MEDIA: China Chases Tough Photo Market with Getty Images Investment

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Bottom line: Visual China’s investments in 2 major western photo suppliers could raise some concerns about censorship, but mostly reflects a broader Chinese pattern of investment in western companies in decline.

Visual China invests in photo suppliers Getty, Corbis

Two deals that are attracting relative muted attention are seeing a Chinese company take major steps into the global photo market, reflecting the difficult state of affairs in an increasingly shared economy where the value of copyrighted material is shrinking fast. At the same time, the latest investments by Visual China (Shenzhen: 000681) are also raising some concerns about censorship, since the Chinese company will have growing influence over 2 of the world’s largest photo distributors, Corbis and Getty Images.

I do find Visual China’s sudden series of investments in copyrighted photos somewhat ironic, since China is notorious for piracy that often sees media and other publishers rampantly copy each others’ materials, often verbatim and without permission. But from a broader perspective, the current difficulties confronting big names like Corbis and Getty are the result of similar global trends that are seeing many owners of copyrighted materials undermined by free equivalents on the Internet.

I’ll openly admit that I’m a user of such free photos, which are quite easy to find these days and are of relatively high quality. Larger traditional media are feeling a similar squeeze as their own profits evaporate for similar reasons, and elimination of high fees for photos from third-party suppliers like Getty and Corbis are probably an easy place for cost cutting.

Visual China doesn’t seem to be too worried about the trend, and is saying it plans to invest $100 million for an unspecified stake in Getty Images. (English article) News of the plan comes just weeks after Visual China paid an undisclosed price for the picture library of Corbis Entertainment, the photo licensing outfit owned by Microsoft (Nasdaq: MSFT) co-founder Bill Gates.

The earlier deal last month gave Visual China rights for Corbis images in all countries except for its home China market. That looks significant, since Corbis’ library contains some images that would be considered sensitive and taboo in China. Those include the iconic image of a protester blocking the way of a tank, which became a symbol of the 1989 Tiananmen movement that ended in a bloody government crackdown.

I suspect the earlier Corbis deal to exclude distribution rights in China was requested by Visual China to avoid controversy in its home market. Still, it was somewhat bold of the company to become associated with such sensitive photos at all, which could attract some anger from Beijing.

Limiting Access?

Some critics of the original deal pointed out that Visual China’s Corbis buy could result in more limited access to some of the photos Beijing considers sensitive. I suppose that’s possible, though Beijing will have to be very careful if it really tries to pressure the company into limiting such access. At the end of the day I doubt China’s propaganda leaders will make such a move, since they’re more interested in keeping such images outside of China and already have plenty of mechanisms to do just that.

Chinese investors seemed oblivious of the controversy, and bid Visual China shares up by their daily 10 percent limit after the Getty Image tie-up was announced. But Visual China’s shares have been all over the map over the last 6 months, moving largely in line with China’s broader markets that rallied at the end of 2015, only to tank in the beginning of this year.

Getty Images was reportedly worth $3.3 billion in 2012 when private equity giant Carlyle bought majority ownership of the company that year. But much has changed since then, and I suspect the company’s value has followed in the footsteps of other traditional media and contracted. Still, even if it’s worth somewhere in the $2.5 billion to $3 billion range, Visual China’s investment would only give it a very small stake in the company, probably around 5 percent or less. 

At the end of the day, there’s probably good reason why this deal is receiving relatively muted attention despite the censorship overtones. Chinese firms are notorious for chasing overseas companies that are past their prime, and Visual China appears to be following in that trend with these latest deals. If I were an investor and Getty were publicly traded, I might even take Visual China’s move as a cue to avoid Getty, since the market for copyrighted photos seems destined to follow other traditional print media.

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