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business photography

November, 2012

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TIPS60 – Delivering To Clients When You Say You Will

Here is another of our videos offering tips and inisights into the business of photography. a transcript of the video is included after the jump.

(Continued after the Jump)

TRANSCRIPT:Here a few thoughts on delivering when you say you will to your clients if not sooner. I'm John Harrington. Here's the thing about delivering images, nobody likes it when you're late. You don't like it when a clients late, clients don't like it when you're late, but ultimately when you're delivering your images after the shoots been done you want to absolutely make certain you're delivering your images on time. If you can deliver them a little sooner, that's great. We do charge a rush charge with our clients if our turnaround time is two business days but the clients want it same day or or next day there is an additional charge, because they're asking for us to bump them up in front of everybody else to do the post production work necessary to get the images done. But it's important to make certain that you deliver those images when you say you will. If you can deliver them sooner, a little bit sooner that's great. If you're offering the client that courtesy to accelerate the turnaround with no additional charges thats your prerogative. But you want to make sure you have a schedule of when you say deliver the images so the client knows when to expect them.


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Alamy's Fuzzy Math: When a 10% Royalty Reduction isn't 10%

Alamy recently announced they would be adjusting the percentage of royalties they would be paying by 10% – in their favor. The reality, is, though, that it's actually going to impact your revenue by much more than that. It is important to note that Alamy pays one rate to the photographer when they have a “Direct” sale via their website, and one rate to the photographer after an Alamy “Distributor” (a.k.a. sub-agent) licenses an image, so both are provided. Here's how their numbers break down:

Alamy's 10 point Royalty Rate Reduction Direct
Sales
Distrib
Sales
Previous Royalty Rate to Phototographers 60% 40%
New Royalty Rate to Photographers (10 percentage point reduction) 50% 30%
Commission Paid by Alamy to Distributors on their Sales (unchanged) NA 40%
     
Example: $1000 gross sale Direct
Sales
Distrib
Sales
Gross Revenue Received by Agency $1,000 $1,000
Distributor Commission $0 $400
Net Sale After Distributor Commission $1,000 $600
     
Effect on Alamy's Share of Sales Revenue Direct
Sales
Distrib
Sales
Alamy Old Share of the Revenue $400 $200
Alamy's New Share of the Revenue $500 $300
By Dropping Photographer's Royalty by 10 points, Alamy Increased Revenue 25% 50%
     
Effect on Photographers' share of Sales Revenue Direct
Sales
Distrib
Sales
Photographer's Old Share of the Revenue $600 $400
Photographer's New Share of the Revenue $500 $300
Alamy's 10 point drop in Photographers Royalties Reduced Photographers' Revenue 17% 25%


Can this royalty reduction ultimately increase revenues to photographers?


Alamy has implied that this reduction in photographers' royalties will be invested into improvements that will result in increased gross sales revenues, and by extension, increased revenues for photographers. To increase gross sales revenues, Alamy must either increase its prices to customers (doubtful) or grow its sales, or both. Let's do the numbers.

How much would Alamy need to increase sales in order to provide photographers with the same revenue received under the old royalty rate? Direct
Sales
Distrib
Sales
After reducing royalties by 10 points, Alamy must increase sales by these percentages in order to provide the same revenue to photographers. Note: This is the minimum, providing 0% benefit to photographers. To provide any benefit to photographers, Alamy would need to beat these percentages: 20% 33%


Do you believe that given current market conditions and trends, Alamy will successfully increase worldwide direct sales by a minimum of 20% and worldwide distributor sales by a minimum of 33% ? If they don't hit these minimum targets, photographers will experience drastic reduction in royalty revenues from Alamy. If they hit these minimum targets, photographers will be revenue neutral.

If Alamy successfully grows its sales so as to meet the growth percentages indicated in the above section, what is the benefit to Alamy? Direct
Sales
Distrib
Sales
If Alamy achieves sufficient sales growth to provide photographers with the same revenue received by photographers under the old percentage (0% benefit to photographers), the net revenue to Alamy after paying photographers/distributors will have grown by: 50% 100%


Although Alamy is unlikely to increase its prices to customers, it is helpful to consider an example. Using the $1000 example sale referenced above, let's see how much Alamy would need to increase its prices in order to provide photographers with the same royalty revenue received before the 10 point royalty reduction.

