Hat Tip: Imaging Resource
Bloomberg posted an article yesterday on Getty's current financial issues. (The story cites two anonymous sources. Take that as a warning as to potential accuracy problems.)
Getty apparently burned through a third of its cash reserves during the last three months of 2014.
Getty took on $2.6 billion in debt to finance the $3.3 billion purchase of the company by Carlyle Group. The loan terms limits Getty's ability to borrow money when certain conditions are met. The 7% drop in the company's fourth-quarter earnings resulted in debt being more that 6 times earnings. This triggered a clause limiting Getty's ability to borrow against it's $150 Million line of credit.
The news caused the price of Getty's debt instruments to drop. (Bad news for those that own them.)
Frankly, the news doesn't surprise me. Getty has made some troubling moves since the Carlyle take-over. Those moves antagonized the people Getty needs to be successful (photographers) and part of their current issues can probably be traced to that antagonism.
Photographers ending their association with Getty leaves Getty with less material to sell or license. It could also result in the material still on hand being lower quality, lowering the price Getty can charge for those materials.
This seems to be reflected in the fact that Getty Images year over year profits are down 17%
Carlyle apparently thought they could leverage Getty's stock image library in order to turn the company into an Internet giant. Unfortunately, many of the moves made in an attempt to leverage that image library undermined Getty's core business, stock photography imaging.
Undermining your core businesses is never a recipe for success.
Right. A few months before the Carlyle Group purchase, the Getty Images New York office started replacing the seasoned contributing photographers with inexperienced several contributing "photographers" at a much lower royalty rate. (the practice continued after the purchase.) The management was very ugly about it.
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