Corbis to take 'microstock' plunge

This month, Corbis, an established but traditional seller of stock photos, will add its name to the list as part of an effort to attain profitability. Until now, the company has missed out as this "microstock" market blossomed, with networks growing to encompass thousands of photographers and buyers. Gary Shenk, Corbis' president and, come July 1, its chief executive, is unworried about the timing.

"It's by no means too late," Shenk said. "We feel the microstock industry is still at the top of the first inning. Nobody's really emerged with the ultimate experience."

Corbis is the other company founded by Bill Gates, who still owns 100 percent of its shares. It has yet to become profitable, but the microstock site and Shenk's promotion to CEO are elements of a turnaround strategy.

"We're going to be acutely focused on profitability over the next couple months," Shenk said.

The growth of microstock sites has been fueled by the increasing quality of digital cameras, the eagerness of amateur photographers to make a little supplementary income, and an appetite for low-cost, royalty-free photos. Corbis' two biggest rivals moved into the microstock business in 2006, sending a clear message that the microstock business was to be taken seriously. Jupiterimages acquired a 90 percent interest in Stockxpert, and stock art leader Getty Images acquired iStockphoto.

The head of one microstock rival, Fotolia, said he's unworried about Corbis' arrival as a direct competitor. "They have the name of Corbis, but it's a new business," said Oleg Tscheltzoff, Fotolia's co-founder and president. "What makes a microstock site successful is the customers," and Corbis will have to attract a new set.

A warm welcome
Corbis may be late to the microstock party, but it won't need much of an introduction.

"I will definitely apply to the microstock offering from Corbis. No hesitation," said Lee Torrens, author of the Microstock Diaries blog and an amateur photographer who submits his own photos to several sites. Given that he's a hobbyist, not a professional, though, he has modest expectations Corbis will approve his work.

Deciding whether to join a new microstock--thereby potentially reaching a new batch of buyers--isn't the no-brainer it might appear to be at first glance. It takes time to upload photos, tag them with keywords and ensure that model release forms are filled out and attached when images show human faces. Torrens concluded earlier this year that some second-tier microstocks might not be worth his time.

Torrens expects Corbis to be worthwhile. Although it's hard for cash-strapped microstock start-ups to build critical mass, he said, Corbis "has a large existing business behind them, one of the top brands in stock photography and probably all the industry contacts there are," he said. "These same factors will give them sufficient advantage to easily overtake the second-tier players."

There often are incentives for stock photographers to sell their work exclusively through one site--iStockphoto lets top exclusive photographers keep 40 percent of the proceeds compared to 20 percent for ordinary members, for example--but Corbis is counting on photographers spreading their eggs among several baskets.

"One thing we have going for us is that photographers are submitting to multiple sites. Very few are exclusively submitting to one site," Shenk said.

That assessment was one factor in Corbis' decision to build its own microstock site rather than purchase an existing one. "None of these companies out there have enormous barriers to entry or competitive advantage," Shenk said. "We decided building it ourselves, given the valuation environment, was a much better way to go."

Corbis can offer microstock members something most others can't: access to the higher-end stock art market. "We're using the microstock as a farm club to find great photographers who can sell their photographs on the main Corbis Web site," Shenk said.

Microstock sites may have shaken up the stock photo business, but Shenk plans on doing some shaking of his own by taking the microstock business into new domains.

"Right now the microstocks are still operating as mini-Corbises and mini-Gettys, selling into a very low end of the professional market," Shenk said. "The big opportunity is finding a much broader customer base--people who may never have bought a picture before (such as) kids putting pictures in school reports."

Fending off competitors
But what about being eaten up by the little guys, or in iStockphoto's case, the little guys backed by big guy muscle? In some areas of the technology business, companies that build a business selling lower-end products can dethrone companies with higher-end, higher-cost alternatives, as chronicled in The Innovator's Dilemma by Clayton Christensen. Shenk doesn't believe Corbis is vulnerable, though, when it comes to stock art.

"It's much harder to start at the bottom and work your way up," building a sales force to target big ad agencies, creating effective search technology, assembling a consistently high-quality portfolio and ensuring rock-solid copyrights and model release rights. In contrast, he argued, "For us to launch a micro site, that's relatively straightforward."

The other threat is whether cheaper sites will gobble up business by luring away otherwise high-paying customers. Shenk's counterpart at Getty, CEO Jonathan Klein, thinks the issue is legitimate but minor.

"I think cannibalization is a fact of life--and completely overblown," Klein said. But in a reference to the iStockphoto acquisition, he added, "If I have to be cannibalized, I'd rather cannibalize myself and find a new customer base."

Shenk agrees that microstocks generally involve new customers. "Nine out of ten customers of microstocks would never contemplate (buying) a picture at Corbis or Getty. The vast majority of microstock customers haven't even heard of Corbis."

The cannibalization issue may be slight, but the flip side is that Corbis can't benefit from a well-recognized, trusted brand.

Bruised business
Gates' initial vision for Corbis was a supplier of images people could display on flat-panel screens he imagined would festoon homes. Indeed, Gates' house has many such screens, though the controlling software is in need of an upgrade.

To that end, the company bought rights to "iconic, historical and celebrity" images, Shenk said. Classic photos of Marilyn Monroe and Albert Einstein are in the collection.

"Fifteen years later, that model is starting to emerge," Shenk said, though so far mostly on the tiny screens of mobile phones, but in the meantime, Corbis has struggled financially.

Though the Seattle-based company has 1,100 employees in 24 offices in 16 countries, and though its revenue increased 11 percent to $251 million in 2006, Corbis remains in the red.

To cut expenses, the company is installing a new accounting and business operation system that will gradually unify the computer infrastructure across the 27 different companies Corbis has acquired. And it will overhaul its Web site to make e-commerce easier and less expensive, he said.

And to increase revenue, the company has three main thrusts. The microstock push is one, but, Shenk predicted, "For the next few years it will be a sliver of our business."

More significant in the near term will be the rights services business Shenk led within Corbis, in which the company handles the chores of acquiring images such as songs or artwork used in advertisements and movies. That business accounted for about 20 percent of Corbis' revenue in recent years, Shenk said.

And for licensing its photography, the company is expanding its focus from editorial buyers such as the news media to the larger market of commercial buyers such as advertisers. There, Corbis will take on its larger rival more directly. "Getty is in the sweet spot, and that's where we're going now," Shenk said.

And though microstock appeals to some commercial buyers, such as those who produce annual reports and PowerPoint presentations, Shenk believes all the emphasis on microstock has distracted competitors from more lucrative customers.

"While other companies are racing to the bottom of the market," Shenk said, "we're capturing a lot of share in the large, commercial part of our marketplace."