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Getty announces purchase of RF channel distributor PunchStock during 1Q07 conference call
Getty Images (NYSE: GYI) announced yesterday that it has purchased one of the leading RF channel distributors, PunchStock. According to a press-release, Getty says the move is in keeping with its strategy “to offer all products to all customer segments on all platforms at all price points.” Getty CEO Jonathan Klein repeated the announcement on the company’s 1Q07 conference call with analysts later in the day. The company did not disclose the purchase price.
Getty’s financial performance for the first quarter of 2007 showed 6% growth in sales over the first quarter of 2006 to $212MM. Operating and net profits slid, however due primarily to $4.1MM in added costs associated with the company’s investigation into stock options back-dating as well as those associated with the terminated purchase of Jupiterimages. Net profit dropped from $39.3MM in the 1Q06 to $38MM in 1Q07 and the net profit margin dropped from 20% to 18%. Without the investigation and legal costs, the net profit would have remained flat at 20% year-over-year.
As in his analyst call for the previous quarter, Klein took pains to emphasize that there is no price war in the stock photo business, despite conjecture that the micro-stock business will inevitably put pressure on RF prices. According to management, RF prices have remained stable for the last several quarters. The CEO also pointed out that the percentage of iStockphoto clients who also purchase from Getty’s other sites grew from 8% when Getty bought the company early last year to 15% in the first quarter of ’07. Klein did not reveal the percentage or the growth in the number of Getty clients who are also iStock clients, however; a far more interesting statistic. To demonstrate his confidence that Getty’s higher-end brands are safe from cannibalization, Klein went as far as to say that he would like for all Getty clients to become iStock clients as well.
The PunchStock announcement made for the most intriguing news, at least to this writer. During the conference call, Klein described PunchStock.com as a source of “high-quality, value-priced imagery” half-way between gettyimages.com and iStockphoto.com. This gives the impression that Getty plans to maintain the separate brand identity of PunchStock. The acquisition raises the question of the fate of the many RF brands from Getty rivals Corbis and Jupiterimages that PunchStock currently represents. Two years ago, Getty removed the RF content from both companies from its sites and vice versa. How will Getty treat the images from these competitors? The question has ramifications for all three companies, the gravity of which depends on how much revenue PunchStock generates for Corbis and Jupiter. If the RF collections from both companies represent a significant portion of PunchStock’s revenue, Getty would diminish the value of the asset it just purchased by taking them off the site. On the other hand, PunchStock’s total revenue might not have been high enough for such a move to inflict serious damage on Corbis or Jupiter. We expect more details of the deal will emerge in the near future.
Other high-lights of the analyst call included:
- The stock option back-dating errors revealed in the company’s internal investigation into the matter will result in a restatement of past years’ financials totaling between $28MM and $32MM. 95% of that restatement amount will be reflected in 2002 or prior years. The restatement will have no material effect on the current year.
- Management sees high growth potential in the Entertainment images sector which grew 70% in the first quarter and will only grow at a faster pace with the integration of recently acquired WireImage. They project WireImage will be accretive to earning in 2008.
- The Rights-Ready licensing model, introduced last August, has proved highly successful. The company has added several collections (e.g., The Image Bank) and tens of thousands of images to RR. During the first quarter, average prices for RR matched those for RM.
- Clients downloaded 3.5MM images from iStock in the first quarter, up from just over 3MM in the 4th quarter of ‘06.
- “Other revenue,” which includes Orchard (assignment photo service) Media Manager (online creative asset management service) and image.net (an editorial digital and marketing materials service,) grew by 35% in the quarter.
- Management claims it has achieved its stated goal (last year) of strong growth in non-English-speaking markets. These include Japan, Italy, the Netherlands, Finland, Portugal, the United Arab Emirates and Russia.
- The company has also achieved its stated goal of increasing the frequency of contact with the top 20% of customers and improving quality of those relationships.
- The company’s guidance calls for $218MM of revenue in the 2nd quarter of 2007 and $880MM for the full year. [$880MM would represent a 9% increase in revenue over 2006.]
Click here to view the original press release.
Posted in: News, Photographers, Stock Art Buyers, Stock Photo Companies
