June 9th 2020 – Article – 5 minute read

ShutterStock: The Rise And Tragic Fall Of Microstock

June 9th 2020 – Article – 5 minute read

ShutterStock: The Rise And Tragic Fall Of Microstock

Shutterstock. How did it all start? Jon Oringer created a dozen tech start-ups before buying one $800 camera to start his own stock photo and video business. Today Shutterstock is worth $1.5 billion.

WHAT IS SHUTTERSTOCK

Shutterstock is an American provider of stock photography, footage, music and illustrations. Founded in 2003 by programmer and photographer Jon Oringer, Shutterstock is headquartered in New York City and has a library of around 200 million royalty-free stock photos, vector graphics, and illustrations, with around 10 million video clips and music tracks available for licensing. Originally a subscription site only, Shutterstock expanded beyond subscriptions into a pricing based model in 2008. It has been publicly traded on the New York Stock Exchange since 2012.

Since its start in 2003, Shutterstock has steadily grown and acquired (bought) other companies: BigStock, PremiumBeat, and Flashstock. ShutterStock also started its own premium brand Offset, where you could buy authentic and exclusive content rarely found on other microstock websites. One of their more positive features is the AI keywording tool which helps creators write keywords faster and better. In 17 years of existence it has served as a bread winning platform for many content creators with some reaching mind boggling numbers of uploaded content going well over 100.000 uploaded images. However in May 2020, this all changed. It was the last straw for users who had grievances with Shutterstock even before that.

Marketing

The company has a history of aggressive marketing practices including misleading pricing, free trial offers with hidden fees, cumbersome switching of automatic subscription renewals as well as cancellation of the subscription itself.

At the moment, the company has chosen a business strategy of creating a tier monetization system which is likely to severely hurt contributors by reducing their income significantly. Previously the minimum payment for the downloaded image was 25 cents but now the minimum payment is down to 10 cents.

How does it work?

Users upload their content which can be pictures, videos, illustrations, 3D renders and even music. When a user uploads content, they become a contributor. Once their item goes through the Shutterstock review, it is then placed online and people are able to buy it. Unknown to most users however Shutterstock has a 6 levels tier system where they pay contributors depending on how much they earn over time, meaning the contributor earns between 14% to 40%.

THE MANY PROBLEMS OF SHUTTERSTOCK

Stealing pictures and copyright infringement

Shutterstock has a well known problem of contributor pictures being bought and then sold as own work by “picture thieves”. Many contributors have argued over the years about their content being outright stolen or slightly modified and then sold. This usually happens when someone buys a picture, uploads it back to Shutterstock and sells it as their own work.

Currently Shutterstock does not have a safety tool to prevent content theft. Given their excellent keyword AI, it would be great if they put more effort into AI recognition of stolen content.

Some users have reported they had great and innovative images or illustrations that they uploaded which sold well but also noticed that sales suddenly went down after a successful period. Once they investigated, they saw their work being plagiarized by others, some having the exact copies and others creating vector images out of it.

Content review and the wheel of fortune

What many started to dislike in Shutterstock in these last few years is their randomness in declining content, be it pictures, videos, illustrations or renders. This went so far that people actually started calling their reviewing system a wheel of fortune, that randomly picks a reason to reject an uploaded item. What’s amusing in this is the complete randomness of the reason they use to reject something while some users have duplicate or low quality images in their portfolio without penalty.

Wheel of fortune Shutterstock rejection

Friends in high places

Another peculiar thing people have noticed is that some high quality content gets rejected for no reason, while there are accounts that have many images that are practically the same (which according to Shutterstock is not allowed) or have plagiarized images. That has led some to start conversations on forums complaining about obvious favoritism. A few people came forward saying they worked at Shutterstock and have helped their friends by accepting their content and not rejecting anything they uploaded. We have no means to confirm if this is true or not, but accounts with low quality and duplicated content do exist which raise the question why.

THE TERROR OF PRICE CHANGE

Out of the blue on May 26th, Shutterstock told contributors that a new earning structure has been set and will come into effect on June 1st. In this new system they will calculate the pay rate based on total sales. Meaning the more you sell, the more you get paid. Based on the sale numbers the contributors will be divided into six levels. A level 1 contributor who has less than 100 image sales will earn 15% per image, while a level 6 contributor who has more than 25,000 image sales will earn up to 40% per image. But there is still a catch: the final price depends on the image pack sold by Shutterstock. But Shutterstock wouldn’t be Shutterstock if they didn’t put another spin on this: they will reset all contributors to level 1 every year on January 1st. Their stated goal of rewarding contributors now looks more like squeezing pennies from contributors.

How levels are categorized in the new tier system:

  • Level 1: Up to 100 (15%)
  • Level 2: 101 to 250 (20%)
  • Level 3: 251 to 500 (25%)
  • Level 4: 501 to 2,500 (30%)
  • Level 5: 2,501 to 25,000 (35%)
  • Level 6: Over 25,000 (40%)

This will remove the current flat-rate $0.25 commission per picture, replacing it with the percentage system. The payout for subscription plans will not be less than $0.10. According to Shutterstock this change is to create “fair opportunities” for all contributors and to reflect the changes in the market.

What is tragic is that it is impossible for an average contributor to reach level 5 or level 6 in a year. When we take into account slow months and other unforeseen global problems, reaching level 4 will be impossible for most contributors. Even if they do manage to reach that level, all contributors will have to start from scratch from the 1st of January each year anyway. Their new system penalizes both average contributor and specialized microstock content creating companies as the tier system works in a way that enables Shutterstock to pay as little as possible.

