Getty Revenues below Expectations

Getty Images, the stock image provide, had revenues of $209mm in the third quarter which came in again below expectations. Mike you were right and I was wrong about it being a short on bad news. The market obviously didn't find too much wrong with it as the stock is up 9%. Can you say short squeeze?

Here are some notes from the conference call which were paraphrased from Seeking Alpha.

Micropayment is good and "the use of and demand for visual content primarily in online usage is exploding.": Thank you very much. Getty CEO Jonathan Klein has just finished his opening remarks, and said nothing about Getty we didn't already know. He twice stressed that Getty's new $49 web-resolution images are a "super low resolution" product. (Fact check: Resolutions of the $49 images are typically 338 by 506 pixels, which is pretty low.) Sure that doesn't make the photographers happy to hear this. Klein also said, "Micropayment is very good for the visual content industry," and noted that it is disproportionally good for Getty, since it owns market leader iStockphoto. "The key difference is iStockphoto's highly profitable e-commerce based business model. Revenues generated here are from the licensing of images through e-commerce not by advertising." And he again mentioned plans for Getty's as-yet-unlaunched consumer Web site. Anyone know what this is going to be called? Is it called Greenfield?

In the Q&A, Klein says the company is considering web-res pricing for its video products. Klein earlier acknowledged that footage was in a "transition" period" and under "a two year investment program into ad content." "Footage will become much bigger, bigger business for us in the future. Our overall cost familiar with the increasing demand for digital video, as bandwidth constrains disappear and video finds its way from big screens to smaller screen, and the web and mobile devices." Klein did water down his excitement by saying that, "You will notice on the numbers that it has not been a great year for footage and 2007 has been very much a transition year for our footage business. We do expect double-digit growth in 2008 and beyond." Good news for Cutcaster.

The $49 question: Klein answered a question about the critical reaction from photographers that greeted his company's $49 web licensing price. "The communication with the photographers didn't clearly enough outline what we had in mind," Klein says. The $49 images, he says, can only be used online. "It's a super, super low resolution image. It cannot be used in any other way." He noted that once Getty explained why it was offering this product (to attract web users who were shopping elsewhere, resulting in declines in RF sales at low resolutions), photographers were "much more comfortable." I don't know if I believe that. From our conversations with photographers they still seem pretty upset and i sense a defection of sorts from Getty because of this and other reasons. "We created a new product for a new market and they're feeling much more comfortable and confident about it." As evidence, Klein noted that blogs and forums had been quiet for several weeks about this topic. Shout out to the Cutcaster blog here. He said low-resolution RF volumes have recovered to the levels they were at in the last quarter of 2006. Many of those buyers are lapsed customers or completely new customers. He added: "Frankly, we had very little pushback from the photographers we work very closely with. Some of the pushback was from people we had very little relationship with who felt it was an opportunity to make a point, and we respect that." Ouch.


The shares whipped around a bit after the news. They are up now in a down tape. I was amazed at how much they talked about microstock and recognize this growing trend, whether good or bad for the overall market space. I think they are happy as clams that they bought and got Bruce L. to come in and help them with their technology. It had been 5 years since the Getty website was relaunched with new changes last August.