Stocksy United: Platform Co-op for Freelance Artists.
This case study was written Fall 2019 by Greg Brodsky and Shahzaib Azhar based on interviews from Stocksy employees and publicly available documents for the benefit of Start.coop accelerator participants, and the broader platform co-op community.
Location: Victoria, British Columbia
“There’s no reason these artists shouldn’t be able to earn a living from what they produce”
Background
In 2000, Bruce Livingstone founded an online platform called iStockphoto as a project to offer stock photos for free over the internet. In 2002, as iStockphoto became more popular, the site began charging for image licensing in order to pay its increasingly growing Internet hosting costs. From the success of this change, iStockphoto opened to other artists and grew into a fully featured stock photography site with a vision to create a marketplace for photographers that was fair and sustainable. Brianna Wettlaufer joined iStockphoto in 2003, initially with a focus on community engagement and ultimately taking on the role of Vice President of Development, where she worked closely with Bruce in his role as CEO. After growing iStockphoto together for seven years, the firm was acquired by Getty Images for $50 million USD in February 2006. However as they watched the platform grow, Brianna and Bruce realized that artists were not getting their rightful share, and they were not happy. For instance, iStockphoto paid photographers 15% of photo sales for their first contributions and up to 45% of sales (depending on how much they sold in a year) if they were exclusive. Getty Images was paying 20% to 30% royalties.
Birth of Stocksy
Hearing the complaints by photography colleagues brought Bruce and Brianna back out of "semi-retirement." "Photographers kept coming to see me, coming to visit, telling me how bad the industry was telling me they were disenfranchised, telling me about the competition, this sea of images. That, combined with declining royalties -- they were super frustrated," he said. "They were looking to me to get back in the game. I just couldn't ignore it anymore."
Having exited from iStockphoto with cash in hand and tremendous industry knowledge, Bruce and Brianna started looking for other ways to create share revenue with artists. Bruce Livingstone, Brianna Wettlaufer, Brent Nelson, Tyler Stalman and Daniel Ross partnered to found Stocksy United, a digital licensing platform co-op. Stocksy was founded April 20, 2012, and publicly launched on March 25, 2013. Stocksy was a new concept in the world of stock photography: An online marketplace owned collectively by its artist-members and dedicated to paying them the maximum royalty fees possible for their work. They launched in Alberta, Canada with five employees, and 220 photographers on board, uploading about 1,000 images a day, with images priced between $10 and $100.
Leadership
Bruce Livingstone was the first CEO from incorporation April 20th 2012 until he named co-founder Brianna Wettlaufer as his successor on March 12, 2014 roughly a year after the site went live. Brianna became one of the key voices of Stocksy leadership, influencing day to day management and the development of longer term strategic plans. In 2018, Brianna stepped away from Stocksy and the stock image industry as a whole to take a break. (In 2019, she rejoined the stock industry as Head of Content at Adobe Stock). Michael Cook, former VP of Operations became CEO of Stocksy and the Adobe/Stocksy partnership continues.
Business model
Stocksy United is a platform co-op where businesses, consumers, and graphic designers can find beautiful and compelling stock content to license for usage in design, presentations, ads, etc. The artists are paid a relatively high percentage of the royalties generated by each image sale: 50% on standard licenses and 75% on extended licenses. On top of that, in the event of year-end company surplus, Stocksy shares this surplus with its artists in the form of patronage.
Financing
By the nature of being a cooperative, there was little to nothing that venture capitalist could invest in because (a) there's no equity since share value doesn't increase and (b) the co-op principles prevent the organization from being controlled financially by outside interests. As a result, Stocksy was initially financed entirely by an initial $1 million investment from two of its co-founders, Bruce Livingstone & Brianna Wettlaufer. The investment was recorded as a loan, and paid back within 3 years.
Value to artists & patronage distributions
Artists receive 50-75% of royalties on all photos and videos sold on the site, substantially higher than the 15-45% of royalty fees that artists receive from iStockphoto or other major agencies.
Additionally, 90% of the co-op’s surplus profit is distributed back to its artists and paid out in proportion to their contribution in total sales (via their patronage distributions). Promotional discounts provided to customers are charged to the company, not out of the artist’s royalties. Whereas at iStock, and other agencies, upfront promotional discounts are taken out of artist royalties.
Competition
Stocksy faces challenging and well funded competition include Getty Images, Shutterstock, iStockphoto, Creative Market in still image licensing, and Offset and Pond5 in video licensing.
In order to carve out a niche and to raise the market prices for their artists, Stocksy has positioned itself as more of a premium site, and Stocksy is much more selective on which artists can join or contribute stock assets. As a site representing premium products, Stocksy generates 30% higher average price per image. Competitors that are less selective of artists and assets may have a wider inventory and offer a lot of stock that is free or lower price.
Membership & operational growth
At the time of launch, Stocksy had five employees and about 220 contributing photographers, with plans to grow to approximately 500 photographers in its first year. Stocksy now has more than 1000 contributing members, selected from over 20,000 applications, and the number of staff has reached to 50 in early 2018.
Sales growth
Stocksy revenue doubled from $3.6 million in 2014 to $7.8 million in 2015. In 2015, Stocksy paid out over half of its revenue as royalties to its members, totaling $4.3 million. Revenue for 2016 has grown to $10.3 million, with $5.9 million paid out to contributors. Surprisingly, 80% of total sales comes from only 20% of members.
Patronage and financial returns to members
Over the first five years of business, Stocksy has paid out over $24.7 million (including around $800,000 in patronage) to their nearly 1,000 artists during the period from 2013 to 2018.
