Hellman & Freidman LLC is an investment firm with offices in San Francisco, New York, and London. Among their many investments, they focus on industries specializing in media and marketing services, financial services, information services and other. They have managed over $16 billion in capital. According to the financial releases, “Under Delaware law, the merger agreement was required to be adopted by the holders of the majority of the shares of the company’s common stock outstanding on the record date of May 20, 2008. Holders of approximately 75% of these shares voted in favor of the adoption of the merger agreement, representing 96% of the votes cast.”
Note the meteoric rise over the past decade. Note the nimbleness with which Mark Getty and Jonathan Klein negotiated the market demands for profits and return on share value. Note the constant array of new and appropriate product lines that tapped into the growing demands of the commercial clients worldwide – the continued technical updates to improve image search, the varied pricing models that reached the needs of new budgets, the swift expansion into news, sport, entertainment, music and footage, all while grabbing market share from competitors. The company also budgeted their money allowing them to acquire every major company with a name and a product line on which they could build their branding and quality.
The Largest Having absorbed between one to seven companies each year, Getty Images has expanded with horizontal mergers to become the indisputably largest company globally in its industry. It commands over half the market and continues to grow. It has managed to integrate intellectual property in the media genre as varied as film, music, sound, and still photography, not to mention asset management and assignment photography. It has enjoyed economies of scale by quickly integrating its product lines into major branding campaigns, and eliminating any staff and office that is redundant.
The company pioneered the digital age by funding the scanning and on-line e-commerce of all of its early acquisitions, and made excellent use of all the complementary resources its mergers offered. New management teams, more knowledgeable in corporate finance, replaced old ones, and each merger created additional “economic rents” whether financing with stock, or debt or cash.
They gobbled up market share, not only by being the biggest and the best, but by purchasing any business that held the share they needed. Then, in 2006, they made their biggest leap into the modern age in order to head off the newest era of “Creative Destruction” by purchasing iStockphoto, the “crowdsourcing” business model that, once again, is changing every pricing model formerly common in the industry, tapping into a new body of imagery fostered by amateurs and semi-pros, and offering a modern and fresh approach to image search. This highly discounted business model demands large volume purchasing, and has continued to threaten the whole image media empire that has been constructed on the strength of the internet over the last decade.
What’s Been Interesting Along the Way?
February 1999: E-commerce sales reached 15% of total sales, working toward an effort to segway from analog to digital, as the commercial client upgraded their systems to accommodate these moves.
May 2000: 20% of the business was coming from new customers. They launched a system to handle digital asset management for others who want to move image on the internet.
January 2001: In order to make the business profitable at a level that would satisfy investors, Getty needed to cut costs. Their biggest payout was to suppliers, the photographers. Getty needed new images, but a large percentage of their suppliers were sitting back and waiting to submit until they got a satisfactory new contract.
October 2001: Stock photo industry in the US recession. Even before September 11th, sales were off for the year compared to 2000.
February 2002: THE COMEBACK: Getty reported better than expected 4th quarter revenues and 61% of sales are now e-commerce. Gross margins are improving because Getty is getting their image inventory on more favorable terms.
February 2003: TURNED A CORNER ON PROFITS: For years Getty invested in growth with a loss. Now the company reports a new income. Achievements: completed digital migration, re-
invigorated major brands and initiated unification strategy, enhanced news and sports coverage, and initiated 3rd party distribution strategy.
August 2005: Getty launches a radical new business model of licensing subscription imagery, catering to the price conscious clients.
January 2007: Stock price rises. Royalty free business model grew 132% and micro business grew. Innovations included new products, footage, multimedia, entertainment video and mobile application developers.
Is this the reason to get out of the public eye? We think so. Now Getty Images can chase that growing but sometimes elusive consumer market that its competitors have been trying to lure for a decade. They can do it without answering to share value and public scrutiny. They can create market share that never existed. They can continue to build their global empire.
To date they have not suffered opposition as a result of antitrust laws, and are now enjoying a new direction under the “private equity partnership” label. We agree that, according to Brealey, Myers and Allen in Principles of Corporate Finance, “Perhaps going private avoids public investors’ ‘short-termism’ and makes it easier to invest for the long run.”
To go back and read the previous page of MacTribe's "Getty: Growth of a Small Empire" Click here for Part 1
Article by MacTribe contributing editor Pat Hunt,
Maureen Meech, Robyn Wolf & Julie Zurowski of the Curry College Business School, Milton, MA,
Home page image copyright Izabela Habur-iStockPhoto
All other images by Mark Hunt of Huntstock, Inc and represented at GettyImages.com
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