Taking Stock

There is an ongoing discussion in the stock image business about the ethics and implications of selling the same content for different prices. The most recent thread appeared on Microstock Diaries and was later picked up in Selling Stock. This practice is known as price discrimination and is extremely common in a wide range of industries. But the volume and diversity of answers in this discussion lead me to suspect that people are interpreting the same question in different ways. I’d like to weigh in.

The answer to the question of whether to sell the same content for different prices has and will continue to be a resounding “yes.” The stock image business was grounded in this tactic (which has also mystified and frustrated creative customers for years). It’s easy to sell the same image with the same rights for different prices when your customer is quoted a negotiated price over the phone, as virtually all rights managed images are sold. This approach to pricing has been justified by arguing that only the buyer can value the image and it’s the seller’s job to capture as much of that value as possible. Frankly, this is similar to what happens in an auction, albeit with much greater transparency.

But this sales assisted model is difficult to scale with volume and has been undermined by lower cost alternatives sold online without human intervention. The very nature of digital distribution and its pricing transparency in worldwide markets make it reputationally risky and operationally difficult to justify selling the same content with the same rights at different price points (on a currency and tax neutral basis). Adobe ran afoul of price discrimination with the worldwide release of Creative Suite 3 in 2007 when they charged some customers in non-US markets more than 100% of the US price for the identical product delivered exactly the same way. Technically they didn’t do anything wrong but they left some customers angry and confused.

In my view, the more pressing question is “How do you sell the same content for different prices when everyone effectively knows the price?” A good example of this is the senior citizen discount for a cup of coffee at a local restaurant. The product being sold is exactly the same but one customer segment (say people 65 years old or older) pay a lower price than another (people under the age of 65). Those of us under 65 don’t dispute this pricing disparity because we intuitively understand that people on fixed incomes have less to spend. In a way it’s a charming quasi-social contract with the local diner. So while there are risks, price discrimination can benefit sellers and buyers by lowering prices for some customer segments while legitimately preserving higher price points for others.

The foundation for implementing successful price discrimination strategies for stock distributors is customer segmentation in conjunction with erecting effective barriers to keep these segments separated (known as rate fences). I strongly believe that customer segmentation should lead to the definition and building of new market segments beyond the creative professional, the mainstay customer of the traditional stock industry. One axis on which to define customer groups, and therefore pricing, is based on the rights required. Knowledge workers, for instance, which are estimated to outnumber all other types of workers five-to-one in North America, may only need presentation rights for PowerPoint. The 521 million students enrolled in primary and secondary education in 200 countries worldwide (the equivalent of K-12 in the United States) may only need home and classroom rights. If segmentation and pricing are successful, a distributor should see overall unit volumes increase with only minimal cannibalization. In my view, one key tenet for success with this approach is masking the complexities of licensing for the target customer altogether, especially if they are not considered professional buyers by industry standards.

We adopted this approach at Jupiterimages in 2008 (Jupiterimages was acquired by Getty Images in 2009). In looking at how to segment our customers we saw Photos.com as a platform for price sensitive, non-professional buyers where Jupiterimages.com was reaching the traditional creative pro (perhaps still price sensitive but in need of more rights than a non-pro). To meet the different needs of these two distinct groups, we stripped out three rights for images licensed on Photos.com and made them available for purchase separately. These extended rights (a 10 person, multi-seat license; a physical items for resale license, and; an extended, unlimited print run license) could be purchased for USD $100 each. This approach allowed for a lower starting price point of USD $5 for a multimedia resolution image. Back on Jupiterimages.com, where creative pros will more likely need one or more of these extended rights, we bundled all three into the price of the image license by default (i.e. buy one extended right and get two for free).

For example, this photo of a doctor holding an x-ray costs USD $10 on Photos.com in a medium resolution (suitable for a PowerPoint presentation). On Jupiterimages.com, this same image at a similar size costs USD $79.95. To buy the exact same rights for this image on Photos.com would cost an additional USD $300. That creates a negative incentive for a creative pro to buy on Photos.com and will help keep them on Jupiterimages.com, as intended. For the non-pro who may have the rare need for an extended license, the nominal price difference between one extended license and an image on Jupiterimages.com is $20. Not only are extended licenses competitively priced, sticky features like purchase history and lightboxes will keep these customers on Photos.com, as intended.

So in my view, the issue is not about selling similar content at different prices. The stock industry has a long history of this practice, typically in assisted sales. The larger challenge facing the industry is innovating new, scalable pricing strategies to enable development of fresh customer segments while slowing price declines in existing ones. One approach I would expect to see more of is customer segmentation, most likely through web sites targeting specific markets and workflows with features, functionality and messaging tailored to the unique needs of the intended audience. Stock seller 123RF.com is doing some interesting work in this area for corporate users as is Getty with Jupiterimages' ClipArt.com School Edition. Without this approach, many sellers may continue to try to be all things to all buyers in a race to the bottom on price.




Taking Stock by James Alexander is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License. Permissions beyond the scope of this license may be available at http://www.ozmo.com/frproduct/1087.

Wouldn't It Be Great If...

If I had a personal adage it would probably be, “There must be a better way.” In 2000 after launching venture-backed Mibrary, I started referring to myself as the company’s Chief Frustrated Consumer. It was a memorable way to be introduced and always drew a laugh of appreciation. As I look back now, it occurs to me that I have always been a frustrated consumer. To be sure, there are products that would put a smile on Vitruvius’ face. Some come from Cupertino. But many come up short, if the need is served at all. This pocket of underserved or altogether unmet needs is where I find inspiration. It is deep with discovery, possibility and opportunity.

My first company, eWatch, was formed in this pocket of possibility. The service got off the ground in early 1995 after I had a conversation with a PR executive of GTE at a Public Relations Society of America holiday dinner in Stamford, Connecticut. I wasn’t supposed to be there but my dad was traveling and mom needed a date (my parents have a well known and successful crisis communications firm in New York). I was 26 years old, listening to this executive tell me how the world’s largest independent US telephone company was being talked about online but GTE didn’t know where it was going on or what to do about it. Over the next few years, eWatch would monitor brand mentions on the internet every day for hundreds of Fortune 1000 companies. PR Newswire bought the firm in 1999. GTE was never a customer.

Mibrary was started in a similar way, inspired by the unmet need for managing one’s personal digital library of ebooks, music and movies. Unfortunately in 2000, there wasn’t much need going unmet. Timing is everything. But it was a neat idea and one that would surely be useful now with such a large proliferation of digital products and so many online retailers selling them. A few years later I would create and build Adobe Stock Photos, helping creative professionals improve their efficiency in sourcing stock content. It wasn’t until I had left Adobe in early 2008 to run Jupiterimages that I realized how much progress we had really made. Not only did Adobe Stock Photos’ customers have a lifetime value of three times an Adobe software-only customer, we drove more than 7,000 of them to buy from the embedded service in less than 36 months, a significant percentage relative to the total number of Jupiterimages’ traditional stock customers.

There are many reasons to start a blog. Mine is to help inspire others to keep looking for that better way. It’s for the Chief Frustrated Consumers. It’s for the thoughtful tinkerers. It’s for the innovators who like to start sentences with the words, “Wouldn’t it be great if…”



Wouldn't It Be Great If... by James Alexander is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License. Permissions beyond the scope of this license may be available at http://www.ozmo.com/frproduct/1087.