Digitization and the paradox of informational reach in stock photography Evidence from Germany Johannes Glückler, Ams

1. Digitization and the paradox of informational reach in stock photographyEvidence from GermanyJohannes Glückler, Amsterdam, 26 January 2006

2. The market challenge in stock photography • Shrinking budget, increasing demand • Consolidation and market concentration • Digitization, digital photography & e-commerce • royalty-free photography Annual reports, Form 10K, press, own research, * Zefa was aquired by Corbis in 2005.

3. AGENDA • shifting the informational trade-off in stock photography • Case study Munich: Reorganization of the supply chain • Questions for future research

4. Personal trust Personal recommendation (reputation network) Public information Richness and reach in information economics Richness = Depth, validity, precision, reliability and relevance of information Richness Reach = Number of people who receive a certain information Reach

5. Shift of the trade-off through technological innovation Richness technological Innovation Reach

6. Share of e-commerce in overall sales at Getty Images Source: Getty Annual Reports A new trade-off through digitization “But the perennial problem for the user is how to access the many thousands of images available. Library researchers do their best to interpret and satisfy phone and fax briefs. But most encourage personal visits. Ultimately, the best approach is for clients to come in and search themselves. They have something in mind about what they are looking for, and ‘the search may spark off other ideas too,’ says Harold Harris, director of Zefa. … ‘When people choose pictures themselves they tend to use them,’ says Kate Pink, library manager at The Hutchison Library” (Purdom 1994). Richness “I can't understand why any picture library can consider going on-line“ (Sal Shuel, BAPLA 1995) traditional Picture library Online-Databank (e. g. Getty Images) Picture agency (e.g. The Image Bank) Reach

7. Royalty free – virtualizing the customer relationship • Royalty Free • Once-for-all purchase of a licence without future limitation at a fixed price • Organizational innovation • Adoption from the music industrie at the beginning of the 1990s • PhotoDisc pioneered this business model in Seattle • Dissemination • 7% in Europe, 15% in the USA (2000) • Getty Images grows increasingly with RF Getty Images, Annual Report 2003

8. Photo Agencies in Germany, 2005 Number of stock photo agencies, 2004 Source: own research based on BVPA-Membership directory and additional research

9. Geographic concentration of media industries in Munich • Munich continues to be Germany‘s leading location for the media sectors. Despite the recent economic downturn, the business sector experienced absolute employment growth over the last 5 years. Number of firms out of the TOP 50 (*30) firms in each market segment in Germany www.wuv.de

10. Digitization and the reorganization of the supply chain

11. Reorganization 1: Specialization between agencies • The production agency • The ‚collection‘ as value proposition • Market screening, strategic planning and production of new image collections • Sales partnerships increasingly also at national level (up to 70% of sales through partner agencies) • The sales agency • Market access as value proposition • customer access, market visibility and large photo stockare key objectives • Supply-partnerships with production agencies •  Redundant image supply on the market

12. Reorganization 2: Margins for navigators • Internet portals • Agencies use prominent portals to enjoy higher visibility for the customer. • Different organizational designs: search engines, portals (e.g. Alamy), subscription systems (APIS) • Pluralization of sales channels • Picture Research Service • Value proposition: compilation of photo selections from the global picture supply • No service charge for customers, agencies pay commission fees • Many agencies and customers in Munich the Hamburg based service

13. RM sales partnerships 1985

14. RM sales partnerships 1990

15. RM sales partnerships 1995

16. RM sales partnerships 2000

17. RM sales partnerships 2005

18. RF sales partnerships 1995

19. RF sales partnerships 2000

20. RF sales partnerships 2005

21. Technical and organizational innovation in the picture supply Richness Picture Research Service traditional Picture library Online-Databank (e.g. Getty Images) Picture agency (e.g. The Image Bank) Portal (e.g. Alamy) Reach

22. Conclusion: From production to navigation of information • Absolute profit losses for photographers • No significant growth of market revenues • Shrinking fees • More intermediary distributors divide up the fee • Increasing production risk for photographers • Profit losses for picture agencies • Commission fees shift from customers to suppliers • Navigators act in favor of the customers • No more fees for administration • Profit gains for navigators and technology providers

23. Questions: Does digitization ease global informational reach? • Increasing internationalization • Expansion of market leaders through M&A • Sales partnerships • Barriers to internationalization • Violation of intellectual property rights by customers and sales partners • Language barriers (caption and keywording) • Different image styles • Service offshoring • Outsourcing of scanning, keywording and picture manipulation • Examples for offshore-activities in East Europe and China

24. Question: Is spatial proximity necessary to ensure informational richness? • New problem of digitization • Increasing reach creates information overflow • Increasing demand for navigation services • Still-not-solved problem • Reach cannot be extended infinitely for all sorts of information (and knowledge) • Organizational production of richness • Traditionally: spatial proximity • Today: organizational proximity, trade fairs, conferences and professional navigators • Geographic disembedding of customer relationship „Well, [this agency] is based in Frankfurt or Cologne. Anyway, it doesn‘t matter, the only thing that matters is the picture.“ (Interview 41).

25. Question: Will urban photography clusters dissolve? • Effects of decreasing distribution costs • Service offshoring: sourcing out routine jobs to the low labor cost periphery • Urbanization advantages of non-routine transactions (creativity, innovation, lobbying) • The lower the distribution costs, the stronger become centripetal effects on firm location in a few metropolitan super-clusters • Counter effect against global concentration • Diseconomies of agglomeration • Low entry barriers increase niche options for secondary centers • What about the agglomeration dynamics in stock photography? Scott (2000, 2001), Leamer and Storper (2001)

26. Backup

27. Firm age and size by eployment Year of firm foundation Number of employees

28. RM sales partnerships in Germany 1985

29. RM sales partnerships in Germany 1990

30. RM sales partnerships in Germany 1995

31. RM sales partnerships in Germany 2000

32. RM sales partnerships in Germany 2005

33. RF sales partnerships in Germany 2000

34. RF sales partnerships in Germany 2005

35. RM 1990 RM 1995 RM 2005 RM 2000

36. Method and case study group • Semi-structured interviews at all levels of the value chain • Total of 48 interviews with photographers, photographer agents, picture agencies and customers # interviewees by primary activity