Selling-Stock has managed to gather more information about what has been happening at VCG. According to sources sometime after the Corbis acquisition VCG decided to copy Getty’s Premium Access strategy and launch a PA plan of its own. In addition to all the Getty and Corbis creative and editorial images, the iStock images are also available to the customers who purchase a PA plan.
The average image license fee for this program is $4.50 when the photographer has supplied the image directly to VCG and not through another agency. VCG’s split with photographers and illustrators is usually 25% to 30% of net revenue minus taxes and other unspecified “fees” so the royalty share can be less than $1.00, even for premium images. These prices are expected to drop further in 2019. In some cases, VCG will provide packages that allow unlimited downloads.
It is unclear what the percentage of the gross sale Getty receives (presumably more than 30%) before Getty calculates the royalty share that will go to the contributors who are contracted directly with Getty Images or iStock.
Legal Sales Team
One of the things that appears to have led to
China’s Cybersecurity Agency investigation seems to have been the activities of VCG’s “Legal Sale Team.” The goal of this team is to identify large users of images in the VCG collections, and pursue the these users legally for any unpaid uses of the images. So far, do good.
Part of the problem developed when VCG claimed compensation for all the the images that happen to be in its collection regardless of whether VCG had exclusive or non-exclusive rights to represent the image. If VCG represents the image non-exclusively then it is possible for a customer to have obtained legal rights to use the image through another source.
It appears that VCG made little, or no, effort to determine from copyright holders of the non-exclusive images whether the images might have been legally licensed through another source, or if the copyright holder would give VCG permission to pursue an infringement on their behalf.
The goal of the Legal Sales Team was to convert image users to regular customers. The tracking system VCG developed runs daily and find targets with great potential value. Once they identify image uses for which VCG has not been paid, the team contacts the target (usually by sending a letter from a lawyer) and offers settlement options.
Normally, the conditions are the following:
1) if a year based “cooperation agreement” is reached, the compensation fee for each un-authorized use will be lowered from 10K RMB ($1,500) to less than 1K RMB ($150), and the target will be converted to a regular customer. The total cooperation for an unauthorized use may range from hundreds of thousands RMB ($15,000 for 100,000 RMB to several millions RMB ($150,000 or more).
2) if target refuses to sign a cooperation agreement, the case will be referred to the courts, and the final compensation amount for each image used will range from 1500 RMB ($225.00) to 2500 RMB ($375.00).
If the target is unaware that VCG may not have the rights to make unauthorized use claims for all the images, they may sign a cooperation agreement in order to pay a lower price for the previous uses. If the target doesn’t agree and VCG is forced to bring a case in court, VCG only claims the rights for images where they have clear authorization from Getty, 500PX or local photographers.
In 2017 VCG filed 5676 lawsuits and in 2018 they filed 2968, or an average of 15.6 per business day over the two-year period. The Chinese government supports legitimate copyright protection, but is unhappy with the chaotic market that has developed.
Royalty Disconnect
If, in fact, some customers are signing “cooperation agreements” for annual fees of $15,000 to over $150,000 annually, it is hard to explain why Getty contributors continue to receive such extremely low royalty shares. (See this story. (http://www.selling-stock.com/Article/another-vcg-update ). Given the amounts being asked maybe all the customers have decided to fight their cases in court.
If the average net license fee is $10 and Getty receives 50% of what VCG earns that would be $5.00. Over 50% of the China sales Getty reports are for less than $5.00 – many way less.
If the annual fee is only $15,000 and the average price per image is $10 that would mean the smallest customer uses 1,500 images in a year. If the annual fee is over $150,000 that customer would have used more than 15,000 images in a year.
Granted, “cooperative agreement” customers may be getting “unlimited downloads,” but that is a lot of downloads for a single year. Is the value assigned each image a proportional share of the gross revenue collected for the “cooperation agreement?”
One certainly suspects that a huge percentage of “cooperation agreement” payments are being deducted as “fees” before the “net” amount is used to calculate the amount going to sub-agencies and royalties to creators.
Future For Image Creators
As the need for legal action grows in order to collect any revenue for image use, one wonders what percentage of the eventual fee paid by the customer ever finds its way to the image creator’s pocket.
Clearly, if the only way to get any compensation for image uses is to build systems to track all Internet uses of certain images, and then pursues each user through a complicated legal process that eventually, dramatically increases the cost of image licensing. A lot of additional expense is involved compared to a system where customers search for images on a site, and then make a legal purchase before using the image.
Nevertheless, it seems more and more image users want to grab images anywhere they can find them, rather than paying a fee for what they need. Many think it is their right to use anything on the Internet in any way they choose. Those who realize they should be compensating the creator in some way, also believe there is very little chance of being caught so they take the risk.
So, when some money is finally collected, a huge percentage goes to the lawyers and the legal administrative system, another huge percentage goes to the organization that was able to identify the unauthorized use. After all these people and organizations are paid their normal rates, then, if anything is left over, (which is usually almost nothing) it goes to image creator in compensation for his/her work and expense in creating the image in the first place.