Rate Schedule/What does NET mean?

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iStockLawyer
Member is a contributor and has less than 250 Photo downloadsForum Moderator
Posted Tue Dec 11, 2012 2:16PM
There have been a few questions surrounding the addition of language to the Rate Schedule when we launched cash sales. Let me see if I can address them.

1. Was there a change to the ASA without notice to you?

No. The manner in which we calculate royalties for credit and subscription sales is the same as for cash sales. Since 2008, we have always calculated on the net value of the sale price. There was no change to the way that we calculate royalties for which you were not given advance warning. There was a clarification to confirm that the royalties will be calculated in the same way that they always have been.
Cash sales launched on September 4.

Prior to September 4, the Rate Schedule said, “In the case of a file licensed using credits, the contributor's royalty is based on the net price of iStock credits used to license a file.”

On September 4, the Rate Schedule was amended for cash sales to state, “For files licensed using our standard pricing, the royalty rate is based on the total amount paid to download your image. In the case of a file licensed using credits, the contributor's royalty is based on the net price of iStock credits used to license a file.”
In the contributor newsletter sent to all contributors on September 7 we let you know the following:
We made changes at launch to the language on the rate schedule page. However, we don't think it clearly enough describes how royalties are calculated. Royalties for our new standard pricing downloads are calculated using the same logic as credit downloads: we apply your royalty percentage to the net US dollar value of the file. We are going to change that language on the rate schedule to be more accurate.
And the Rate schedule was changed to “For files licensed using our standard pricing, the royalty rate is based on the net amount paid to download your image. In the case of a file licensed using credits, the contributor's royalty is based on the net price of iStock credits used to license a file.”

2. Can we have a definition of NET?

The kinds of items that we net from the payment include taxes or other withholdings, refunds, bad debts and currency hedging. We can certainly look creating a specific definition of net the next time that revisions are made to the ASAs. It takes about 4 weeks of development work for a team to complete changes to the ASA, including translations, uploading new copy, making the notice pop up, disabling uploads until new agreement is approved and creating the email notifications. That is development time that we would rather spend on addressing the other issues that you are raising and further product development until there are enough ASA changes to merit blocking out this development time.

3. How does the currency hedging work?

• Our system is built on a price book which sets all credit and cash prices in USD. When we offer credits for sale outside of the US, we convert the USD credit or cash price to the country’s local currency. For the conversion, we use an exchange rate that is set at the beginning of the month and designed to accommodate fluctuations in rates that can arise over the course of the month in addition to covering the cost of converting foreign currencies into USD

• The exchange rate is set every month, it is different for every currency and it is based on local market conditions.

• Our system calculates royalties based on the USD price per credit or USD cash price charged to the customer, then pays royalties in USD on this amount

• Because of this, your royalties are only impacted by the USD price per credit or USD cash price

• This is the process we have followed since 2008, when we announced how we would set non-US currency prices http://www.istockphoto.com/forum_messages.php?threadid=80935&page=1, and this process not changed with the introduction of cash sales.
jjneff
Member is a Bronze contributor and has 250 - 2,499 Photo downloadsMember is a Diamond contributor and has 12,500 - 99,999 Video downloadsMember is a contributor and has less than 125 Audio downloadsExclusiveExclusive iStockphoto VideographerExclusive iStockphoto Audio ArtistMember has had a File Of The Week
Posted Tue Dec 11, 2012 2:37PM
I have no major problem with this but Currency Hedging clearly benefits iStock and not the artist. 
benjikat
Member is a Silver contributor and has 1,250 - 4,999 Video downloadsMember has had a File Of The Week
Posted Tue Dec 11, 2012 3:00PM

Not acknowledging that your "hedging" is 10-20% is totally disingenuous. We may be foolish, but we are not idiots. The level of this hedging was hidden from us until the cash prices revealed it. It is clearly just a way of reducing all our royalties by a percent or two.


I get why you don't want to do all the translations etc, but why not just provide a definition of "net" here. I am looking for an explicit declaration that items like "marketing fee", "storage charge" etc etc will NEVER be deducted from the gross income. Terms like "net" allow for a wide range of creative accounting - please convince me that I am receiving the proportion of royalties that the agreement I signed states I am entitled to.
CHBD
Member is a Silver contributor and has 2,500 - 9,999 Photo downloadsExclusive
Posted Tue Dec 11, 2012 3:01PM
Posted By jjneff:
I have no major problem with this but Currency Hedging clearly benefits iStock and not the artist. 