Multi-stakeholder Structure
Ownership is made up of three classes of stakeholders:
Class A is made up of advisors, (which has included founding members Bruce Livingstone, Brianna Wettlaufer, Daniel Ross, Brent Nelson, and Tyler Stalman in various configurations over the years), - $1/share / 5% of patronage dividends, divided equally
Class B is made up of staff - $1/share / 5% of patronage dividends, divided based on years of service
Class C is the artists who contribute content - $1/share / 90% of patronage, divided based on contribution of sales toward the whole
Members pay no annual dues and pay just $1 for their initial share of voting stock.
Selective Class C membership
Stocky's public brand focuses on an upscale niche in order to drive up average revenue for their membership. And while staff report that high-end photographers want to join because of their artist-owned model, in order to preserve the brand position, Stocksy is not an open group for all members. Prospective members apply to join Stocksy using their Call To Artists application form.
New member acceptance rate has remained steady since inception, with an average acceptance rate of 4-5%. Initially started as an invitation-only offer, Stocksy opened their first Call to Artists campaign in mid-2015, bringing in just over 150 new members. Membership was closed throughout 2016-2017 before reopening indefinitely in late-2017.
For several years the membership voted against expanding the membership further as many members felt that adding new members would only create additional competition on the platform and also risk brand dilution. After further research and careful consideration in early 2018, Stocksy’s membership voted to remove the 1000 member membership cap, with the caveat that members may choose to freeze membership growth during a “freeze vote” each year if they feel leadership has not held to the expectations set during the member cap vote.
In August 2019, the membership voted against freezing membership growth in 2020 and Stocksy continues to increase its membership month over month—with current Class C (Contributor) membership exceeding 1100 artists.
Board structure & governance
Each class of stakeholders must have at least 1 director (for a minimum of 5 total directors). Class A may not have more than 5 directors, Class B may have not more than 2 directors and Class C may have not more than 2 directors. The maximum number of board directors is 9.
Currently, Class A has 5 directors, Class B has 2 directors & Class C has 2 directors.
Of note, Stocksy does not give Class C Patron members the majority of board ownership, which some co-op purists might critique, and yet members are relatively happy because they see growth in the business, and high returns per artist, and they have a very democratic decision making process. It's also worth noting that Class C can easily outvote the other classes on resolutions, which also helps with the director imbalance.
Annual meeting
Stocksy holds an Annual General Meeting for all members. Since the membership is spread quite wide geographically across multiple time zones, Stocksy ensures that the Annual Report is shared with all members in advance of the AGM, presents its AGM as a combination of pre-recorded and live sections, and includes a live Q&A section to address any concerns or questions, followed by discussion in the membership forums for those who were unable to watch it live. Stocksy introduced the “Stocksy Co-op Portal” to educate and update its members.
Since Stocksy generally accepts and responds to submitted resolutions throughout the year, the AGM is limited to the most basic votes required by law (approval of financials and appointment of an auditor).
Democratic decision making
Members use an internally developed intranet platform to propose a resolution anytime by submitting an Idea for Discussion. Once it is submitted, members can vote on whether they believe that idea should be prioritized and addressed by the co-op. Once quorum is reached, members are advised that they have seven days to vote on whether to advance it to the next stage. The discussion platform allows members to read, think about, and discuss the resolution. It is a healthy democratic debate among members and between members and the company's leadership. Quorum on any resolution requires a minimum membership participation of 10% of Class C and at least one member of Class A and Class B before a resolution can advance to a formal vote. If 50% or more of those votes are in favor by the members then it advances to the board. The board reviews and determine whether to approve (most likely) or reject the resolution (if deemed detrimental to the business). Following board approval, the resolution is passed to Stocksy’s resolution committee, which consists of the directors of Classes B and C as well as 2 additional Class C members, who collaboratively organize proposals, work to make every proposal clear in its wording, and then passes it back to headquarters to release for final voting. If in the final voting it is approved by a majority of members, then it becomes a part of business roadmap.
The Stocksy members’ forum is also used to promote conversation, discussion, and community building. Due to the co-op’s ownership model and democratic decision-making model, Stocksy members feel more connected to the organization. Potential downsides could be a slow decision making process because so many members are involved, the disparate interests of artists and content buyers or the distinct interests of certain groups of artists, a possible backlog of proposals and lesser understanding of implications by the members.
Management
Co-op management and staff have to keep diverse members on a coherent strategy and to grow in a sustainable way that doesn’t dilute the brand’s perceived value. Stocksy staff look after the artists’ selection process, which can be somewhat subjective in the evaluation of talent and commercial viability. However, many staff members are artists themselves (in particular those on the content side of the business) so they have expertise and understanding of the market. One of the biggest roles of management is to make sure that Stocksy is always aligned with the 7 Co-op principles:
Open and Voluntary Membership
Democratic Member Control
Members' Economic Participation
Autonomy and Independence
Education, Training, and Information
Cooperation Among Cooperatives
Concern for Community
What’s Next?
Stocksy Video was launched in 2016, providing a unique revenue stream for cinematographers and other creatives. In mid-2017, Stocksy signed its first content distribution agreement with Adobe Stock. This new collaboration gives Adobe customers access to Stocksy’s exclusive, high-quality photos and videos, and in turn, Stocksy’s artists now have a new platform to showcase work to Adobe’s community of creatives.
Stocksy is working on elevating the customer experience and search functionality. New search abilities make it easier to find the right content, such as the option to find similar visual content and search by color. A new homepage redesign is coming soon, and Stocksy continues to explore the growth of new products, including illustrations and mixed media, while also expanding the breadth and depth of their core products.