Tuesday, June 13, 2006

Photo Piracy

Everyone knows how big an issue piracy has become for music and movies. But it seems now that the same sort of cheap, easy reproduction of files is causing problems for high-revenue photographs.

What kind of photographs are high-revenue? Well, these ones, obviously, for which People magazine paid $4.1 million. The New York Times details how pirated copies of the Jolie-Pitt baby photos were appearing online before the magazine hit the stands, thus upsetting People Magazine's planned marketing strategy. Several websites carried the scanned photos, obtained from various sources, days before the magazine hit the stands.

Of course, just as with music and movies, there are people who are arguing that the appearance of the photos online may actually spur sales of the issue (whose price was 50 cents higher than normal on newsstands). The Times quotes one magazine analyst (how does one get that job?) as saying "(i)t just creates more buzz, more noise, so more people will buy the magazine." Not everyone feels that way, and not just at People. The editor of one of the online sites that posted the pictures disagrees, saying "a few less people are going to buy it if they can see it online."

There's no way to test out who's right, of course, but there are elements to truth in both statements. Seeing the pictures online will certainly stop some people from searching them out online (though they may largely be the same people who would have flipped through the magazine to see them, and not bought it) but it will also create a lot of buzz, which may bring in new customers who (somehow) might have missed on all the hype.

Two other things of note from the article:

  1. Apparently Hello! magazine purchased the British rights for $3.5 million. People paid $4.1 million for North American rights. The U.S. has a population of nearly 300 million, while Britain has a population of about 60 million. So People paid 1.4 cents per potential customer, while Hello! paid 5.8 cents per potential customer. The Brits really do love their gossip...
  2. The article suggests that the magazine may sell as many as five million copies, and reports the circulation over last year as 3.7 million. So that's 1.3 extra million magazines at $4 a pop. Let's guess that it costs $2 to print and ship an extra copy of the magazine. (That cost would include all the paper, ink, and facilities, and should probably also include some guess at the fraction of printings that don't sell and they must buy back from vendors- I have no idea, so this is a complete guess, but it seems reasonable to me.) That's a profit increase of $2.6 million in extra sales, plus assume (again, wild guess) that half to two-thirds of the regular sales base is newsstand based, so there's an extra 50 cents for each of those copies. That's close to another $1 million. So, given that these guesses are wild guess meant to be conservative, it looks like they are close to making their money back in the short run; there is clearly a long-run strategy here as well, as evidenced by this section from the article quoting People's managing editor:
    But in the long term, People wants to reaffirm that it is the place where these kinds of high-profile photos will appear. "I would not want to give Us Weekly or any other magazine the kind of traction in this arena," Mr. Hackett said.


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