Getty Images bankruptcy is here. The company is in the process of restructuring. As a stock photographer, you are probably thinking: this is bad, right? But, let me tell you in this blog why I think this is actually good news for stock photography. While there are many nuances in this story, it all comes down to one important thing you will learn shortly.
On this blog I have tracked the state of the stock photography industry for a long time. But, Getty’s bankruptcy is a standout for sure. Let’s understand what really happened and what led to this event that forced Getty’s hand to file for Chapter 11 reorganization. But, most importantly, what does this bankruptcy mean for stock photographers like you and me.
How Getty Images Got Into Financial Trouble
For one or another reason, Getty Images has been a darling of private equity funds. Private equity groups are financial institutions that raise capital from private investors and then use proceeds to buy other companies. On average, private equity groups hold their companies for 3 to 5 years. During those years, they cut costs or raise product prices to quickly improve financial results. Later, they sell these optimized companies to someone else at a profit.
Very often, these acquisitions involve debt. In fact, lots of it. Back in 2008, Hellman & Friedman private equity group took control of Getty. In the process, this group made Getty take even more debt and pay them a special dividend. As a result, Getty’s debt ballooned.
Later in 2012, another private equity firm called The Carlyle Group bought Getty from Hellman and Friedman. That acquisition was financed through even more debt. This is something called leveraged buyout in the financial parlance.
Long story short, by the time Getty went public in 2022, it was saddled with an immense amount of debt. Debt by itself is not a problem, as long as it is reasonable and does not involve high interest rates. For Getty, it was not the case at all. Its recent debt amounted to $2.1B and was consuming its entire operating income! Basically, the company was not making enough profit from licensing photos and videos to pay interest to its lenders.
Failed Getty Shutterstock Merger
Things began looking complicated around 2024 as generative AI was taking market share from real content. Getty was still showing sales growth, but its operating income was not going anywhere.
And here, Shutterstock and Getty agreed on a plan to merge. The logic was that by merging, they will be able to better leverage their assets for better profit. For instance, they could have asked for more money from generative AI companies. Or, maybe they could have cut contributor payouts or raised prices for customers.
Basically, there was a risk of creating a large monopoly in the stock photography industry. In my previous videos, I speculated that there was a large regulatory risk to this merger. I also thought that Getty would cut Shutterstock’s contributor payouts even more. Either way, all this went out of the window.
While the US federal government gave a green light, the UK authorities objected to the merger. And this is where problems began piling up one after another leading to this cascade of events that culminated in bankruptcy filing.
First, Getty incurred more than $100 million in fees and interest expense leading up to the merger. If Getty and Shuttestock merged, Getty would have gained access to Shutterstock cash which was around $130 million. Well, that opportunity vanished.
On top of that, Getty faced litigation from its warrant shareholders. Getty lost that fight and owed more than $200 million in adverse judgment. And, don’t forget bills from lawyers of over $35 million.
What Getty Images Chapter 11 Reorganization Means
So, when we add all of these extraordinary expenses, Getty’s finances were stretched to the limit. But, in September, things have escalated. Getty nearly missed its interest payment on its debt carrying 10% and 14% rate. And, by the way, if you know anything about interest rates, 14% is huge and very burdensome. Miraculously, Getty was able to pay this interest. But, the stock market took notice. The bankruptcy filing was imminent and Getty’s stock was trading for pennies in September.
According to news outlets, Getty looked at different alternatives to refinance its debt. But, apparently, it ran out of options other than filing for Chapter 11 reorganization.
What Chapter 11 bankruptcy means is that Getty Images does not cease to exist. It continues to function normally. However, its common equity shareholders get nothing for their shares. At the same time, Getty will likely lower its debt and other obligations by over $200 million. I say likely because the reorganization plan is still pending.
But, here is the most important part in all of this. The Getty family and Koch fund will take control over Getty Images after the dust settles. Before the bankruptcy, Getty family maintained a sizable stake in the company at 42%, while Koch had 27% stake. After reorganization, both Getty Family and Koch will contribute over $500 million in fresh capital, including over $400 million in cash. This new cash will be instrumental to fix the company’s finances.