  Direct
Sales
Distrib
Sales
Example: gross revenue on a sale $1,000 $1,000
The royalty revenue to the Photographer at the old royalty rate was $600 $400
To provide that same revenue to the photographer under the new royalty rate, Alamy would need to increase that $1000 sales price to $1,200 $1,333.33
This increase in pricing to customers would be 20% 33%
     
Alamy's Share of the $1000 sale before dropping photographer's royalties and before increasing sales was $400 $200
The amount received by Alamy under the new scheme, after increasing sales sufficiently to provide photographers with the same revenue as photographers received previously $600 $400
Amount of the increased revenue to Alamy $200 $200
By decreasing photographers' royalty rate and by then increasing sales sufficiently to provide photographers with the same royalty revenue as received under the old royalty rate (a 0% benefit to photographers), revenues retained by Alamy increase by 50% 100%
(Continued after the Jump)

Is this fair? Well, it's a business decision. However, let's take a step back. The 50/50 percentage hasn't been fair for at least a decade. Why? Back in the analog days, it cost money for a New York-based stock photography agency to receive, catalog and store your images. Once that effort was made, when a call came in, for, say, a Time Magazine stock request, an image license for 1/4 page was about $250. There was physical labor involved in locating the image, filling out the tracking sheet and delivery memo, packaging the image for shipping, and then, when the image was returned, confirm the image wasn't damaged, and then re-file it, all for a 50/50 split of $250, or $125 to the stock house. I'll even include a few years where the stock house was converting their libraries from analog to digital, and so they incurred those costs. Now, it's all digital, with little to no human interaction required, yet not only did the 50/50 split persist, but it's eroding away even further, and unfair. Now more than ever, photographers need to be their own distributors. You will see Getty Images making a similar shift in percentages in the near future. We'll tell you why, when they announce it.


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TIPS60 – The business-critical matter of prices being based upon your costs

Here is another of our videos offering tips and inisights into the business of photography. a transcript of the video is included after the jump.

(Continued after the Jump)

TRANSCRIPT:Here are a few thoughts on how you might set your prices as a photographer. It's complex, but it's simple. The simple side of the equation is what you set your prices at have got to be more than what it costs you to be in business. I know that sounds like a simple concept, but most people don't understand what it costs to be in business. If you do not know what your cost of doing business is, you need to sit down at the NPPA's calculator on their website. Check out the URL below. Go to the NPPA business calculator and calculate your cost of doing business. Once you've done that, you know what you need to charge at the very minimum in order to stay in business. After that pricing gets to be a little bit more complicated, but understand that prices have to be more than costs. It's really a simple concept that most people don't focus on when they're starting out they just think, “”Oh it's a few hundred dollars, that'll be fine.”” Not when it costs you twice that to be in business.


Please post your comments by clicking the link below. If you've got questions, please pose them in our Photo Business Forum Flickr Group Discussion Threads.

TIPS60 – Choosing Your Business Entity – S-Corp, LLC, or Sole Proprietor?

Here is another of our videos offering tips and inisights into the business of photography. a transcript of the video is included after the jump.

(Continued after the Jump)

TRANSCRIPT:There's a big difference between being an S-Corp, an LLC, and a Sole Proprietor. I would strongly encourage you, for a variety of reasons, to strongly consider being an S-Corp. An S-Corp gives you really substantial tax benefits. I am not an accountant nor am I a lawyer, so this should not be construed as legal advice or tax accounting advice. So talk to your lawyer, talk to your accountant about this. But a Sole Proprietorship is a great way to start your business. I started my business and ran it for over twenty years as a Sole Proprietorship. I then took a second look and really should have done it sooner and determined that an S-Corp really was the better way to run the business. By being an S-Corp it actually costs you less in taxes, it allows you to write things off differently, and here's a big deal from someone who has been audited by the IRS, the probability of you being audited by the IRS, when you're an S-Corp, is a fraction of what it is when you're a Sole Proprietor. Sole Proprietorship who write off in Schedule-C's often get audited and certainly at a much higher rate than an S-Corp. So look carefully at your options.


Please post your comments by clicking the link below. If you've got questions, please pose them in our Photo Business Forum Flickr Group Discussion Threads.

TIPS60 – Keeping & gaining clients in a challenging market

Here is another of our videos offering tips and inisights into the business of photography. a transcript of the video is included after the jump.

(Continued after the Jump)

TRANSCRIPT:Here a few thoughts on gaining new clients in a bad market. I'm John Harrington. One of the ways in which you can work on growing your client base in a bad market, one where the cyclical nature of the economy are ups and downs and people may not be ringing your phone, calling you to ask for you to do this work is to reach to clients that are a little more insulated from the ups and downs of the economy. Move to that next tier up, but doing that you when you deal with clients that are not so concerned with whether the economy is down or not because they are all higher tier client. Maybe they're planning for six months or a year out and you can deal with those clients, work with those clients, step outside your comfort zone and talk to somebody who you may have thought was out of your league before, but now is someone that you have the time to reach out and speak to, talk to, and convey to them at you're confident and capable of doing the work that they're looking for. And also do something like reaching out to past clients who may have forgotten that you exist. Those clients may not be happy with who they are using or may all of the sudden realize that they need new head shots or new other types of photography.


Please post your comments by clicking the link below. If you've got questions, please pose them in our Photo Business Forum Flickr Group Discussion Threads.
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