Royalty-free subscriptions are attracting a lot of attention in our industry, these days. They were pioneered in the late 1990s by Val Gelineau at PhotoSpin and by Jim Saghir at WebSpice (now part of Index Stock). They were then expanded and improved by folks like Peter Gariepy and Paddy Vargas at ArtToday (now part of Jupiter Media) and Kim Dixon and Arlen Bartsch of Hemera (also now part of Jupiter Media). My stock photo agency, Index Stock Imagery, entered this market in October of last year with its Index Open product for high end designers. We have now also launched a product for small businesses and Web designers called Photos To Go Unlimited. Recently, our industry's largest player, Getty Images, announced that it was planning to launch a subscription product, soon.
So far, the success of the products has made them money-makers for the artists who are involved. I won't cite dollar figures (that info is just too proprietary, to share!). But, I have not gotten any complaints to date, from the almost 100 artists who participate in our subscription product.
However, many non-participating artists and industry pundits have worried that subscriptions are just too much of a giveaway, to be good for the industry. For the price of one or two royalty-free photo licenses, a subscriber gets access to tens of thousands of high-quality royalty-free images. (Index Open costs only $599 for six month access, and now offers more than 70,000 images at between 32MB and 50MB resolution.) Will subscription wipe out the flourishing single-image royalty-free market and perhaps damage further the flat or declining market for rights-managed images?
It seemed to me that the best way to measure the effect of subscriptions was to look at the behavior of some customers who are using them. (Note, all of this data is for our customers only, and through the end of July.) The first thing I wanted to know was what the average number of downloads per day, per user. It turns out to be about 1.4 images per day.
Note what looks to be a "normal" distribution. The actual number of images downloaded during any given week is likely to be fairly random and subject to large variation.
From customer surveys and follow up, we know that more than 90% of the images downloaded from the subscription are not used in projects. Instead, they are used in comprehensive layouts and proposals--most of which are changed before they are produced. Therefore, over a six month period, we could estimate that the average customer uses 1.4 high resolution images * 180 days * 10% = 25 images. This is pretty good value to the customer, since the one-off price for 25 high res royalty free images would normally be about $7,500. Of course, many clients buy royalty-free CDs. These discs offer between 60 to 100 images for only $300. That is cheaper than this subscription value. Some royalty free suppliers have started offering "custom" royalty-free CDs. They create a custom disc that contains a customers royalty-free pics, and sell it as though it was a regular CD collection. These package deals are probably competitive or even cheaper than the subscription price.
Of course, a subscription customer could theoretically take the maximum number of images per day (25 images for the Index Open subscription) each day, for a total of 4,500 images over a six month period. Are there people who are abusing the system? Do a few customers take hundreds or thousands of images, while the rest take none? Our information says that 95% of customers use an average of 5 or fewer images per day, over the course of their subscription. About two thirds use only an average of 1 image per day.
About 20% of our users never used their subscription at all. Rather than considering it a good thing, we are trying to fix this, by educating our users on the value of hte product. We want to keep our customer satisfaction rate high, to keep our renewal rate up. The average use by the rest of our customers of between one and five images per day, is pretty reasonable. Any full-time image-user should have at least one new idea to explore each day--and three to five ideas would not be uncommon. There is a small group of subscribers--about 3% of the total--who use an average of 10 images per day. Most of these accounts are Web designers and small design firms, that have to do a lot of layout options for their clients.
Averages can be misleading. Were customers using images steadily, or did they have big peaks of usage? To answer this, I found the maximum number of downloads, for each customer, during the course of his or her contract. As I suspected, there was some clustering at the 25 image max--from customers who had one-time peak needs. However, the rest of the users had a fairly even distribution of peak use--with most well below the maximum allowed level, per day.
In my next post, I plan to talk a bit about the trend of use over time. I will also offer some conclusions about the value equation of subscription products for both customers and artists.
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