IMO currency hedging doesn't really benefit anyone but the exchanging third parties involved meaning banks. IStock has to play safe due to uncertain markets and their volatility, remember they set it once a month so they cannot take hit twice when things go downhill, especially these days when currency exchange rates change so often.
jjneff
Member is a Bronze contributor and has 250 - 2,499 Photo downloadsMember is a Diamond contributor and has 12,500 - 99,999 Video downloadsMember is a contributor and has less than 125 Audio downloadsExclusiveExclusive iStockphoto VideographerExclusive iStockphoto Audio ArtistMember has had a File Of The Week
Posted Tue Dec 11, 2012 3:13PM
Hedging is fine people and if I were iStock I would make sure to fall on the safe side for the company as well! The ASA screaming was out of place in the first place in my opnion.
iStockLawyer
Member is a contributor and has less than 250 Photo downloadsForum Moderator
Posted Tue Dec 11, 2012 3:15PM
I get why you don't want to do all the translations etc, but why not just provide a definition of "net" here. I am looking for an explicit declaration that items like "marketing fee", "storage charge" etc etc will NEVER be deducted from the gross income. Terms like "net" allow for a wide range of creative accounting - please convince me that I am receiving the proportion of royalties that the agreement I signed states I am entitled to.


Things like marketing fees and storage charges will never be netted from the price of iStock credits or the amount paid to download your file.
georgeclerk
Member is a Diamond contributor and has 25,000 - 199,999 Photo downloadsMember is a Bronze contributor and has 125 - 1,249 Audio downloadsExclusiveExclusive iStockphoto Audio ArtistMember has won a contestMember has had a File Of The Week.
Posted Tue Dec 11, 2012 3:23PM
Posted By iStockLawyer:
There have been a few questions surrounding the addition of language to the Rate Schedule when we launched cash sales. Let me see if I can address them.

1. Was there a change to the ASA without notice to you?

No. The manner in which we calculate royalties for credit and subscription sales is the same as for cash sales. Since 2008, we have always calculated on the net value of the sale price. There was no change to the way that we calculate royalties for which you were not given advance warning. There was a clarification to confirm that the royalties will be calculated in the same way that they always have been.
Cash sales launched on September 4.

Prior to September 4, the Rate Schedule said, “In the case of a file licensed using credits, the contributor's royalty is based on the net price of iStock credits used to license a file.”

On September 4, the Rate Schedule was amended for cash sales to state, “For files licensed using our standard pricing, the royalty rate is based on the total amount paid to download your image. In the case of a file licensed using credits, the contributor's royalty is based on the net price of iStock credits used to license a file.”
In the contributor newsletter sent to all contributors on September 7 we let you know the following:
We made changes at launch to the language on the rate schedule page. However, we don't think it clearly enough describes how royalties are calculated. Royalties for our new standard pricing downloads are calculated using the same logic as credit downloads: we apply your royalty percentage to the net US dollar value of the file. We are going to change that language on the rate schedule to be more accurate.
And the Rate schedule was changed
to “For files licensed using our standard pricing, the royalty rate is based on the net amount paid to download your image. In the case of a file licensed using credits, the contributor's royalty is based on the net price of iStock credits used to license a file.”

2. Can we have a definition of NET?

The kinds of items that we net from the payment include taxes or other withholdings, refunds, bad debts and currency hedging. We can certainly look creating a specific definition of net the next time that revisions are made to the ASAs. It takes about 4 weeks of development work for a team to complete changes to the ASA, including translations, uploading new copy, making the notice pop up, disabling uploads until new agreement is approved and creating the email notifications. That is development time that we would rather spend on addressing the other issues that you are raising and further product development until there are enough ASA changes to merit blocking out this development time.

3. How does the currency hedging work?

• Our system is built on a price book which sets all credit and cash prices in USD. When we offer credits for sale outside of the US, we convert the USD credit or cash price to the country’s local currency. For the conversion, we use an exchange rate that is set at the beginning of the month and designed to accommodate fluctuations in rates that can arise over the course of the month in addition to covering the cost of converting foreign currencies into USD

• The exchange rate is set every month, it is different for every currency and it is based on local market conditions.

• Our system calculates royalties based on the USD price per credit or USD cash price charged to the customer, then pays royalties in USD on this amount

• Because of this, your royalties are only impacted by the USD price per credit or USD cash price

• This is the process we have followed since 2008, when we announced how we would set non-US currency prices http://www.istockphoto.com/forum_messages.php?threadid=80935&page=1, and this process not changed with the introduction of cash sales.

Thank you for finally providing some communication.  I would still maintain that the terms of the ASA were broken, because it clearly states in section 5.a that: "The parties acknowledge that the Rate Schedule is subject to change in the sole discretion of iStockphoto upon providing you 30 days notice by e-mail at the last address contained in your membership information and by posting such changes on the Site."

But as detailed in the OP, the section highlighted in green above, the text on the rate schedule page was changed on 7th September - on the same day that details were emailed out to us.  30 days notice were not given.

