Thank you very much for having me. I think one of the stories about our industry is that it is not only about being good and smart, but also a little bit about luck, and I was lucky enough to draw the long straw last night so I get to go third.

I am the Senior Vice President of Images for Corbis and I love this industry, like all of you. We have a fascinating product and it is an incredibly dynamic industry, and I think most of us who go to work and thrive in it really enjoy what we do every day.

The industry is filled with incredible entrepreneurial stories of people like Jeff (Burke) or Chris (Ferrone) or Roger (Ressmeyer) or Beate (Chelette) who have built entrepreneurial companies and sold them for significant value. All of us in this room have a great livelihood from this industry and I think that over the past six months we’ve seen a lot of tension building as words like micro sites have come into our lexicon and subscription has really gained critical mass and Google and Yahoo are knocking at the gates.

I think all of us are starting to feel that maybe there is a monster who’s eating us and perhaps the party is finally over. We’ve had a great run in this industry. In global standards it is a relatively small industry -- $2 billion -- we’ve heard some numbers quoted today, but $2 billion is a significant value industry and I think we’re all wondering how we’re going to make sense of the changes.

Today, I want to give you my thoughts on that, on some of the changes that are going on, and I have three messages today. Number one is that I have a very bright message for our industry. I’m very happy that our two major competitors are very bullish on the growth prospects for this industry. So am I. I think the key thing to focus on is that the industry is growing. So that means that there is more value and more opportunity for all of us.

The second message I am going to talk about today is that the industry is changing and the opportunities are changing and there is this emerging low end which is a great opportunity, and there are already people who are in this room who are successfully pursuing and benefiting from being early movers in that opportunity space. And it is here to stay. But it is also going to be a relatively small part of our market.

My third message is for everyone else. Call us the traditionalists. People who understand the industry as we have known it and play more at the high end and the middle part of the market – royalty free and rights managed. That also is going to be a vibrant market, but it is a market that is under some risk and the key for people to successfully continue to create value is to make sure you do well the things that create value in that market. So let me give a little bit of a framework.

There’s been all sorts of numbers thrown out. No one really knows so I just set $2 billion as the size of our industry (maybe it is $2.5, maybe it is more) in any case it’s a relatively small market by global standards relative to some of our peer industries but it’s still a significant value industry. Roughly, this industry breaks down 75% to the commercial licensing market licensing to advertisers, graphic design companies and corporations; 25% to editorial customers, magazine, newspapers, book companies, media entertainment companies; and then the consumer market which has always been relatively small, although that was Bill Gates original vision for Corbis.

Corbis is a leader in the editorial and consumer markets, but I don’t want to talk about those today. While those are markets that have very interesting dynamics, today I want to focus on the commercial market which is the large part of our business.

At the top of the market we have the high end with all the acronyms that we know so well: JWT, BBDO, DDB – the high end ad agencies where there has been huge consolidation in the market, and on a global basis these are huge buyers of stock photography. But at the same time that they are huge buyers, they are very judicious in their use of stock. Selling stock photography to a creative director of a large agency is making him or her go somewhere where they don’t want to go. They would prefer to drive the creativity and shoot it themselves. So while our industry does a huge amount of business in this market, at the same time the growth is about continuing to create credibility for our product.

The middle market is different. The middle market consists of agencies of regional scope or interactive agencies, smaller agencies, direct mail agencies. These are ones that are maybe part of global holding companies, but are smaller companies. The budgets that are going through these companies are smaller and stock is absolutely core to what they do. So on virtually every campaign they are looking to use stock heavily in the context of that campaign.

Then there is the value segment. Mark [Burns] talked a lot about that. The value segment includes the small business owner, SOHO -- some of you are in this room. They are freelancers who maybe don’t buy stock that often, but maybe a few times a year. Maybe you have a project so you’ll buy a subscription for a month or maybe a CD. And this is also a large segment, and our owner looks at the person you never see and never talk to as the best customer you can possibly have. And Getty and Corbis and Jupiter who have these global sites are getting a lot of traffic from these companies.

So then how do the players in our industry, align (to service these segments). Getty, the largest company in our industry plays across all the segments. The have made great acquisitions and developed great collections across the spectrum – Tony Stone, Image Bank, PhotoDisc, Digital Vision, Photonica -- and really has content for all of these different markets.

Jupiter through its content strategy has developed content mainly for the lower end of the market. And then Corbis has been mostly at the high end. So 86% of Corbis’ business is Rights Managed and we deal very heavily in that high-end agency market, and mid market agency, and we have the lowest ratio of e-commerce of the three companies.

So this was the industry that we knew as of last PACA, and then what happened? Below the value segment there are two new forces. There are micro payments. Selling pictures for $1.00 or $139 a month, or different ways these sites are priced. I came from Hollywood, from the music business originally and then the motion picture business, but this reminds me a little bit about what happened in the music business where we had a product value equation that just wasn’t right. Most customers did not want to buy albums, but they wanted a single at a much lower price.

Likewise, I think that micro sites have thrived – and the interesting thing – and this is not a perfect framework and we should talk about it, but micro site customers are at the high end as well as the low end. There are people in large agencies who will buy stuff for comp purposes from a micro site. There are people from middle market agency that use these images. And, there are large newspapers that publish an iStockphoto image. But they really come in at the low end of the market with a different value equation -- which is good enough quality and good enough rights at a much lower price.

