Getty Images CEO declares 'nothing will change for contributors' after its sale
Jonathan Klein, co-founder and CEO of Getty Images. Image courtesy of Getty Images.
Following today's news that Getty Images has been sold for $3.3bn to The Carlyle Group, BJP spoke with CEO Jonathan Klein about what's to come for the company
Author: Olivier Laurent
15 Aug 2012 Tags: Getty images
The deal will see Carlyle acquire a controlling stake in Getty Images, while co-founder and chairman Mark Getty and the Getty family "will roll substantially all of their ownership interests into the transaction". In 2008, their ownership represented 15% of the company's share. Jonathan Klein, Getty co-founder and chief executive officer, will also invest "significant equity" in the company.
BJP news and online editor Olivier Laurent speaks with Jonathan Klein about the deal.
BJP: Why this deal? Why now?
Jonathan Klein: This deal is happening now because Hellman & Friedman typically owns a business for three years on average. It has owned Getty Images for about four years now. A few months ago, they thought there would be a lot of interest for Getty Images, just from private equity firms – and there was. We had enormous interest in the company throughout the process. We had lots of private equity firms looking at us, extremely impressed by the company and our position in the imagery market. At the end of the day, Carlyle teamed up with the Getty family and management to buy Getty Images from Hellman. The timing worked, and Hellman & Friedman were very happy with the price. The family and management are comfortable with the arrangements with The Carlyle Group, so that's why it's happening now.
BJP: What is the arrangement between Carlyle and the Getty family and management?
Jonathan Klein: What it means is that instead of the Getty family selling and getting cash, and the management team selling and getting cash, the Getty family is not selling – they're exchanging their shares for shares in the new company, while the management team is taking some cash and investing some money back into the business for the next period of growth.
BJP: You're now talking about taking the company into the next phase of development and growth. What is that phase?
Jonathan Klein: The main thing around that is: more international. We're going to be investing more in Asia/Pacific, the Middle East and Latin America. The second part is to grow our ThinkStock subscription business more aggressively. And thirdly, our editorial imagery business is really strong, and we will be more aggressive in expanding that – in particular internationally. We're obviously really strong in the UK and US, but not internationally. We also have some new product – in particular Connect (an API service), which has about 100 customers so far, but we only launched it a few months ago. We're thinking about being more aggressive in selling Connect though our salesforce. We're also [focusing on the Getty brand, what it's about]. Many people in the UK think Getty is an archive. In other countries, people think Getty just does editorial, or just sports, or stock photography. In fact, we're the largest global platform for imagery. Full stop. So we'll be doing more of that.
BJP: How is The Carlyle Group going to help with this?
Jonathan Klein: What The Carlyle Group has is enormous scale internationally. Out of all the private equity firms, they're the most international. They will help us with customer relationships and open doors for us where we are now as strong as we are in some of the English-speaking parts of the world.
BJP: What about Reportage by Getty Images? What will this deal mean for them?
Jonathan Klein: The key is that the culture of our company, and what we care about and what we think is important, won't change. So what we've done in the photojournalism world in the last four or five years is very important for us. Our support for photojournalism globally – whether it's through the Grants programme or supporting Perpignan or various other areas – will not change. They understand that, and they know it's important. We also think the future of photojournalism is important to the world, and it's important to Getty Images. That won't change at all.
BJP: What does this deal mean to your contributors? Will it change anything?
Jonathan Klein: No. Nothing will change for them, just like the Hellman deal didn't change anything for them.
BJP: This is a $3.3bn transaction. Compared with how Getty Images started 17 years ago, what would you say to people who believe that Getty has lost its soul?
Jonathan Klein: I would say we have a deeper, richer culture than we've had in the past. We're still totally committed to imagery. We're committed to innovation. We have been responsible for almost all innovations in this industry in the past 20 years. Yet we're still pretty much the same team. The team that runs the company - the 12 most senior people in the company - all of them, except the CFO, have been with the company for at least 10 years. It's very much all the same team. It's harder when you get bigger, there's no question about that, but we've worked really hard to try to keep that intimate feel, not to have too many layers, and to have close relationships with image partners, clients and photographers.
Comments
Good luck Getty - one of the few creative business models out there taking risk and investing in images.