Anyway, as I said in messages to support in back September, for me that's not what is important.  As long as iStock are not making an extra commission on non-USD transactions, then I'm happy.  For me, iStock's 55-85% commission is already big enough, taking two commission for one sale is frankly greedy.

But part 3 of iStockLawyer's message doesn't really help there.

At the moment, where the USD price is $300.00, the UK price is £215.25.

So contributors will be paid as if the customer paid $300.00.  But at today's Citibank rates, £215.25 is worth 346.81 USD.  So where does the $46.81 go?

Are you saying that whatever prices you choose for non-USD currencies, no matter how high they are, you will pay us the standard USD price?
bunhill
Member is a Gold contributor and has 10,000 - 24,999 Photo downloadsMember is a contributor and has less than 250 Flash downloadsMember is a contributor and has less than 250 Illustration downloadsExclusive
Posted Tue Dec 11, 2012 3:29PM
Until relatively recently non US customers could choose to pay in US$. Often that was a way of getting a better exchange and therefore effectively paying less. Why was that option removed ?
iStockLawyer
Member is a contributor and has less than 250 Photo downloadsForum Moderator
Posted Tue Dec 11, 2012 3:34PM
Are you saying that whatever prices you choose for non-USD currencies, no matter how high they are, you will pay us the standard USD price?


Yes – but with a caveat – it would be accurate to read “no matter how high or low they are” because in some markets the non-US prices are lower.
georgeclerk
Member is a Diamond contributor and has 25,000 - 199,999 Photo downloadsMember is a Bronze contributor and has 125 - 1,249 Audio downloadsExclusiveExclusive iStockphoto Audio ArtistMember has won a contestMember has had a File Of The Week.
Posted Tue Dec 11, 2012 3:42PM
Posted By iStockLawyer:

Are you saying that whatever prices you choose for non-USD currencies, no matter how high they are, you will pay us the standard USD price?



Yes – but with a caveat – it would be accurate to read “no matter how high or low they are” because in some markets the non-US prices are lower.

Out of interest, do you have any examples across the offered currencies where the non-US price is currently lower?
jjneff
Member is a Bronze contributor and has 250 - 2,499 Photo downloadsMember is a Diamond contributor and has 12,500 - 99,999 Video downloadsMember is a contributor and has less than 125 Audio downloadsExclusiveExclusive iStockphoto VideographerExclusive iStockphoto Audio ArtistMember has had a File Of The Week
Posted Tue Dec 11, 2012 3:43PM
The $46.81 is the hedging part which like I stated clearly benefits iStock. There is still some fuzzy math here as you have pointed out but it is what it is. I too agree a 30 day notice was due but not given but if you read the entire ASA they can do pretty much whatever they want now and give you no choice!
landbysea
Member is a Silver contributor and has 2,500 - 9,999 Photo downloadsMember is a contributor and has less than 125 Audio downloadsExclusive
Posted Tue Dec 11, 2012 4:07PM
Thank you for this clarification. It seems fair enough to me.  I am happy iStock is set up in currencies. Something I could not do easily on my own. And thanks for taking the taxes out on your side so we still get the full commision on the US price.
lostinbids
Member is a Gold contributor and has 10,000 - 24,999 Photo downloadsMember is a contributor and has less than 250 Video downloadsExclusiveExclusive iStockphoto Videographer
Posted Tue Dec 11, 2012 4:11PM

Hi iStockLawyer, thank you for your post.


I do have a couple of problems which need clearing up though.


You say a newletter came out to us on the 7th September.  I did not get one.  I did get a newletter on the 14th September with the wording you stated. Why the descrepance?


The Exclusive ASA states that there can not be a change to the rate schedule without 30 days notice.  You changed the Rate Schedule twice in September by going from adding total and then going to net and informed us after the event. Why did this happen?


Regarding the Net definition

  • I think you need to be more specific about what is netted from the payment. What taxes, is it corporation tax, purchase tax, envirnmental levy tax? There are a lot of taxes out there. Please can you be specific. 

  • What are the other withholdings you mention? 

  • I would like to know why refunds are included? You take money back from us for refunds. Are we being charged twice?

  • Why are we being charged for bad debt? 

  • Why are we loosing out because of currency hedging? Is this because you are poor at setting the rate or because you are gaming the system to your benefit?


