iStock Angers Contributors with New Royalty Formula

Microstock distributor (and Getty subsidiary) iStockphoto has announced plans to change it’s royalty structure to reward contributors who bring in the most revenue over the short term, instead of rewarding contributors for accumulating downloads over time. The new system, which is designed to increase iStock’s gross profits, takes effect in January.

iStock COO Kelly Thompson’s announcement about the changes on September 7 drew hundreds of responses from contributors. Many concluded that they would lose income under the new system, and expressed their outrage.

Thompson responded the next day, explaining that only 24 percent of contributors would experience a royalty-rate decrease under the new system, according to iStock’s projections. The rest would retain their current royalty rate or get an even higher rate, according to Thompson.

He also explained why the current royalty system, which raises contributors’ royalty percentages of as their lifetime download counts increase, had to go.

“As the company grows, the overall percentage we pay out to contributing artists increases. In the most basic terms that means that iStock becomes less profitable with increased success,” Thompson wrote. “As a business model, it’s simply unsustainable: businesses should get more profitable as they grow. This is a long-term problem that needs to be addressed.”

It hardly calmed the anger, drawing hundreds more mostly negative comments.

“Greed has taken over iStock,” wrote one contributor. “I feel like I’ve been stabbed in the back.”

Particularly angry are non-exclusive contributors, who already receive lower percentages than exclusive contributors. Under the new system, they are eligible to receive a maximum of only 20 percent of their sales. Exclusive contributors will receive a minimum of 25 percent, and a maximum of 45 percent.

To calculate royalty payments, iStock will track the so-called “redeemed credits” for each contributor’s images. Customers buy credits, and redeem them for image downloads. Larger image files cost more credits than smaller ones.  So redeemed credits accumulate not only on the basis of how many image downloads a contributor has, but what file sizes those downloads are. The more large image downloads a contributor amasses in a calendar year, the higher his or her royalty percentage will be the following year.

That effectively rewards the best and hardest-working photographers. By tying percentages to accumulated downloads, the old system rewarded not just talent and hard work but also longevity: Percentages crept upward toward the maximum of 40 percent regardless of how active the contributor was.

Although iStock is trying to assuage anger by emphasizing that contributors’ incomes will continue to rise as  iStock’s overall revenues climb, iStock’s own gross profit will rise even faster. After all, iStock says “we can’t pay everyone 40 percent and remain competitive,” so it is changing the rules to make sure it gets a larger share of the pie in the future, regardless of whether total revenues increase.

It’s a reminder of how much power distributors have in a market glutted with stock images. And the irony of the angry reaction from iStock contributors is how much it echos the reaction of rights-managed and royalty-free stock photographers back when Getty and other agencies were cutting their percentages with impunity. One rationale for those cuts was that the traditional agencies just couldn’t compete with upstarts like iStock, which was selling images for as little as a $1, and attracting contributors in droves who were grateful to sell their work for almost nothing.

History is apparently repeating itself, and it’s probably no accident that iStock’s new royalty schedule is designed to entice the next wave of hungry new stock photo producers.

12 Responses to “iStock Angers Contributors with New Royalty Formula”

  1. btezra Says:

    I also heard today that people who make horse carriages are upset that there’s a new fangled invention called “the automobile”, they’ve had to cut back on the # of people making new carriages and those folks who own stables and make horse shoes are also affected by this new invention that has caused the horse driven buggy business to take a nose dive and has caused owners of those companies to change the way they pay their employees…

    History repeats itself, too bad the stock image industry didn’t become proactive and think out of the box in terms of distribution, payment and expansion of the market.

  2. Marvis Willman Says:

    Regarding this: “And the irony of the angry reaction from iStock contributors is how much it echos the reaction of rights-managed and royalty-free stock photographers back when Getty and other agencies were cutting their percentages with impunity.”

    It’s hilarious that the iStock contributors think that they would actually be immune to what Getty has already done to its direct contributors, and to the agencies it represents.