Bought for $2.4 billion four years ago - took out dividends of at least $950 million and then sold it on for $3.3 billion. Would have been interesting to know if this dividend was from a re-fi or if the special dividend was taken from income.
Hellman & Friedman was looking for $4 billion for their exit so they got less than they hoped for but since the amount of leverage in the system has been declining for a while, they must have thought this exit was attractive enough given they took out $950m already. PE funds would not want to hold on to an asset for too long but assume the opportunity to report success to their LP's is one not to sniff at!
Would be interesting to see the Debt/Equity ratio too on this deal. H&F apparently bought in with more 50% equity which is high compared to pre-2007 crisis times (of around 30%). Assuming that it was 50%, they put in $1.2 billion of equity, borrowed $1.2 bn (to make the $2.4 bn purchase price), took out $950m and sold it for $3.3 bn.
I make that a return of approx. $1.85 bn in 4 years ($3.3 bn - debt to pay back - equity they put in + dividend they paid themselves already) from investing $1.2 bn - not a bad return on equity!!!!.
I read that CVC ands Charterhouse both looked at this deal and thought it was overvalued. They are both excellent european Private Equity houses and their judgement is not to be sniffed at. That to me means that the premium placed on the growth projections of the current business was too high despite the attractiveness of holding a cash generative asset (so they can pay the interest on the mortgage they take out). Plus they are Euro denominated funds whereas Carlyle is a dollar denominated fund.
Multimedia is my guess at the real growth engine - 360's, interactive video's, technological advances providing nice margins.
Probably this is the wrong place to comment economically here but photographers should note that they want to internationalise their business. For reportage photographers, I am just guessing magazines readers from the B.R.I.C/emerging economies would not want to buy stories shot by foreign western europeans documenting the difficulties that exist in the everyday lives of residents within the BRIC's/emerging economies - just a guess. Imagine American audiences seeing an Indian photographer shoot the harshest images from America and then trying to sell it back to them (although I personally see an intellectual plus side of an outsider's view of what is local).
Time for some of you shooters to look on your own doorstep for stories that others around the world might want to see about where you live? Maybe expect an editorial/cultural overhaul to reflect this?
"Jonathan Klein: No. Nothing will change for them, just like the Hellman deal didn't change anything for them."
This is a blatant lie. Because of Hellman contributors had their commissions slashed, the unfair RC system was developed so that Istock had complete control of contributor destiny, contributors were forced into Thinkstock to compete with themselves at the higher paying Istock commissions.
Then with all of these pay cuts, Istock management has the gall to post in their OWN FORUMS that "money doesn't make us happy. Has any of this been shared with the new equity firm? I doubt very seriously that diluting their suppliers was one of their tactical approaches to cooking the books.
Greedy bankers robbing artists again.
It is disgraceful how Klein and Getty have treated their photographers. They forget who built the brand with great images. At any given opportunity photographers were exploited and royalty rates cut so Getty and Klein could fill their fat wallets. Not once have they done photographers any favours.
We are at a stage where many photographers have seen a drop in income of a staggering 90%. The result of this has been the selling of studios and houses to stay afloat. Try explaining that to your family and friends: "Well I'm afraid we are having to move into a trailer because some greedy bankers are squeezing every last cent out of our company to pay themselves large bonuses"
Instead of securing higher payments for photographers Getty and Klein have chased the volume micro sale to boost the balance book. Great for them but pointless for us.
A book could be written on how Klein and Getty have screwed photographers. I have no time for this as I am trying to make enough money to feed my family.
.. not forgetting the arms sales
With its investment portfolio in the arms industry, looks like Carlyle have the global wars market pretty much sewn up. Profit from the arms sold to the despots around the world and then make the $$$ from the media coverage of these conflicts. Genius!
That's right nothing will change they will continue to give the work away and we will all continue to receive bugger all for it !..Stock photography stopped being a viable business 4yrs ago and continues to do so and that is from someone who used to earn several thousands per month from a few hundred images.Getty have killed a good business and many photographer livelihoods along with it....GREEDY Corporates...