How The Getty Family Stayed Involved With Getty Images
While I was researching this topic, the same question popped in my mind. What is the role of the Getty family in all this? If we look throughout Getty Images history since 1995, the Getty family maintained either a minority or majority stake in the company.
Since 2018, the family has effectively controlled Getty Images. Throughout all these years, the family has shaped the company’s path one way or another, so its continued control of Getty Images is not news. The Getty family, along with Koch, is putting hundreds of millions of dollars into Getty Images. Clearly they believe it is worth owning, especially since the bankruptcy will reduce its debt and give the company a financial reset.
There is also another curious fact in all of this. The Getty family owns the Getty Images trademark. That’s important as it ensures that the family’s influence over the company stays even after its sale or bankruptcy.
In other words, no other lender or creditor can come in and take control over the company Getty Images without the Getty family’s consent to use the trademark. Otherwise, the family will claim trademark ownership and new investors would have to change the brand from Getty Images to something else within two years. And, that’s messy and very undesirable for a new owner.
Why Getty Images Bankruptcy Is A Good Thing
And, now comes the interesting part. Both Koch and the Getty family are long-term investors. In my opinion, it is better for them to keep control over the company rather than some other private equity group or creditors.
After wiping out some of its debt and infusing new cash, Getty Images will be stronger financially. There won’t be an immediate need to cut costs or jack up product prices. If let’s say a private equity group took over the company, I would have expected them to do these things first. And, cutting costs would have likely affected contributors one way or another.
Under Chapter 11, there will likely be less disruption too. Vendors and contributors will be paid in full. Operations will continue normally. Getty also said that they don’t plan layoffs as part of the restructuring.
Plus, Getty Images is going private. This means that the owners can work on business turnaround quietly and away from the public scrutiny. But, is this the best alternative available out there? Meaning, what if another outside investor came in and provided a fresh perspective on this turnaround?
After all, Getty Images is facing serious pressure from generative AI and falling stock content prices. Many competitors began transitioning to unlimited plans like what Shutterstock is doing. All this dilutes the value of its licensable assets.
The Getty family has been more or less in control of the company since 2018. On their watch, the company went through this recent warrant litigation and lost over $200 million. Getty Images also went after the Shutterstock merger that fell through and produced over $100 million in expenses.
Of course, it is easy to see these blunders in hindsight. But, it is a different matter of making judgment calls and rolling with punches. So, I am definitely not criticizing anyone here. Either way, I definitely think that private takeover of the company by the Getty family and Koch is better than the creditor-led alternative.
But, there exists a parallel universe where an investor with fresh perspective takes over and steers the company into a new future without jeopardizing its relationship with contributors. The Getty family could be that patient investor. But, their track record has been less than ideal, especially since 2022.
Where We Focus As Stock Photographers
So, now, as a stock photographer, what do I expect from Getty Images going forward? I expect them to stay in business, which is good. I don’t think Getty will do another round of contributor payout cuts. Their payout rates are some of the lowest in the industry, especially for non-exclusive photographers. If they lower payouts further, there is a serious risk of contributor backlash.
I also expect Getty to lean more on licensing content to generative AI companies. For instance, they already have an agreement with OpenAI to license content in ChatGPT answers. Like when someone is searching for things to do in London, ChatGPT shows images of Big Ben and other places licensed from Getty.
I also think that there is some chance that Getty will start selling metadata and images to AI companies to train their algorithms. This is what Shutterstock has been doing for years. Now, this is a double-edged sword for Getty. On one hand, they get immediate cash from AI companies. But, at the same time, they are creating rivals whose generative AI imagery will compete with them later.
As for stock photography in general, I believe that the bright spots there reside in two main areas. First is editorial content. Generative AI cannot replicate real places, real people and real events. There will be demand for this type of content at least for the foreseeable future. We are focusing our efforts on editorial content a lot lately.
Second is stock videos. While generative AI is fully capable of producing videos, they tend to be short and somewhat unrealistic at least for now. This will likely change, as AI algorithms get better and cheaper. But, for now, this is another lucrative area we are working on.
Related Post: Making Money on Shutterstock
Either way, I am much more hopeful with Getty staying in place and at least preserving its status-quo on stronger financial footing. What comes next largely depends on how this turnaround gets executed.
