One way to satisfy customer demands for lower prices without reducing overall operating costs is to cut the amount paid for the product you’re selling. Over the past decade some stock photo distributors have used this strategy very effectively.
The charts below show how it is possible to cut the overall average price of the products without reducing revenue for the distributor. I should point out that photo distributors are not the only companies that treat their suppliers in this manner. Walmart is regularly accused of pressuring their suppliers to cut the cost of the products they offer for sale. And Walmart is not the only one.
The first column shows how much the average license price can be reduced, and still provide the same revenue for the distributor (column 4), if the distributors percentage of gross sale is increased (column 2). Note how the percent of revenue decline for the photographer compares with the decline in royalty percentage. Over the years customers see a significant reduction in costs and it all comes out of the photographer’s pocket.
These numbers are hypothetical and do not represent actual numbers of any distributor I know. However, in 2000 the average price of an image licensed through a combination of RM and RF licensing was probably in the range of $450.00. Average prices have steadily declined over the last decade, particularly in the last five years since the introduction of microstock. Today, many photographer find that the average they are receiving per-image-licensed (number of transactions) is very low compared to what it was a few years ago.
As a business planning exercise, I urge every photographer to look at their total stock revenue for 2005 and divide that number by the total number of images licensed in that year. Then compare that number with revenue and images licensed in 2010. Revenue may be going up and total number of images licensed may be going up because the photographer has been producing more aggressively, but what is important is to be aware of the average return-per-image-licensed (transactions) and the trends.
| Average |
Distributor |
Photographer |
|
|
Percent |
| License Fee |
Royalty |
Royalty |
Distributor |
Photographer |
Photog Rev. |
| For Image |
Percentage |
Percentage |
Share |
Share |
Decline |
| $150.00 |
50% |
50% |
$75.00 |
$75.00 |
|
| $125.00 |
60% |
40% |
$75.00 |
$50.00 |
33% |
| $115.40 |
65% |
35% |
$75.01 |
$40.39 |
19% |
| $107.20 |
70% |
30% |
$75.04 |
$32.16 |
20% |
| $93.75 |
80% |
20% |
$75.00 |
$18.75 |
41% |
| $88.25 |
85% |
15% |
$75.01 |
$13.24 |
29% |
| |
|
|
|
|
|
| |
|
|
|
|
|
| $450.00 |
50% |
50% |
$225.00 |
$225.00 |
|
| $375.00 |
60% |
40% |
$225.00 |
$150.00 |
33% |
| $346.00 |
65% |
35% |
$224.90 |
$121.10 |
19% |
| $321.50 |
70% |
30% |
$225.05 |
$96.45 |
20% |
| $281.25 |
80% |
20% |
$225.00 |
$56.25 |
41% |
| $264.70 |
85% |
15% |
$225.00 |
$39.70 |
29% |