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Getty releases 3Q07 financials
In his opening remarks to investors on Getty’s 3Q07 conference call, CEO Jonathan Klein referred to the corporation as a “broad-based digital media company.” The term reveals how Getty management now strives to remake itself in the face of the changing landscape of the image licensing business. The company’s profit results, on the other hand, reveal how it really isn’t “broad-based,” at least not yet. The lion’s share of Getty’s revenue continues to come from still image licensing, a business segment that appears to be contracting at Getty, while the new businesses it has entered have yet to help the bottom line.
Getty generated $209MM in revenue in the 3rd quarter of ’07, compared to $198MM in the 3rd quarter of 2006, a nominal increase of almost 6%. The company says, however, that currency fluctuations accounted for much of this apparent increase and that year over year revenue for the period grew by only 2% on a currency neutral basis. Gross profit margins suffered from a change in the revenue mix as higher average commission-based micro-stock and subscription sales replaced lower commission-based traditional RF and RM sales (an irony Getty’s professional photographers are sure to find less than gratifying.)
Margins also suffered significantly from proportionally higher selling, general and administrative expenses, as shown in the following chart:
$000s 3Q06 margin 3Q07 margin
Revenue $198,917 100% $208,860 100%
Gross Profit $147,619 75% $152,628 73%
EBITDA $ 73,604 37% $ 68,295 33%
Net Profit $ 37,326 19% $ 25,679 12%
A one-time restructuring charge of $4.2MM in the third quarter of 07 makes the decline in actual net profit seem more severe at 31%. Nonetheless, even without this charge, real net profit would have declined 19% from 3Q06.
Klein offered the following stats for the creative stills single image business:
Volumes (numbers of images licensed) declined by mid single digits for rights-managed (RM) and by 10% in traditional royalty-free (RF.) Average prices for creative stills RM were down by mid single digits while they increased by single digits in Editorial and traditional RF.
Given the admittedly difficult climate for traditional single image licensing, Klein discussed the many steps the company has taken toward becoming more “broad-based.” iStockphoto continues its stunning growth, having experienced 4.6MM downloads during the quarter; an 85% increase over the same quarter last year. Image subscription sales have also improved. Getty plans to continue to move ahead with its multi-site strategy to offer images to all types of buyers at all types of price points. In this regard, he took the time to defend the controversial $49 web-resolution product, which he says has shown strong evidence of achieving its stated goal of allowing its premium collections to participate in the rapid growth of image use on the Web.
Klein cited several other reasons for optimism at Getty. Editorial image licensing has become a strong growth are for the company, having acquired MediaVast, which owns WireImage. Getty has seen significant growth in all four editorial categories: news, sports, entertainment and archival. Klein also pointed out the opportunities afforded by the fragmented music licensing business, which Getty entered earlier this year with the acquisition of Pump Audio.
At the 2Q07 conference call, Klein alluded to a consumer business Getty would launch soon. Klein mentioned this again, but would not reveal the details. He did mention, however, that Getty’s web-sites received 14.5MM unique visitors during the month of September, alone, representing a huge opportunity for selling various kinds of consumer-oriented digital content.
Amid all the positive news about new products and high hopes for other business segments, Klein recognizes the challenges his company faces, especially in the single image business. The company continues to take steps to shore up this part of the business by cultivating more face-to-face relationships with its biggest clients. It appears then, that the key to Getty’s success will be to truly become the “broad-based digital media company” Klein wants it to be before the decline in what remains by far its most important business segment does too much damage.
Click here to view the original press release.
Posted in: Getty Images, News, Photographers, Stock Photo Companies
