Article on Microstock vs Macrostock

This is a very long article from the Business 2.0 Magazine

It is quite interesting as it gives background to the macro sties (Getty and Corbis) and the microsites (Fotolia, Shutterstock and Dreamstime). It details the issues the macro sties face, how they are addressing it and why micro sites wont kill of the macro sites.

I have only pasted in extracts so a link to the full article is below:

Photo wars: A $2 billion business gets rough
The giants of the stock photo business--Getty Images and Corbis--are being challenged by a flock of tiny "microstock" agencies. And it's become a game that almost anyone can play, reports Business 2.0 Magazine.

By Robert Levine, Business 2.0 Magazine
April 4 2007: 9:15 AM EDT
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Tscheltzoff is the president of Fotolia, one of a new breed of so-called microstock houses--born of the Internet and Web 2.0--that are challenging the giants and could soon start cutting into their market share.
While the big two offer exclusives on great photos at prices that range from a few hundred dollars to more than $10,000 apiece, these startups sell pretty good pictures for a good deal less--often just a dollar or two. Unlike Getty and Corbis, which compete fiercely to work with the top artists, the microstock firms get most of their photos the way Wikipedia gets its entries, by "crowdsourcing" work from interested amateurs or beginning pros.
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Although Fotolia sold 4 million images last year, it doesn't offer the quality or the exclusivity that ad agency art directors demand, so it can't charge premium rates.
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In a Manhattan Starbucks, a continent and a sensibility removed from the Corbis and Getty offices, Tscheltzoff is describing how Fotolia is trying to play David to the industry Goliaths. The company offers 2.2 million images taken by 25,000 photographers, but it employs only 18 people--all but three of whom work from home.
"We IM and talk on Skype," says Tscheltzoff, a Frenchman who splits his time between New York City and Paris. When he needs to take a meeting, he says with a sweep of his hand, "this is my office." Today's rent is a small iced coffee, which he sips as he explains how his business works.
As he describes it, the microstock model is the picture of efficiency. Submissions pour in electronically from photographers, who get 50 percent or more of the proceeds of each sale. The company has few inventory concerns, no shipping issues, and hardly any operating costs. The business broke even after eight months, Tscheltzoff says. (He won't reveal much more, except that annual sales are less than $10 million.) The biggest expense is marketing: selling the company to both prospective contributors and potential customers.
"If you don't have buyers, you don't get photos," he says. "And if you don't have photos, you don't get buyers."
Other microstock sites--there are several large ones and dozens of smaller entries--tell a similar story, although the details differ. Jon Oringer, founder and CEO of Shutterstock, based in New York City, sells low-cost photos by subscription--25 photos a day for $199 per month or $1,999 per year.
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Let's make one thing clear: These aren't necessarily arty photographs. Most microstock images are provided by amateurs looking for extra pocket money--many of Shutterstock's photographers make $200 to $300 a month--and at best they shoot the kind of pictures top art directors refer to dismissively as "stocky."
"The creatives won't choose the microstock photos because they're not tasteful," says Josette Lata, former head of art buying at JWT. "If it's a photo of a mother and a baby, you don't want them both looking at the camera and smiling."
But even stocky pictures have their uses--magazines trying to save money on images that will run small, Fortune 500 firms putting out internal newsletters, and, above all, bloggers and website designers. That's where microstock could really hurt Getty and Corbis.
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In February, during the company's earnings call, Corbis announced that it will build its own microstock site. In an interview with Business 2.0, Corbis president Gary Shenk insists that the company has nothing to fear from its tiny competitors. It just makes sense for Corbis to get a foothold in that business.

Link