Getty Images, the market-leading stock photography vendor, is up for sale. Or, at least, it admitted it has hired Goldman Sachs to explore strategic options.
The US-based company was founded in 1995 by Jonathan Klein and Mark Getty, grandson of John Paul Getty, the philanthropist.
Having grown at a cracking pace, mainly through acquisitions, Getty is now the world's largest supplier of video and digital pictures to ad and media agencies, posting a profit of $130.4m in 2006 on a turnover of $807m. Getty Images owns the UK-based Tony Stone Images, Image Bank and the Hulton Archive.
However, in August last year the company said it was cutting its forecasts, precipitating a slide in the stock price from $50 down to $22 last week.
The cause? The internet, which has done so well for Getty over the years, has fathered a swathe of digital image suppliers who have undercut Getty's prices and eroded its market share. Nevertheless, the company is still expecting to post higher sales in 2007 of around $850m and is believed to be holding out for a $1.5bn sale price.
Whoever buys Getty Images, and it is thought that private equity groups Bain Capital and Kohlberg Kravis Roberts are circling, will have their work cut out holding up profits in our view, and Getty will be fortunate to achieve this price.
As an occasional Getty Images customer, we pay around £430 for use of an image for use on a website. And this only covers a licence for a 2 month period! Contrast this to most of Getty's fast-growing competitors, where you can download and use a high resolution image, on a permanent basis, for about £5. And it's not just the price. There is an arduous, fiddly and non-standardised order process on Getty where you need to specify exactly how and when the image is to be used, the territories it will appear in and more. Other sites have a simple pricing system across all images; the only variable is the image resolution.
Getty has been buying up some of the stronger online competitors (iStockphoto, for instance) and have an absolutely huge media bank. The average quality of its images are, I would have to admit, higher than any of its competitors. But the pricing differential cannot be sustained for long, cheaper competitors are now sprouting up everywhere, and Getty can no longer rely on the assurance of juicy corporate contract renewals from large media owners.
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