Sunday, January 8, 2017

Since It Can't Sue Us All, Getty Images Embraces Embedded Photos

[ed. I see Getty stock images every day. They're all over the net, so I began wondering about the company's business model. See also: Since It Can't Sue Us All, Getty Images Embraces Embedded Photos and Photographer Suing Getty for 1 Billion.]

Many companies are founded on inspiration or imitation. But Mark Getty, a grandson of the billionaire oilman J. Paul Getty, and Jonathan Klein, an investment banker who had been Getty’s boss, started theirs with a checklist. Tired of crafting deals for others, the pair came up with strict criteria for their own dream business. It had to be global, operating in a fragmented industry ready for consolidation, and on the cusp of change. And the less risk the better. “We didn’t want to fix something that was broken,” says Klein.

Although the business they started in 1995, Getty Images, didn’t have a big idea behind it like a Twitter or Facebook, it’s proven just as revolutionary. If Google is essential to navigating the Web, Getty has become essential to visualizing it. Cobbled together through acquisitions, Getty is the world’s largest photo and video agency, and its database of 80 million images is the raw material from which many of the Web’s slide shows and photo galleries are made. A search for its images of happy people, for instance, turns up 626,317 results. That depth allows Getty to license its image trove online to all manner of bloggers and websites, businesses small and large, advertisers, newspapers, and magazines (including this one).

With annual revenue approaching $1 billion, according to Getty, it’s become a media business too important to ignore. Carlyle Group certainly took notice: On Aug. 15, the private equity firm agreed to buy majority ownership of Getty from another private equity investor, Hellman & Friedman, in a deal that values the company at $3.3 billion. The Getty family and Klein will own the rest.

Mark Getty and Klein, a native of South Africa, were working at Hambros Bank in London when they stumbled upon the stock photo business. “It was a cottage industry, it didn’t have any business discipline,” says Klein, now chief executive officer (Getty is chairman). “It was run by and for photographers.”

They began by acquiring the premier photo library in Britain, Tony Stone Images, for $30 million. Since then, Getty has bought more than 100 other photo collections and companies. It went public in 1996, and three years later moved its headquarters to Seattle to be closer to the tech community and many of its customers. “They came in with a super-simple strategy and held to that,” says Stephen Mayes, who had worked at Tony Stone, stayed at Getty until 1998, and is now managing director of the photographer-owned VII Photo Agency. “They are not inherently entrepreneurial. They take good businesses and make them better.” Giorgio Psacharopulo, CEO of Magnum Photos, the cooperative started by Henri Cartier-Bresson and others, says: “We’re in awe of what Getty Images has been able to accomplish. But, like Wal-Mart, they operate at a scale that makes it difficult for smaller agencies to exist.”

Getty was early in recognizing the digital revolution’s impact on photography. In 1998, Getty acquired PhotoDisc, the first company to figure out how to sell photos in a digital format. “They always recognized the business eating their lunch and bought it,” says David Walker, executive editor of Photo District News, a trade publication. By 2001, Getty’s entire business was digital.

The bigger disruption came once digital cameras, and then mobile phones, began producing high-quality images—making everybody a potential photographer. By 2005, a company called iStockphoto emerged as the leading source of crowdsourced (otherwise known as amateur) images. Its average price for a photo was $2 to $3. Getty bought it for $50 million in 2006. “A lot of people thought we were cannibalizing our business,” Klein says. “But sometimes it’s perfectly legitimate to use a $5 picture.”

Getty’s move into the microstock business, as it’s called, came as the media and advertising industries were contracting and the Web was expanding. Soon Getty’s business model was turned upside down: While it started out providing expensive images for limited use to a small group of customers, now it also provides cheaper images for broad use to a big group of customers. Explains Klein: “The fundamental change is how and where pictures are being used.” Before Getty bought iStockphoto, it had some 150,000 customers a year. Now it has 1.3 million. “About 900,000 of them are small and medium-sized businesses, many of whom weren’t using images legally or at all,” Klein says. Fifteen years ago, Getty uploaded a few hundred photos a day; now it uploads tens of thousands. Getty used to license or sell 100,000 images a year; today it’s 30 million to 40 million.

by Susan Berfield, Bloomberg | Read more:
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