This new plan does not seem to be rewarding successful selling contributors, but to make them quit the stock market. Every year the rat race will become harder and the profits lower. Before reaching a decent tier, contributors’ earnings will be poor and overall they will feel the decline in revenue more and more, especially when comparing it to previous years.

The cost of creating content is not cheap especially when models, props, and traveling is considered in costs. With this new system, there will be a roughly 50 to 60% drop in income compared to the previous system and the first quarter of each year will be a disaster for many contributors.

What many do not take into account are the years of experience, time, effort, proper keywording and the expensive gear, especially high end cameras and lenses that specialized content creators use. This new system will undoubtedly force them to rethink their continued presence on ShutterStock.

It's as if millions of voices suddenly cried out in terror and were suddenly silenced by Shutterstock

CURRENT FINANCIAL RESULTS

For their first quarter 2020 financial report, Shutterstock announced their revenue decreased by 1% to $161.3 million. However at the same time their image collection expanded 27% to approximately 330 million images. Their video collection expanded by 29% to approximately 18 million clips. This shows that people are uploading more and more content. This could mean content creators are still making money but it could also be argued that the current Coronavirus crisis brought a lot of spare time to many people who used it to make stock videos, pictures or illustrations.

We could say that Shutterstock’s recent changes were a result of uncertainty in the current global markets and the financial hardship of many companies. But that cuts both ways since it is the contributors that drive and “stock” companies such as Shutterstock. It is the content creators who contribute the videos or pictures, work on quality and innovation to make their content stand out and also sell. Lets say Shutterstock is a supermarket and content creators are suppliers. When the supermarket starts cutting corners, undercuts and pays little, this in turn lowers the quality of products they receive. You cannot have quality and low price at the same time. And once you start paying your suppliers pennies (like 10 cents), then there is a really high risk they will stop being your suppliers.

Companies want to grow and reduce the risk of losses. So does a working content creator. There may be an increase in the microstock contributions, but creating good content is the key. That’s how people still make money from it. Equalizing all contributors on the bottom level with ridiculous rates is just unfair. Even if the global economy gets better and Shutterstock doubles its revenue, this new system is here to stay and contributors will only get less and less.

You don’t believe that? It is already happening. Many users have started forum threads and discussions about the new earning system and it’s safe to say they are not happy. Far from it. While there are people still on the fence about what to do, others have suspended their portfolios and some have outright deleted them. Many have decided to migrate to other microstock companies which offer better paying structures.

Contributors see deleting or disabling of their portfolios as a statement to Shutterstock and other microstock companies: you can make unilateral decisions to undercut our stock work, but we wont be with you when you go down.

Shutterstock disconent

WHAT MADE THIS HAPPEN?

While something like this does not come without the top management approving it, one wonders if they thought about repercussions.

Contributors are leaving.

Russian contributors (which represent a large part of high quality stock market on Shutterstock) decide to leave in mass on 15th of June. This brings bad publicity resulting in share price drop which in turn triggers owners dumping shares. Smaller ordinary contributors are starting debates and fume at new price dumping, making them very unhappy.

Another big contributor also made waves: Africa Studio deleted their portfolio of 1.5 million pictures. Considering their content is of a high quality, this certainly cannot be good for Shutterstock. But there are also reports of many other content creators with a large number of high quality items disabling or deleting their accounts.

Update: it would seem Africa Studio resumed their business on Shutterstock which has led to speculation, that they have negotiated higher pricing for their portfolio. Unfortunately we cannot get a confirmation what the reason to resume their contributing was.

What does Shutterstock price dumping create?

Leaving contributors mean competitors receive new material that is top notch quality. Will competition jump in and sweeten the deal for the fleeing contributors? Most likely. They will also take the opportunity to advertise on the loss of Shutterstock which will trigger more bad publicity to attract good contributors for themselves. Marketing agencies will notice that they need to look for fresh, relevant, quality material elsewhere.

Shutterstock lost a great deal of credibility here and their recent changes will force many high quality contributors to leave their platform meaning their content will no longer be present due to the lack of sustainability of the new model. Regaining this credibility will take time and effort but as history teaches us, when a microstock site starts price dumping, their contributors leave and the company often bankrupts.

If Shutterstock’s new model is based on average people to provide content even if it is just quantity based will that work instead of having specialist high quality contributors? It might just end up proving how misguided such a model is, where your suppliers are driven away by low pricing. As in all things, sustainability is important for continued growth, which is currently lacking.

CRITICS ARE SILENCED

Many have also reported that Shutterstock is deleting profiles of contributors who criticize their new business model. Apparently they target those who speak up on the Shutterstock forum or on social media and just outright delete their portfolio. If true, this is a behavior unbefitting for such a company. It is weird for them to tackle the problem of unhappy users in such a way that further alienates them from their stock contributors. One would think a company dealing in microstock would try to make their contributors happy and at the same time make more money. However their current business practice makes no sense to us.

As for us, we have already disabled our portfolio on Shutterstock so we do not fear repercussions for writing this article.

FUTURE OF MICRO STOCK?

It is hard to predict the future. As usual, there are always two vocal groups: one defends authority (in this case Shutterstock) when they make stupid decisions, while the other group rebels against it since it hurts their interest. What is safe to say is that quality content creators will not settle for such low prices as making quality content is very costly.

The most realistic scenario is that Shutterstock will not budge in their decision. Creators who value their work leave and migrate to other microstock agencies, helping their sales. Shutterstock declines in sales but keeps the existing model, lowering their profits as well since customers no longer find the high quality content, losing on popularity, ultimately losing a large portion of their current value.

But their undercutting tactics do show a worrisome trend to contributors: the future of microstock is pushed into lowering prices more and more and might reach a level where it is no longer economically feasible to solely focus on it. Hopefully this will not happen.

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