Getty Confidential Information: Part 2

Here are sections of Getty confidential info memorandum. How confidential and secret it is? Not too much since they posted it on the web. It's on the SEC EDGAR, the US stock market reporting system. The full document is available at: Getty SEC fillings

"Getty: EXCERPTS FROM CONFIDENTIAL INFORMATION MEMORANDUM" Jun 2008

Trends in Imagery Market

Two key trends are currently impacting the imagery market in which Getty Images operates. The first major trend is the transition from traditional print-based image usage to web-based usage. Corporations and advertising agencies are relying more heavily on electronic communication, including Internet advertising, and therefore are printing fewer brochures and marketing collateral. The second major trend is the introduction of microstock images. The proliferation of microstock has significantly expanded the imagery market, both increasing the number of available stock images and providing stock images at price points affordable for smaller businesses. Together, these two key trends are leading to a dramatic overall increase in the number of images being used, which benefits Getty Images, as a leading supplier of pre-shot imagery. A significant portion of this new demand, however, is at lower price points than traditional print-based stock imagery and has put pressure on overall industry revenues. These two key trends are described in more detail below, as well as a description of their overall impact on Getty Images.

Microstock

The introduction of microstock has significantly increased the availability and usage of stock imagery. The advent of affordable high-end digital cameras and broadband Internet access has enabled semi-professional and hobbyist photographers to greatly expand the supply of digital stock imagery, and low microstock prices have put stock images within reach of far more potential customers.

• The primary consequence of the introduction of microstock has been to open the creative stock imagery market to new segments of users. Small and medium-sized businesses represent a large customer segment for which stock imagery was previously too expensive: For example, a dental practice might now include a microstock image of a boy brushing his teeth on its mailers to patients, whereas before it might have only shown a drawing of a tooth and toothbrush (or perhaps just a message in formatted text) on its appointment reminders because of the relatively high cost of stock imagery.
• Microstock also enables traditional stock image users to cost-effectively use stock images for interim uses such as storyboarding, customer pitches and internal presentations. Previously these applications would have contained lower quality, freely available images, or hand-drawn sketches.
• Customer research suggests that approximately 40-50% of microstock demand is comprised of entirely new end-uses, such as those described above.
• As a result of the combination of new customer segments and new end uses, volumes of microstock images are 15-20x greater than traditional stills. Sales volumes for iStockphoto have grown substantially in recent years, and the vast majority of these sales have been to new customers.

For certain customers however, microstock may be a viable substitute for traditional stock imagery. Such substitution has largely been limited to lower-end applications of traditional creative stills, such as direct mailing and web advertising. In most cases, these applications do not require the highest quality images, assistance with purchasing or full-service rights management.

1. Microstock demand is 40% to 50% new end-uses.
2. Microstock volume is expanding substantially.
3. Low end customers turn to microstock.
4. The low end customers are mostly:
   1. Direct mail
   2. Web advertisers
5. The low end customer buys mostly:
   1. Lower quality photos
   2. Lower resolution photos
   3. No right management

Also see: Getty Confidential Information: Part 1