Wednesday, December 12, 2012

Getty Images and iStockphoto - A Corporate Marriage Made In Hell

“iStock becomes less profitable with increased success.  As a business model, it’s simply unsustainable: businesses should get more profitable as they grow.”

“Money will not make you happy.”

Kelly Thompson, Sept 9, 2010

The big fish devouring the little fish is as common place in and nature as it is in the annuals of business.  Getty Images purchase of the upstart online stock company, iStockphoto in February of 2006 blazes a familiar trail of corporate takeovers.  However the history of what happened to iStock, it’s contributors and buyers of imagery is a sordid tale of greed, mismanagement and underhandedness that would entice Al Capone to repent of his sins. 

A Bit of History was founded by Bruce Livingstone in May, 2000 as a free stock image site that gradually evolved into a stock agency where the photographers were paid though at very low values.  Over time that grew and provided a profitable return for contributors.  Exclusivity was encouraged and those that complied resulted in additional perks such as quicker approval time for submitted images and a higher royalty rate.  However, many remained independent but at a lower royalty rate.  The arrival of iStockphoto and other online stock sites (Shutterstock, Dreamstime, Fotolia, etc.) launched the Microstock wave that caused many traditional stock image companies to either flounder or go under.  Over time, iStock would add vector illustrations, video and audio clips to the mix of products to sell.  A sense of community developed through iStock’s forum which allowed a free exchange of ideas, help, critiques, complaints,  besides just hanging out with like minded creatives. 

Never the less, Bruce Livingstone’s sale of iStock to Getty in 2006 changed all of that, slowly like it always does, with the frog put in his pot of water on a slow boil.  There was much consternation in the forums with some despairing the change, some positive to the point of being delusional, and some people absolutely clueless as to what happened.  I will never forget the poster that wrote, “They couldn’t beat us, so they joined us.”  Poor soul.  Have working for a company taken over in 2000 and having lost my job as a result of it, I was leery of what waited down the road and was glad in my decision to never go exclusive there.  

And, that wasn’t the only takeover because private equity firm Hellman & Friedman bought Getty/iStockphoto in 2007.  Since then, in October of 2012, The Carlyle Group announced its acquiring of Getty/iStockphoto.  

One Damn Thing After The Other
The first notice of Getty’s new ownership was the arrival of the “controlled vocabulary.”  This came from Getty’s keyword system and allowed for the use of multiple languages to used in image searches.  A lot of grumbling about that since the contributors were tasked with making the changes to their portfolios.  It was a lot of work, especially for those with thousands of images online.  At least it allowed for broader international search coverage and one thing that worked out well.

But other issues ensued over time and clouded over iStock’s sense of independence within a larger corporate structure.  Here is a brief look at the worst of them:

Redeemable Credits.  In the beginning, sales progression for a contributor was shown as film canister graphic.  Copper, bronze, silver, gold, etc.  This original system everybody was happy with.  It gave one a sense of something to work towards to, a viable goal for success.  In 2010 a new system of "redeemable credits" was announced which amounted to selling on a curve.  Now everybody would have to sell a certain amount of images to maintain their royalty percentage.  Few do with the added burdens of a bad search engine, price hikes and massive Getty image content uploads, among other issues so the majority took an income hit.  Many are calling for an end to the RC system but but an update from the General Manager stated that this won’t be happening. This announcement of this new royalty structure by former admin Kelly Thompson was accompanied by his now famous “Money will not make you happy,” quote which did nothing to soften the blow and certainly gained the ire of many.  Even worse, all were told that the original commission model was no longer “sustainable.”  They take an 80% commission from each image sale from the non-exclusives and that is not a viable business model?  Laughable.

Screwed up search.  Complained about for months on the forums, the “best match” image search has been tinkered with so many times buyers can’t find what they need and photographers have seen, for many, a drastic drop in sales.  Management has been hesitant to admit any problem, with GM Rebecca Rockafellar who at first would not admit to it at all.  This is an ongoing issue and apparently, the BM currently favors Getty images first.  Stay tuned.

Price Raises.  Multiple price hikes over time have caused many buyers to look for cheaper images at iStock’s competitors.  The pricey Vetta collection really raised the bar and to be fair, is made up of some very high quality and creative imagery.  But the slogan such as “The designer’s dirty little secret,” is from a bygone era.  Buyers know there are cheaper alternatives at other Microstock sites.  Notice these price hikes were not seen at Getty–but at iStock they were.  

