are rushing up simply because the US customers are the ones who pay most of the extra tariffs. This fact results cut in spendings on non-essential contents which also later negatively effects the performance of the US businesses.
Well…not easy.Pond5 is strange in these days, very strange. They are US heavy so they’re definitely hit hard by the wind of the possible US economy recession but on the top of that, they make mistakes.Many and ugly mistakes that I don’t think can’t be forgotten by many artists and because in this industry many artists are clients and many clients are artists, this agency with its current management, is cutting their own legs off. Pretty suicidal tactic. It looks like the Pond5 management don’t understand this industry. Plus it feels like (even if it’s not true but who knows really) that some artists are prioritized over others and some are punished by Pond5 which generates extra tension.
On the other hand, they seem to be trying hard but just the outcome isn’t good. It usually turns out to be really bad and they might be blamed for things that they didn’t do on purpose. I don’t want to defend them and I do think that someone is and must be responsible for this mess at Pond5 but there are always two sides and we probably don’t know everything about the happenings in the background. Anyhow, Pond5 seemsto be in a trouble but I do hope that it will find its way back to be one of the most trusted and best agency.
There are also other stock media agencies out there but these 3 are the most significant and based on their performance we can see where this market goes to.
So, What is going with the stock footage agencies?
The Final conseqence –
The primary reason behind the drop could be the much lower US demand due to the US-China Trade War that slowly but surely pushes the US (and possibily the World) into recession or even depression. The Corona Virus might make this decay faster and even more damaging Worldwide.
Plus all we see, is that enormously huge debt that US households, businesses and even the USA itself roll from month to month. In this environment companies don’t even know which segment they should target with their ads and marketing because everyone is swimming in the pool of debt.
Secondary reasons are the massive dilution in the content, and in case of Pond5 the management doesn’t seem to be very competent.
Upcoming reason can be the negative impact of the unlimited subscription models which can put an end to an era of digital media artists making a living by their creations.
All content of the post is personal opinion not fact and based on researches and publicily available facts (such as SSTK earnings). You can agree or disagree with the content but overall I hope you find it useful.