I think it would be a very good idea to have a proper definition section in the ASA and the Exclusive ASA.  You say it takes about 4 weeks to do but I am sure not all of that is with the webdevelopment team, I would imagine most of it is with the legal team.  Wouldn't it be better to sort this out properly now than have it as another thing on the to-do list.


 
benedek
Member is a Diamond contributor and has 25,000 - 199,999 Photo downloadsMember is a contributor and has less than 250 Video downloadsMember is a contributor and has less than 250 Flash downloadsMember is a contributor and has less than 250 Illustration downloadsExclusiveExclusive iStockphoto IllustratorExclusive iStockphoto Videographer
Posted Tue Dec 11, 2012 4:19PM
It would be fairly easy to implement a foreign currency conversion payment for contributors with an exchange rate changed daily, as paypal does for example. Paypal also deducts the conversion fee which is no more than 3%. Why is Istock not doing the same?


 

(Edited on 2012-12-11 19:23:06 by benedek)
lostinbids
Member is a Gold contributor and has 10,000 - 24,999 Photo downloadsMember is a contributor and has less than 250 Video downloadsExclusiveExclusive iStockphoto Videographer
Posted Tue Dec 11, 2012 4:24PM
^ To be honest, I wouldn't mind being paid in multi-currenies.  If I had a dollar, euro and gb pound balance I would be over the moon.
PaulCowan
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Posted Tue Dec 11, 2012 4:36PM
Posted By lostinbids:
^ To be honest, I wouldn't mind being paid in multi-currenies.  If I had a dollar, euro and gb pound balance I would be over the moon.

me too
jlmatt
Member is a Silver contributor and has 2,500 - 9,999 Photo downloadsExclusive
Posted Tue Dec 11, 2012 5:44PM
Thank you for the additional information. My concern lies in how convoluted everything seems to be. Am I missing something? Exchange rates calculated monthly? As stated above, calculating those rates more frequently should be easy to implement and much more efficient - unless that's of no benefit to istock, of course.A detailed definition of "net" that really doesn't tell us anything. Again, what is included? Where is the transparency? Lostinbids' questions are excellent.Why on earth would it take 4 weeks to complete changes to the ASA? Legal time, I understand. Uploading new copy - easy. Creating a notice pop-up - simple coding. Creating email notifications? Does Istock REALLY not have a distribution list of emails? Who are the project managers for development? I hope they are not as incompetent as you all make them out to be. I think they tend to be the scapegoats sometimes for things happening behind the scenes. How patronizing to tell us that making changes to the ASA takes away development time from fixing the outstanding issues with the site. I'm extremely insulted.So bottom line, we still don't have concrete information and likely never will unless a lawsuit ensues.
georgeclerk
Member is a Diamond contributor and has 25,000 - 199,999 Photo downloadsMember is a Bronze contributor and has 125 - 1,249 Audio downloadsExclusiveExclusive iStockphoto Audio ArtistMember has won a contestMember has had a File Of The Week.
Posted Wed Dec 12, 2012 1:34AM

I agree with what others have said previously on this issue: Allow customers to choose between paying in their local currency, or directly in USD.

People buying things on the internet these days are not stupid, and they don't like being taken for a ride.  With a four word Google search (like "215.25 GBP in USD") they can quickly see how badly they are being ripped off, and they probably don't like it.  That sort of thing generally doesn't fill any type of customer with cheer.

We get it, the extra money is nice.  But - in the interests of appearing straightforward and honest - why not allow customers to choose whether they pay the price offered in their local currency, or the direct USD price?
MichaelJay
Member is a Gold contributor and has 10,000 - 24,999 Photo downloads
Posted Wed Dec 12, 2012 1:57AM
Posted By georgeclerk:
I agree with what others have said previously on this issue: Allow customers to choose between paying in their local currency, or directly in USD.
... why not allow customers to choose whether they pay the price offered in their local currency, or the direct USD price?


When did that change? It didn't...


You can change your preferred currency in your profile, and you can change it during the purchase process in your cart when you purchase a credit pack. You can't change it in single image sales, I guess, but I think this is in the interest to streamline the process and make it as easy as possible.


 
MichaelJay
Member is a Gold contributor and has 10,000 - 24,999 Photo downloads
Posted Wed Dec 12, 2012 2:03AM
Posted By jlmatt:
Thank you for the additional information. My concern lies in how convoluted everything seems to be. Am I missing something? Exchange rates calculated monthly? As stated above, calculating those rates more frequently should be easy to implement and much more efficient - unless that's of no benefit to istock, of course.


If you go back in time, the exchange rates were calculated on a daily basis before 2008. This was driving customers nuts because they made an offer today to their clients and came back tomorrow to download the image just to see the price has changed. From a business perspective I can tell you "reliability in pricing" is an important factor. A certain number of iStock customers is using "other people's money" to license images - either their clients' or their company's money. And they need to ask for approval somewhere, so they want to be sure that they can make the purchase with the amount they've been asking for. 


If I had a say in this, I would set the exchange rates once or twice a year only, even with the risk of falling below the USD pricing every now and then in between.
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