"Nothing will change for our contributors"......exactly! Getty will continue to pay their contributors crap, but more importantly, their contributors will sign off on the crap payments just as they have over the past few years! It's easy to say Getty has cut horrible stock deals with their clients and that they pay their photographers a fraction of what they would have received a decade ago for the same types of resales, but who let that happen? THE PHOTOGRAPHERS! I pulled all of my work out of a large stock/resale agency (Outline/Corbis) years ago the minute they floated a pay structure that gave them a penny over 50%. Why? Because it was smart business for ME to do so. When I started licensing my images through an agent the split was 70/30, but when the move past 50/50 happened, I saw the writing on the wall. No matter what argument the agency gave for the 'need' to keep more than half of the license fees in order to 'stay in business', I always saw it for what it was...a smart business model that took advantage of a dumb supplier! I have always made more money licensing my own photos at higher prices than what an agent would charge. And now you see 80/20 splits that are considered 'normal'?!!
I might license fewer images, but in the end I know I'm getting a fare price. I hate to point out the obvious, but the majority of people who call themselves 'professional' photographers are the worst businessmen you will ever find. They let this happen and now they complain about what an awful situation they find themselves in.
...nothing will change for the contributors. They will still get paid, but Reportage shooters will not see certain images of theirs published in the news. The purchase of a company which supplies a huge amount of news images to the media every second is now owned by one of the largest military industrial complexes on the planet. Scary.
Sure Mike! With Abu Dhabi holding a 7.5% interest in Carlyle and no doubt other Arab investors (not to mention the Bush's and other ex-Washingtom insiders ), I can foresee that Getty's coverage of the Arab Spring may be the first casualty!
We should be in no doubt that there will be no change - the difficulty for photographers (whether inside or outside their gulag) is that the remuneration will not allow for the "hard to do" - those pictures that take time, dedication, knowledge, the cultivation of contacts etc, or further down the line, the papacy of payment may not even allow photographers to continue as full time professionals. But for Getty the currant buyout further increases the already fabulous wealth of the top execs - lovely! And of course Alamy - despite profits plunging- will also continue with further undercutting, product "simplification" etc. etc. - as they have already warned in their much vaunted, if somewhat vacuous, "White Paper" and as their price/volume business model dictates. As far as they are both concerned there are "plenty more where you came from" and this is crucial: contributors have agreed to no minimum rate, giving away any control to these "savvy marketiers" who possess rather opposed interests to those of the contributors- as surely must be plain for all to see by now? Photographers have not got organised in either company, with the exception of the USA Stock Artists Alliance who lobbied in opposition to the new Getty contract in 2001. As long as all there is are odd bits of complaining that "they are not being very nice" followed by "but what else can we do?", as long as there is no attempt to put a floor under this helix of decline, these zombie monopolies will continue to stumble down this path dragging all of us with them..
Yes and when Getty Images bought Pump Audio, the music licensing company I have had my music licensed through for TV , Movie etc for the last 11 years the first thing they did was send out a new contract to sign.Previously we had gotten 50% Royalty, the new contract was for 30%. They basically said sign it or fuck off.
Lovely, I will be waiting for the next letter for 20% percent or so. Fortunately Im a very giving person and I want to contribute my part to help the Saudi Arabian Carlyle Board member add a new addition to his 350 room gold palace.
Cheers
http://www.gettyimages.com/Music/Search?msm.SearchTerms=zallen&msm.SearchCollectionFilter=1&msm.SearchCollectionFilter=2#msm.KeywordSearchTargets=0&msm.SearchTerms=zallen&msm.SearchCollectionFilter=1&msm.SearchCollectionFilter=2&msm.Genres=0&msm.TrackTypes=0%2C6&msm.TrackTypes=3%2C7&msm.TrackTypes=4&msm.VocalStyles=0&msm.LyricThemes=0&msm.Moods=0&msm.MinimumDuration=0&msm.MaximumDuration=240&msm.Speeds=0&msm.Instruments=0&msm.Collections=9&msm.Collections=2&msm.Collections=1&msm.Collections=11&msm.Collections=5&msm.Collections=8&msm.Collections=6&msm.Collections=14&msm.Collections=10&msm.Collections=3&msm.Collections=7&msm.Collections=4&msm.Collections=13&msm.PageSize=40&msm.CurrentPage=1&displayColumns%5B0%5D.ColumnName=ID&displayColumns%5B0%5D.Sort=&displayColumns%5B1%5D.ColumnName=Title&displayColumns%5B1%5D.Sort=&displayColumns%5B2%5D.ColumnName=Artist&displayColumns%5B2%5D.Sort=&displayColumns%5B3%5D.ColumnName=Genre&displayColumns%5B3%5D.Sort=&displayColumns%5B4%5D.ColumnName=Duration&displayColumns%5B4%5D.Sort=&action=Filter
I prefer drug cartels to arms dealers!
