The Business of Selling Digital Photos

The question I get asked most often is how to price digital photos. This is really a simple answer once you take a bird’s eye view of your photography business. First free yourself from thinking about prints and packages of prints. We will cover this a bit later, but for now focus on your customer. Regardless of the products offered, what is your current or desired average sale per customer? This can be calculated by taking your total revenue for a particular period of time and dividing by the total number of customers and/or sittings for that same period of time. Industry data suggests that for sports and event photographers this number averages between $20-$35. For most portrait and wedding photographers, this number is $120-$150. Remember these are averages and may not accurately reflect your photography business. Plug in your own numbers based on your actual sales and customer data to provide you the most accurate measurement. Once you have your average sales per customer then take a look at what products are you selling to get you there. Prints, services, frames, etc. should all be included. What item do you sell the most of? Typically for today’s photographer the answer would be prints. Today prints represent the majority of the revenue of a photographer and also provides a healthy profit for the business, however that is quickly changing.

Let’s do the calculation together. Let’s say you are a sports and event photographer and your average sales per customer is $25 consisting of approximately two 5x7 prints. In order to match that in a digital world would require that each file be sold for $12.50 each. Yes, you will lose the residual revenue of the future of that image, however that typically is less than 1% of the annual sales of a professional photographer. In exchange for losing the unlikely residual print revenue for that image, you also decreased your costs and hassles of not having to print those images. This reduces your cost of goods sold from a typical 35% to less than 10%, saving you over $6 on this one order alone. Not a bad trade-off for hoping to get twenty-five cents in the future. As my grandmother always said, a bird in the hand is better than two in the bush.

In addition your customer’s interest in buying the digital file is increasing by the day, while their value of a physical print is decreasing. They are not saying that they do not want to print, what they are saying is they do not want to be forced to purchase a print as part of a professional photography session. By attaching a professional service such as photography with a commodity that is quickly losing value, creates a recipe for a fledgling business down the road. The consumer views the print just as another product in the long list of photo products that now include photo books, digital picture frames, mouse pads and pajamas. At a recent industry conference held on imaging, it was stated that over 4,000 products can now be produced with your photo. Many of these may not seem credible, however to your customer being able to choose to print when and where they want is of increasing value. Take advantage of this trend and price your digital files to not only replace your current offerings, but lower your costs of doing business and leaving more profits in the bank.

When I meet a photographer who is beginning to sell digital files, I always ask them to describe how they price and market them to their customer. Over 80% of the time, I get the response that they sell the digital file only if the customer buys a print first. My response is always the same. I tell them that you have got it backwards. You are forcing your valuable customer to buy something they may not want, and in the process, you are discounting the digital file as an afterthought. This would be like me going into the grocery store for a jar of peanut butter and being forced to purchase a loaf of bread first. I may want the bread in the future to make a peanut butter sandwich; however I may have other pressing reasons for buying just the peanut butter today. Always offer what is most valuable to your customer and you will maximize the sale. Start with selling the digital file and then offer a discount on a print. This aligns the transaction with your new digital customer’s expectations and will result in an easy and profitable sale. Never discount or subordinate the product with the greatest value to your customer.

Don’t be afraid to change your business model to reflect the value most prized by your customer. Swimming downstream is always easier than swimming against the current.

Selling Digital Files? – what are you waiting for...

Selling digital files does not mean that you are giving up your copyright to the photo. Copyrights are created the moment you take the photo and they are valid 70 years following your death. By selling digital files to your customer, you are in control of what rights are given as part of the consideration. If you want to relinquish all rights for a price then do so. If you just want someone to be able to make prints or other products with the photo for their own personal use, then by all means that is your right. Copyrights are not an all or nothing game. They are a negotiated based on what the artist, you the photographer, are willing to part with for the sum of money given. If you want to sell a low resolution web photo to be used on social networking sites such as MySpace.com or Facebook.com, go for it and price it appropriately with written limitations that clearly state the rights that you are giving to the buyer. Same goes for a high resolution digital file that is sold to a portrait customer that may want to make prints in the future, upload to their own photo sharing site and/or create a photo book.

