When iStockphoto announced its plan for royalty rate change for 2011 on September 7th, the overwhelming response from its contributors was anger mixed with shock. The original thread quickly grew to over 2600 posts and was locked down when iStockphoto posted an official response. That thread grew to 3335 posts before another official response came.

Despite the better efforts that iStockphoto management put in in the latest explanation, the angers among contributors who will be affected financially seem even harder to quench. For some, the explanations are oil over the fire. Sentence such as “… money isn’t going to be what makes you all happy” is a poke to the eye for many. The responses are still overwhelmingly negative. Some contributors have started deactivating files, others are thinking about ending their exclusivity and spreading out, a few are tossing an idea about co-op site, some decided to wait and see…

iStockphoto has also posted a frequently asked questions thread. It contains some explanations of the disparities between photographers and vector artists, and the so-called Agency Collection. The disparity between photos and illustrations has been puzzling. If an artist generates the same sales for iStock, shouldn’t they deserve the promotion to the same next royalty levels? iStock has decided that vector artists need to do more to deserve the same royalty level. For example, photographers will got to 30% rate if they get 12500 redeemed credits, the illustrators will need 22000 to be eligible for 30%. The explanation from iStockphoto is quite interesting.

The average download for each file type involves a different number of credits. The average illustration download involves almost twice as many credits as the average photo download. So to keep the distribution of the different royalty levels more or less similar between different kinds of artists, the targets need to be different.

A Vector artist’s Redeemed Credit total will grow faster than a photographer’s who gets the same number of downloads. So while the targets for the Vector artist are higher, if the Vector artist and Photographer are similarly successful as far as the number of downloads they get, they will progress through the royalty targets at roughly the same rate.

On the surface, the whole change is about royalty payout levels determined by redeemed credit instead of download numbers in order to promote high quality work and award hard working people but when it comes down to the details, the real motive is all about managing the payout using some illogic scheme to ensure profitability. In the official words, the goal is to stop “percentage of our total cost to always increase over time”.

It appears that iStockphoto will not back down even through they have promised to re-evaluate the royalty rate schedule at the year end and re-adjust if necessary. It is difficult to know the extent of the impact with contributor dissatisfaction. But even if most people eventually decide to stay, this episode will definitely leave a bad taste in their mouth. The trust between iStockphoto and its contributors will likely suffer. Some iStockphoto’s current and upcoming competitors will likely try to seize the opportunity for their benefits.

The iStockphoto saga isn’t going on without being noticed. CNET has an article about the same issue.

Posted in: Opinion on September 10th, 2010. Trackback URI

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