By Daryl Lang

All evidence suggests the stock photo industry is in for a bleak couple of years. Just ask the people in charge of Corbis.

Corbis executives said Saturday that the stock licensing industry will decline over the next four years, and the company will cut the royalty rate it pays most rights-managed contributors.

Corbis CEO Gary Shenk said the company faces “a moment of disruptive change in the image market.” Last month Corbis announced a wave of layoffs and restructured its executive team. And this week, two Corbis competitors – Getty Images and Jupiterimages – agreed to merge.

Shenk and other Corbis executives announced the royalty cut Saturday at the PhotoPlus Expo in New York during meeting of about 30 stock photographers, trade association leaders and industry reporters.

“Overall, we expect the image licensing market to shrink in the coming years,” Shenk said. He showed a slide forecasting that the total stock image licensing business will fall from $2.3 billion dollars in 2007 to $2.2 billion in 2011. The traditional stock licensing that makes up most of the industry will shrink at an even faster rate, Corbis predicts, as low-priced microstock services grow and take more market share.

Corbis, which is owned by Bill Gates, has never turned a profit, though executives said the company’s financial shape is improving.

The unenviable task of announcing the royalty rate cut fell to Don Wieshlow, who joined Corbis when the company acquired the Veer agency and who was recently promoted to Corbis senior vice president.

“As contracts expire, photographers will receive a letter indicating a possible adjustment to royalties, aligning them to industry norms,” Wieshlow said. He said the rates will change to about 40 percent. “That’s something that’s imperative for this company to continue to invest and continue to grow.”

The change will affect rights-managed royalty rates, not royalty-free rates, and there will be other exceptions such as celebrity portraiture, according to Corbis spoksperson Dan Perlet. Photographers' rates will change as contracts come up, beginning in the next few months and continuing for three years. Current royalty rates vary, though contributors say Corbis generally pays in the 40s and is higher than Getty Images.

Some photographers challenged Wieshlow on the change, and in response he stressed that royalty rates are not the same as revenue. He said Corbis hopes the change will eventually lead to higher payouts for photographers – as Corbis invests in growth, expands its market share, and earns more revenue.

That explanation didn’t fly with photographer Zave Smith, president of the Stock Artists Alliance.

“I believe your intentions are good. I’m just skeptical it will play out,” Smith told Wieshlow. He said photographers need to invest in growing their businesses, too.

Smith's complaints about the royalty cut were greeted by applause from several others at the meeting.

Shenk pointed out that Corbis has gone through some tough changes and after the royalty adjustment, Corbis will still pay higher rates than Getty.

The Saturday meeting had a distinctly informal feel. All of the company executives present wore casual outfits, and there were no microphones (which made some remarks difficult to hear on a noisy balcony at the Jacob Javits Convention Center). Shenk sat in the audience, rather than at the presentation table, until it was his turn to speak. Near the end of the meeting he said, “This is not our company” and gestured to the four other Corbis execs. He then gestured to include the audience. “This is our company together.”

Corbis faces a tough fight against market leader Getty Images, which will grow in size by bringing the Jupiterimages brand into its fold. Getty said Thursday it will pay $96 million for Jupiterimages, which was valued at well over $300 million during failed merger talks last year. The price of the deal reflects the bleak outlook for Jupiterimages.

Traditional stock photography has been suffering for several years, and the economic downturn does not bode well. Several stock photographers and agency managers at the PhotoPlus Expo said revenues and returns per image values are down sharply.

One was photographer Jack Hollingsworth, who contributes stock to Corbis and several other agencies.

After listening to the Corbis presentation, Hollingsworth said he understands why Corbis has to cut its royalty rate to remain competitive.

“They’re a business, they have to make money. I’m a business, I have to make money,” he said. But he added, “It’s a crazy business. I wake up every day, I have no idea what the day’s going to be like, what the week’s going to be like.”