Flood of Getty Images.  This was bound to happen.  Getty took various collections of images from their massive library of content and started flooding them on iStock’s servers.  Naturally, they get a high placement in search.  It annoyed many that these images didn’t have to go through the file inspection process and the original images could remain on their respective web sites–something no iStock exclusive photographer can do–thus cheapening the whole selling point of exclusive content not available elsewhere.  Not to mention how much competition these images bring to iStock contributor’s sales.

The Claw Backs.  In early 2011 there was apparently a surge in credit card fraud.  Some of the bigger selling contributors lost thousands of dollars.  One photographer, Sean Locke reported a loss of over $5,000.  Was he repaid?  No.  Nobody was.  I lost a few bucks myself so I consider my involvement in this very fortunate.  My heart goes out to those that lost their work and income to fraud and my never ending loathing of a company that allowed such a thing to happen through sheer incompetence and their failure to repay those who were robbed.  And to add to the resentment, contributors were promised new security measures in place to prevent this from happening again.  However,  claw back messages are still being sent out but are now vaguely worded so the photographer has no idea what happened.  Was it fraud?  Was it a refund?  Who knows?

Exchange Rate values resulting in questionable payments.  Probably the most confusing and convoluted mess currently ongoing at iStock.  So bad they’ve brought on a forum admin named iStock Lawyer to respond to questions.  Apparently, when the exchange rate goes up compared to the US dollar, the royalty percentage is taken from the original dollar amount, not the increased value, if any.  Also, exchange rates involve a lot of rounding up and down and the exchange rate for international currency is set monthly, not daily.  Various esoteric concepts such as “currency hedging” come into play.  Anyway, contributors have noticed discrepancies in moneys earned and get a lot of meandering answers regarding the issue.  iStock apparently quietly updated the Artist Supplier’s Agreement (ASA) to include rate changes which is in violation of the agreement to issue a 30-day notice for any such changes.  iStock Lawyer’s response?  To simply state that they had been doing this for years so no need for a notice.  Ha!  However, one poster on the forum had an original copy of the ASA showing that a rate change occurred on 9/7/12.  And no 30-day notice was sent out.  

And this is just a bare-bones account of what has gone on since iStock was sold in 2006.  It’s one outrage after the other and I’m shocked that no class action lawsuits have been filed.  The credit card fraud and lack of reimbursement should be reason enough alone for one.  They have proven themselves unworthy of trust and unethical in their deeds.  

The Clueless Among Us
Some people don't seem to get what happened.  Getty did not buy iStockphoto to grow the brand.  No big company does that when it buys a smaller company viewed as a competitor.  They either absorb the company, cut out the fat, sell off the assets or keep it functional but on a tight leash.  That is basically what happened to iStock.  This was evident early on when Getty would place ads for their content on iStock’s web site but no link-back on Getty’s site for iStock's images.  Then with the reduction in royalty rates with the RC system, lack of marketing of iStock’s brand, poor search and the price hikes, so the main marketing point of iStock was devalued.  It was on the leash at that point.  Every decision Getty made, some which looks dull-witted in retrospect, was meant to devalue the iStock brand.  And at that, they succeeded.  They started slowly at first but now it’s full speed ahead.

It was quite telling when the contract was changed from agent to distributor.  An agent has their client’s best interests in mind and acts accordingly.  A distributor doles out the product with no other interest than moving product.  That’s how cold the business relationship is with the content providers.

Many people on the forums complain about Getty management not giving them any respect.  Hey people, it’s Crowd Sourcing.  You work too cheap to be respected.  You are the peasants at the King’s gate with your torches and pitchforks.  That’s why the Redeem Credits model was instituted (with Shutterstock’s subscription model arriving before that) to keep the peasants in their place.  You rose up too high.  Now it’s time to put you back down to where you started.  Where you belong in their eye.

Future Days
Corporations are needed things.  They give us jobs and a good life if principled people are in charge.  They also can lapse into oppressive organizations capable of all kinds of unprincipled deeds.  Many people constantly blame iStockphoto’s management for these awful decisions and the mess it has become, but really, most of the decisions have come down from on high.  iStock management for all intent and purposes no longer exists.  Getty has the majority of the blame for what has happened.  One must wait and see what Carlyle management will do with all of this.  

I suppose there are worse examples of corporate takeover, greed and incompetence besides the Getty mauling of iStockphoto.  But this situation has taken a turn to the dark side so rapidly it’s amazing to watch.  Nobody could have dreamed up such a scenario as has unfolded.  It is as if sociopaths are in charge and no injustice is deemed too outlandish to carry out.  No telling what is coming in the future.  Sit back and see.