“Years back being a content creator meant something like being an agency or a network like NBC or Paramount studio,” explains VideoBlocks founder and CEO Joel Holland in a recent interview. “But as you know today, you, me, everybody are content creators.” As video has become a medium completely accessible for non professional consumers to inexpensively create content, VideoBlocks, which is primarily a subscription based repository of stock video, has benefited from this transformation.
The Washington, D.C. company existed in 2008 as stock video distributed by DVD, but iterated to its current streaming version and name in 2011. The company says its revenue will be about $25 million in the current year, representing “substantial growth from last year” and they say they have been profitable from the first year.
Customers and the necessity of enhancing the original business
Stock video is one element that video creators use to produce video. Creators also use stock photos, audio, music, graphics and any other element that contributes to producing video.
Customer Ed Glaser, owner of Neon Harbor Entertainment, says that he uses VideoBlocks several times a month, but he also uses material from those competitors that have more specialized content on line or from previously purchased discs. In an email, he wrote, "I have a subscription, so if I find what I need there it won't cost me extra."
Holland and the team were well aware that their customers were going to numerous places to find the additional “elements." So for revenue growth and for defensive reasons, they have been creating additional products to protect their business from competitors as well as to bring customers in from adjacent product space. They have launched three new businesses: GraphicStock in 2013, AudioBlocks in 2014 and VideoBlocks Marketplace in April 2015.
Holland explains how customer research deeply influences the formation of the new products.
“We were a couple years in running VideoBlocks. It was growing very quickly, it was very profitable. But I was thinking. are we just a stock video company, or are we more than that? Have we come up with a model that is a better way to provide creative elements, and if so how will it apply to other content types outside of video? And so we did the only thing I know to do, which is to survey the customers we asked them if we were going to launch into a new content type, what would it be and would you pay for it? The results were pretty resounding -- they said "graphics" like vectors, buttons, icons, design elements. They said that these are things that we want and we cannot find on other websites for reasonable prices. We love the subscription model for this sort of thing and yes we would pay for it.
"So then we had a radical experiment of letting the customer build the product. We had a whole series of surveys that had open answers which allowed us to whittle down the results. The customers chose the name, chose the logo, they chose the content types .
"And they ultimately gave us the green light to say when is this minimum viable product ready to be exchanged for your dollars and when it was time, we launched it. It was really a cool experiment to see what is the extreme way to listen to your customers to build a product. And it worked because we went from $0 to $5 million in a year. And I think it showed that customers might not have all the answers, but they know what they want and it is good to listen.
"As soon as we finished building GraphicStock, we went back to the well and said, guys what’s next? And that’s when they said music. And audio. Every video is better with music. And we built AudioBlocks the same way."
Rich Carr, CEO & President of frequent VideoBlocks' customer Carr Knowledge Interactive Marketing, confirms that VideoBlocks is exceptional in asking what customers need. In an email exchange, he wrote that "VideoBlocks has become my defacto footage search primarily because they’re constantly improving their product. Constantly.... They also query their client base and ask, 'What would make us better?'"
VideoBlocks adds products with Costco in mind
VideoBlocks, Graphicstock and AudioBlocks all have the same pricing scheme, with most of their customers on annual plans. (All three products are sold separately.) “Most freelancers are paying $99 per year for unlimited access in worldwide distribution commercially," says Holland. "For comparison, one HD clip on Shutterstock is $79 for a basic license, which doesn’t give you the ability to use it in worldwide distribution. So basically if you pay for a VideoBlocks 'membership' – this is the way we pitch it – if you can find one or two clips in a calendar year, you do better than buying individual assets from Shutterstock."
Holland adds that “VideoBlocks is really a membership organization –we are basically Costco. We always want to make our profits off of that membership money and at least break-even on the other stuff. We want to provide more reasons for our customers to be happy, to stay and to renew at higher rates.”
VideoBlocks is one among many competitors
There are numerous companies that compete with VideoBlocks with stock video footage, stock still photos and many other creative elements needed by content creators. Among the largest of these competitors are Shutterstock which had $328 million in revenue in 2014, Pond5 which raised $61 million in private equity in July 2014 and Getty Images which had 12-month revenue of $879 million ending in September 2014.
VideoBlocks distinguishes itself in its pricing structure:
- Simple subscription for unlimited downloads ($99/year for basic, $198/year for premium (such as 4K content.)
- Intellectual property clearance, which is worldwide and for all purposes, including commercial ones.
Major competitors, such as Shutterstock, promote a subscription-like pricing plan, but they are actually pre-selling a volume discount. credits; what their “subscriptions” provide is a discount on providing materially individually. [corrected as per note from Shutterstock in "Comments."]
“You have a relatively fixed number of NBCs out there. Most of those networks and cable channels are customers of ours. They represent probably 1,000 of our 100,000 customers,” says Holland. “So really our sweet spot is this mass creative class which includes freelancers and hobbyists and enthusiasts who are trying to quit their day jobs and make money by getting into creative production. And they are budget conscious groups, but they expect high quality. So that’s who we are squarely targeting. It tends to be who Getty and Shutterstock alienate since their pricing prohibits that mass creative class from accessing content."
“The reason we are able to offer real unlimited subscriptions and the competitors aren’t is that we are the only group that invested millions in creating and acquiring content that we wholly own distribution rights to,” says Holland. “So Shutterstock is a great company, but they are a very two-sided marketplace. They only pay commission on something that sells. But they do not actually own the assets so every time something is distributed then they have to pay the creator, whereas we spent money to acquire all of our unlimited libraries."
In other words, the basic business models of the two companies differ fundamentally:
- Shutterstock is protected on the downside, but has limited upside; it scales its revenue and profit by leveraging other people’s assets and by providing the marketplace, giving Shutterstock consistent variable margins.
- VideoBlocks has made a big upfront investment, but has the potential for a higher upside; it scales by buying assets upfront and selling them over and over again to a growing number of subscribers which the company hopes will yield ever increasing variable margins.
This is the first article based on an interview with VideoBlocks CEO Joel Holland. The second, How To Go To War With The Competitors: Pay More For Assets While Charging Customers Less, explains customer acquisition and how the pricing around VideoBlocks’ newest product, VideoBlocks Marketplace, enhances their subscription model intends to take market share from competitors.