Supply and demand are still the same in the digital world - it is the price and product that changes. Just as print sizes determine pricing in the analog days, resolution and transferred copyrights determine pricing in the new digital era. To better understand your copyrights, here are a few links that will assist you in determining what you have and how you can price your digital files to best fit your business:

Learn all the facts:
http://www.copyright.gov/circs/circ1.html

Different licensing options:
http://creativecommons.org/about/license/

Don’t be afraid of selling digital files, however do your homework and make sure you are comfortable with what you are selling. If your photos are showing up on social networking sites, web pages or blogs that means that photo is of value to the person who placed it there. Give them an opportunity to pay you for its use rather than just getting angry that they didn’t purchase a print from you. This doesn’t mean that prints are dead, they are just one of many uses for a professional photo. Tying your professional service into an old commodity like a print will only hurt your ability to meet the changing demands of your customers. The game has changed so adjust your product offering to include digital files before your competition renders you irrelevant.

Share your ideas and thoughts on this subject – post a comment or e-mail me at gmcfarland@expressdigital.com.

Making the Case for Digital Delivery

For the sake of argument, let’s pretend that professional prints became obsolete and no longer desired by your customer. If that were the case, what would happen to your photography business? Could you survive?

The purpose of this article is to show you how you can make more money selling the electronic version of the digital photo, rather than prints of that digital photo.

In 2006, PPA published a financial survey that indicated that retail based studios averaged gross sales of $239,000. If you average the annual spending per household for family portrait, senior, children and adult you get roughly an average of $210 per sitting. Divide total revenue by this average and you get 1,300 individual sittings per year or 4 sittings per day. Cost of sales equals approximately 25%, primarily consisting of hard goods such as prints, frames and packaging. General expenses excluding the owner’s compensation, amounts to 40%, leaving $83,650 profit.

Instead of offering prints, you decide to provide a limited number of retouched, ready to print digital files along with your 2 hour portrait sitting for $250. At an average of 4 sittings per day, 1,300 per year, your annual revenue tops $325,000 and your cost of sales plummets to only 10%. This combination increases your profit by 94% to a joyous $163,000, not to mention simplifying your business model. No more lab bill, no more frame inventory, no more waiting, no more hassle for your customer. The result is instant gratification and delivery of what the customer wants; access to and usability of their professionally taken photos when and where they want.

If the customer wants you to make a print, that revenue is all gravy and you can decide whether to offer that value added service. Just remember that you’re now competing with Walgreen’s, Wal-Mart, Shutterfly and probably your old pro lab for that print, so be sure to differentiate and price accordingly.

What are you giving up? Well to be truthful you no longer hold the monopoly on the use of that photo. You have sold it to your customer and provided them with the ability to duplicate, share and print as needed. You have not however, sold your copyrights. You still own them and the image cannot be used to make money without your consent. Creative Commons http://www.creativecommons.org/ is a great organization that is helping artists of all kinds protect their copyrighted digital works using standard licenses that describe legal restrictions placed on the user.

So what is the result of this discussion? Well, printing will never cease, however it is and will continue to decline in value to your customer. Linking your business with a declining commodity is a recipe for failure. Those professional photographers who understand that the business model is changing and that digital delivery will soon be the rule rather than the exception will continue to succeed and reap the rewards for their innovative approach to meeting the customer’s demands. They will also be leading the charge to help solve important problems such as copyright and protecting their work against unlawful and unintended use. We can make the case for digital delivery, not only as a business model, but as a natural consumer progression tied in with the realities of a digital age.

A recent Infotrends market analysis report concluded that given the current climate, professional photographer’s need to reposition themselves as “visual memory service providers” that not only capture a memory, but provide products and services that extend how that memory is shared and displayed. I could not have said it any better than that.

How are you preparing your professional photography business for the future of digital delivery?