Carlyle are the lowest of the low. They will do anything to make a quick buck. Even selling weapons to kill women and children during the Iraq and Afghanistan wars.
And yes George Bush Snr works for them. Conflict of interests - of course.
I am not surprised Getty and Klein sold to these evil men as those snakes have no morals either. Typical greedy bankers. And yes it's the photographers that suffer.
I suggest people watch this documentary about the Carlyle group to see what immoral low lives these people are:
http://www.hereinreality.com/carlyle.html
Things will get worse for sure.
Photographers in the supply chain of things...
The ability to produce high quality photographs has been democratised by both the education system and camera technology. There is plenty of supply and very little scarcity of great, amazing, well taught, well executed, passionate photographs shot by a great many wonderful passionate photographers.
Given the scarcity is not in the supply side but from demand, the simplest way to increase demand is to reduce prices. The quickest way to produce profit is reduce cost per unit of production. The best way to do both increase demand and profits is to innovate and do something new.
Photographers are all taught the same thing in universities and their place in the supply chain is certainly no longer critical. Getty's value is in the ability to distribute and find uses for imagery rather than in the image itself. Their distribution network is what is scarce and that is where their value is generated. I bet the cost of photographs reflect this reality more than it is a bunch of greedy executives sitting in an office plotting their demise.
There will come a time when the Competition Commission will look at this but they have not as yet - maybe someone else wants to refer them if they really want to try and make a difference for photographers?
I am personally not sure we are near that point yet. Photography is not an essential product like energy, food, transport or health so I think it will be relatively hard for them to look at this from a photographers perspective to defend an outdated expectation of value in what they do. I am not sure there is much outrage or sympathy in society for the plight of photographers today to put this on the political agenda.
The sheer scale of the education sector, the endless paid for workshops, competitions you pay to enter and university degrees pumping out hope with a hefty price tag has led to the industry to where it stands. Getting endless students to get in debt to pay fees in the hope that they can make a living is just as much of a problem. Anger needs to be focused of these parts of the industry too - those who dish out unreasonable levels of hope.
What photography has to do as an industry is have a much broader social function - a reason for it to exist that benefits others, a purpose. Then you can charge a fair price for it. Instead, you'll see the same kind of stuff in graduate shows, trying to please the same people, with the same way of thinking, using broadly the same old methods to achieve the same kind of negative outcomes. Today these photographers are being produced on an industrial scale and this is just as much a race to the bottom as the old stock agency model is.
Its not personal, its structural. Its not exploitation and it is certainly nothing to do with anybody being Arabian (I mean come on!) or an investor - like in most areas of life, there are good people and bad Arabs, Investors and Photographers.
Getty & Corbis are screwing photography
t o why are you photographers all staying with Getty & Corbis? Come to the individual litte photo-agencies in different countries around the world!
Better deals, better prices, better contact with the direct salesdepartment.
Getty & Corbis are killing the little photo-agencies, because they fear them, while we still exist,because we like the photo-business more than they do.
So photographers, stop complaining and go to the core-business people and publish and sell your pictures!
Josie Sunshine
Getty & Corbis are screwing photography
t o why are you photographers all staying with Getty & Corbis? Come to the individual litte photo-agencies in different countries around the world!
Better deals, better prices, better contact with the direct salesdepartment.
Getty & Corbis are killing the little photo-agencies, because they fear them, while we still exist,because we like the photo-business more than they do.
So photographers, stop complaining and go to the core-business people and publish and sell your pictures!
Josie Sunshine
Last year Getty increased their commission from photographers by force, from 50% to 65%. A 15% increase is way beyond the CPI.
Greedy bunch, but its a capitalist business isn't it?
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