I think Jupiter and micro sites is a very good thing for our industry because a lot of companies out there saw a need that wasn’t being served and now they are serving it. That’s a growth opportunity for all of us. And we haven’t seen any impact on Corbis’ business from the impact of Jupiter and others entering the market.

But I do think you can even think of the market as going lower. Right now we define the industry with this line, (all users above the Google level on his power point presentation) but is Google going to be at PACA next year? Is that the way people will find their images in the future? And will they be free? So I do think there are pressures pushing for it to go even lower. Now you have to look at the low end as a holistic thing. It is not just micro payments. To me there are four things that are driving this emergence:

Number one is declining client budgets. That we know about. The advertising industry is under the biggest squeeze in its history. And it is not that the overall value going through the industry is declining, but it is shifting toward different channels – toward the internet primarily – where that type of advertising does not get the price realization that people will get for broadcast, print and other uses. And also ad industries are being questioned as middle-men -- what is their real value? So ad industries are all experiencing lower client budgets, and this is true for all customer types in our industry. Budgets are in decline.

Secondly, Jupiter has gained some scale and driven the emergence of the low end. Again, we haven’t seen it have a bad impact on Corbis’ business so it always a sign of a vibrant industry when a good company like Jupiter can come in and drive some growth. But Jupiter’s emergence is also driving the emergence of the low end.

Imagery oversupply is something Jim [Pickerell of Selling Stock] has written a lot about. Are there too many pictures? I do think the supply/demand equation is getting a little out of whack. So there are a lot more pictures. The number of pictures is growing more than the value of our industry. So definitely supply is getting to the point where return-per-image can’t keep up.

And then, finally, because the emergence of these new models exists we hear all the time in sales discussions with our clients -- “Well you know I could find a picture from iStockphoto or Shutterstock for so much less money, you’ve got to give me a better deal.” So there is a risk of pricing pressure by the nature that these sites are out there offering these low prices.

So I do think the low end is a vibrant part of our industry. I think it is going to be an important part of our industry. However, it is a specific client type and it is going to be relatively limited in its scope. So I don’t see that Corbis’ or Getty’s traditional customers have been significantly impacted by this emergence yet. We, by continuing to focus on the needs of our customers, don’t anticipate that it will. But, it will be a growth driver that everyone has to play in.

Do I worry? Of course I worry and like Tom Grill or any of you out there when you worry you search web sites in the middle of the night. The search that we use as our benchmark is “businessmen carrying briefcase”. So what I did is that I looked at Corbis and I looked at iStockphoto and I looked at Google. [Editors note: This was based on my analysis in Story 792. I also searched these three plus Getty and found 683 images on Corbis, 814 on Getty, 4 on iStockphoto and 166 on Google Images. Most of the Google pictures were links from other professional image distributors.]

And I was thinking why are customers willing to pay $2 billion a year for what we offer? What separates (the professional content from everything else available) and I think it comes down to four things. There are really not a lot of things that are value creating in our industry so we have to be really mindful of what they are.

1 – Differentiated content. What do I mean by that. Great pictures. And that means great creative intelligence, and a lot of the stuff that Lewis [Blackwell] alluded to. Better pictures that customers really need in this move toward sophistication and a lot of the stuff he talked about. We have to deliver great pictures. That is one of the key values of our industry.

2 – Secondly is very strong rights management. The core client base in our industry needs the security that what they are going to use pictures for is fully protected. And photographers want to insure that their work is fully protected. That is a key driver of value.

3 – Third is metadata and search. [At Corbis], We consider ourselves a leader in metadata in the industry. The key is to make sure you have the right data on pictures in a way that ties to a search experience the customers want. So at Corbis, because we were an editorial-focused company, the way we applied metadata was very much in an editorial context years ago. And now we are in the process of re-cataloging our entire library to insure that it meets the needs of the commercial market that is searching for pictures in different ways.

4 – Finally, global marketing and distribution. There is an increasing globalization of our industry. Customers are coming from all over the globe. You need to be able to transact on a global basis and you need to have a service and sales network that is able to sell to customers on a global basis.

I ask everyone in this room who is a picture agency owner, how do you stack up against these four because really there is not too much value in our industry. We can argue about it, but why hasn’t Google taken over and why won’t Google take over? It’s because Google – and we did this rating thing of Corbis and some other players against these criteria – and Google actually rates pretty low on a lot of these criteria. If we want to preserve the value of our industry, and you want to preserve the value of your company, you’d better make sure you do these well because if you don’t there is not a lot keeping someone from replicating you or making you irrelevant.

So as an industry I ask, where do we draw the line? Are we going to draw the line in the sand that our industry begins and ends at some point in this value chain. As companies you have to populate yourself somewhere on this matrix and you have to decide where you are going to play. But the key, as I said, is to focus on value creation.

So in summary, I want to say two things.

It is a very bright future for our industry as long as we focus on value. This is a baseball town and I’m sorry for the international guests of PACA who might not know the specifics of baseball, but it’s really the bottom of the first inning of the stock industry. A lot of people have had wonderful rides in this industry and it almost seems like, “Oh my God an era is over,” but we really feel that it’s just beginning. And our industry is going to continue to thrive and change and we need to embrace that.

The second thing that I want to say comes from my wife who is probably my greatest source of advice. Sometimes it’s challenging and changing and we work hard to keep going and sometimes you question “what do I do next” in this challenging environment. My wife always tells me, just put your foot forward and keep walking. And that’s what we have to do as an industry. Embrace the change and continue to thrive.

Thank you.