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The Impact of Royalty Free
A clearer picture is now emerging of how the Royalty Free business model has adversely affected the market for stock imagery. The consequences of this “simple” solution to stock licensing that gives away so much for so little are becoming more apparent to any observer willing to take a closer look.
Lost Revenue
Current industry revenues are estimated to be around two billion dollars a year but have flattened out in the past few years after a period of growth. There is compelling evidence to suggest that Royalty Free is responsible for diminishing the revenues made for image licensing by a significant amount. RF has not only deflated the fees paid per license but by offering unlimited use, it has lost the potential for future revenue as well.
We are seeing the fallout in the growing disconnect between image usage and purchase intentions. Surveys of image buyers suggest that more of them are re-using RF images, especially those who are most cost sensitive. So, after the huge short-term revenue gained by the sales of RF CDs, the consequences are reduced purchasing by the very market that the RF marketers were originally targeting.
Another issue relates to the inability to track RF uses since clients simply pay the unit purchase price and feel that they essentially “own” the image, regardless of the fine print. This perception of a carte blanche license, which has been perpetuated by RF marketing approach, has certainly led to extensive unauthorized use of RF images. For example, a design firm purchasing RF CDs with a license for one client may then use the images on projects for many different clients.
As Royalty Free brands reposition themselves at the high end and low end of the spectrum to target different users, we are seeing new strategies to attract budget users through increased promotions and deeper discounting. A growing segment is RF subscription sites which offer unlimited access to an online collection for one flat fee in the hundreds of dollars. One subscription site actually mentions that there is a “maximum download” of 200 images per day allowed. So, RF images that once sold for dollars are now being sold for pennies.
We can only speculate as to the magnitude of lost revenues for the stock industry because of the “over generosity” of the RF model, as well as from what appear to be extensive unauthorized uses.
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