    Welcome to real world. Post as many things as you want on whatever forum you like, as long as you know that you have absolutely no control, and no real voice, in what happens next if you want to play the game. 99% of them will simply take it, just like the rest of us have taken it over the years.

  3. Republic Monetary Says:

    I think it’s funny to read the outrage – they wouldn’t have this international platform if not for iStock. Sure, I can understand being upset about the changes but instead of whining they should adjust to the new rules or start their own distribution company & site.

  4. David Says:

    Keep in mind that iStock initially targeted people who couldn’t afford traditional RF, and began as a photo sharing site. Many of the contributors are also customers, and brought in other customers/contributors. Some of the customers are also leaving in protest:

    http://www.microstockgroup.com/istockphoto-com/buyers-bailing-on-istock/msg159480/#new

  5. J Says:

    Yeop….istock is not hurting financially and either is Getty. Sucks to be a photographer these days.

  6. Chris Says:

    “As the company grows, the overall percentage we pay out to contributing artists increases. In the most basic terms that means that iStock becomes less profitable with increased success.”
    - Laughable. As the company grows, it becomes MORE profitable, not less profitable. CEOs only talk about profits in terms of percentages when it suits their needs. Like in this case.

  7. Bill T. Says:

    I don’t have many images on istock, probably 120 or so. But if they go through with this new arrangement, I for one am thinking of pulling my images off. I also sell on 3 other microstocks. I’m sure they all will eventually do the same dance. Monkey see..monkey do.

  8. pam Says:

    For someone living currently on around 1,000 monthly, I admit hearing about any amount of income off of micro-stock had me a little envious. I have one image accepted at VEER but for some reason it doesn’t come up in any search for the keywords or subject of the image.

    Micro-stock is micro-stock. I think that they originated as image grabs and really never had any intention of passing serious money on to the contributors although they portrayed themselves as such.

    There are other ways of selling your stock but they are more time consuming and require more time spent by the photographer to set up and run (read: hire employees). Stock and Micro-Stock are the only ways to just submit images and let someone else do all the foot work for selling them and get paid commissions. License Stream has some interesting ways to sell stock and there might be a few others out there that I’m bit aware if.

  9. Mainecoonmaniac Says:

    The big stock will eventually become like big record companies. They will become dinosaurs. Photographers offering stock images could and should have their own websites to sell directly to art buyers. Flicker now offers licensing opportunities for photographers that use their service. I’m wondering both internet resources could be an equalizer to companies like Istock photo?

  10. Holgs Says:

    “History is apparently repeating itself, and it’s probably no accident that iStock’s new royalty schedule is designed to entice the next wave of hungry new stock photo producers.”

    I hardly see how lowering the commissions for new contributors from 20 to 15% is designed to entice anyone. If it makes the next wave hungry, it will only be in the literal sense.

  11. me Says:

    A very “polite” article that down plays the negatives for the photographers and doesnt cover many of the issues, like how people were offered at the beginning of the year to be ‘grandfathered’ into the old system if they became exclusive then.

    maximum of 20%, well yeah but not a single person achieves it (like the 45% for excls), and you dont mention that commissions start at 15% and there is upload limits and the levels for each rise are being redetermined every year. It is very clearly not designed to entice the next wave of hungry new stock photo producers.

    Reads like someone got a press release and one or two statements and hey presto article or as if someone was worried about upsetting getty.

  12. David Walker Says:

    @Holgs: new contributors don’t see a wage cut. All that most fledgling microstock shooters see is a way to earn pocket money by doing something they enjoy. The possibility of earning higher royalties by working hard and shooting well–regardless of how long you’ve been a contributor–is just added enticement for newcomers because it gives them a heady sense of control over their own destiny. But otherwise you’re right: for those who have gotten past the romance of being a photographer and want real money for their efforts, then yeah, the new pay structure is probably no enticement.