A day after PhotoShelter announced that it was closing its PhotoShelter Collection stock photo service, PDN spoke to CEO Allen Murabayashi and vice president of marketing Andrew Fingerman.

The two discussed why they decided to close their photographer-focused stock service after just a year, and why they couldn't compete with stock giant Getty Images.

They said they regretted disappointing photographers, and that the company remains committed to its Personal Archive service. They also said that they had to let go the majority of the 30 people working on the PhotoShelter Collection.

"We lost a lot of people on our staff because of this decision, and of course I carry the burden of making that decision," Murabayashi said. "But we did feel good about standing for something in the industry, standing up for the photographer, and we really wish it could have worked out."

A condensed version of the interview follows:

PDN: I wondered about the timing. Why not give the PhotoShelter Collection more than a year to see if it would take off?

Murabayashi: We had a few key assumptions that we were predicating the business on. One of them was that we could create a high volume of Internet sales, unattended sales, and keep the cost structure down. And number two, that the crowd-sourcing concept could really go very, very viral, so that we would have a very, very large community of photographers. After a year of data, and after trying a number of different things, we were satisfied that the trend line we were on for our growth wasn't going to be altered substantially enough.

The other part of that is, every time we would go into a sales situation when we were competing against Getty, for example, we found that to compete effectively we would have to become even more and more like Getty. When we looked at the organization we said wow, the vision of this company has changed substantially from this Internet model with high efficiencies to having a direct sales force that was competing with Getty head-to-head. There's no point in trying to replicate Getty because you lose all your competitive advantage. If you're going to become another Getty, chances are you're going to fail, because you don't have the time and resources that Getty has to do it.

There are a lot of people out there who are saying, hey, you should have stuck it out for another two or three years. To them, I say, there's no point in that if at the end of three years, if we're still in business, that the only thing I can say to you as a photographer is, "Your cut is 35 percent. We're Getty but we have a different name and it's PhotoShelter." That totally destroys the whole purpose of creating PhotoShelter in the first place.


PDN: I've noticed that the PhotoShelter Collection had a real interest in helping the photographer. Do you think maybe there needed to be more focus on the customer?

Murabayashi: I definitely think that we needed to have more sales activity. The sales channel needed to be much wider than it was. The number of people that we could touch on a regular basis needed to be much wider than it was. We're constrained, like any small company, by the amount of money that we can spend in marketing. For the segments that we targeted, we did OK. But it's really hard to get repeat buys on a regular basis when you're dealing with a lot of large accounts that have subscription deals in place with Getty. It's a disincentive for them to go outside the subscription deals and spend money.

Our goal wasn't to become a small boutique agency with 10 people and revenues of $2 million a year. Our goal was to change the industry dynamic altogether. We knew that if we had ten years, and we could build up, then maybe we had a chance of growing organically. But that's not the V.C. [venture capital] plan. And that's not the way that the individuals here wanted to spend their time as entrepreneurs.

PDN: Some niche agencies end up partnering with a bigger distributor like Getty. Was that out of the question from the get-go?

Murabayashi: No. We were approached by Getty a number of times and we talked to them. But the problem there is that they were offering the normal percentage, 35-40 percent, and they wanted us to split that with the photographer. And if we split that with the photographer, 20 percent or 10 percent of the total sale, it's just a strange thing to say, "Hey guys, it will be made up in volume, we think, but we're not sure."

The other part of it that people don't really think about is that we had fairly relaxed technical requirements on the imagery. For the same reasons we think that the Flickr-Getty thing would never fly is the same reasons that it's not so easy to take different technical requirements and assume that the images can just shoot into another system.

PDN: You mentioned the Getty-Flickr deal. I remember when the PhotoShelter Collection launched, there was talk about capitalizing on the Flickr attitude – the community and people helping each other out. I haven't really seen anybody turn that into a money stream yet except the microstock sites. Is there no other way to make it work?

Murabayashi: I'm a little pessimistic on that notion. Commercial usage and creative usage is where the money is. The average good photographer is incapable of shooting, like, a lifestyle image. That is a very specialized field and I don't think a guy on Flickr can reasonably assume that he's going to create a body of work that's representative of the stuff ad agencies and publications want to see. He might have one or two or ten images that might be phenomenal. But year after year he's not going to be capable of shooting that kind of stuff. For the casual Flickr user, it's going to be very, very difficult.


PDN: I heard from a couple of photographers who were PhotoShelter Collection members and never sold a single image through the service. Were sales that low?

Murabayashi: We actually were having our best month in September. And yesterday, a lot of photographers had their first sale, which is kind of ironic. We had a system that had 25,000 photographers in it. A lot of photographers were submitting stuff like flowers, mountains, sunsets. That's not to say those were the people you spoke to, but there was a lot of stuff that had lower commercial value. And the people who were shooting stuff that was in high demand, those were the people who were selling images. There were a number of people who sold images for several thousand dollars and got 70 percent of those sales.

Fingerman: If you look at a community of over 25,000 photographers contributing, if we one day were able to make 10 percent of them very happy with 2,500 sales in a month, which we were not doing, that's still 22,500 upset people. And if we were doing 2,500 sales in a month, we'd be pretty damn happy.

PDN: You had a huge number of photographers in the system. I know you'd done some recruiting on Flickr. How else did you bring photographers in?

Murabayashi: We had a group on Flickr, we had a group on MySpace, we did a lot of recruiting of great photographers that we were made aware of. I think the events [which included seminars for photographers] helped to bring in a lot of people. I think the videos we put up of the events helped to bring in a lot of people. And there was word of mouth. People would blog about us. It was a really positive community of users. It definitely is a shame that it had to go away.

PDN: What did you learn about what worked and didn't work here? Anything surprise you?

Murabayashi: I want to make clear that, first of all, we're very apologetic that things didn't work out. We lost a lot of people on our staff because of this decision, and of course I carry the burden of making that decision. In terms of things that we learned, I think it's not like selling something on eBay, which is what I put on my blog. When we're dealing with a marketplace that's licensing intellectual property, you have a photographer who's trying to deal with technical and content issues, we try to license it to an ad agency on behalf of an end client. All of the sudden there's two extra intermediaries and everybody's talking about different issues. At the end of the day, even if you have a great image, the client might say we want to go with that other image because it's priced cheaper. The complexities of the industries make it a lot harder to succeed than you might think.

I thought we actually executed it pretty well, I thought we did a good job building the brand. Clearly we weren't successful, so we have to live with that on our resumes for the rest of our lives. But we did feel good about standing for something in the industry, standing up for the photographer, and we really wish it could have worked out.