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Technology Stocks : GETY: GETTY IMAGES INC. Huge/Undiscovered Net Potential!
GETY 3.780-1.6%4:00 PM EDT

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To: REH who wrote (22)5/5/1999 6:44:00 AM
From: REH  Read Replies (1) of 47
 
Photography House Getty Images To Buy Art.com For About $200 Million

Dow Jones Online News, Wednesday, May 05, 1999 at 01:26
(Published on Tuesday, May 04, 1999 at 22:23)

By William M. Bulkeley, Staff Reporter of The Wall Street Journal
Photography house Getty Images Inc. has agreed to buy Art.com for up
to $200 million, in a move aimed at creating a dominant online marketer
of artistic and photographic reproductions.
Getty, founded by the grandson of billionaire oil man J. Paul Getty,
has become one of the world's largest sellers of photographs through
purchases of photo repositories. It owns about 30 million images and
dispatches photographers around the world to take shots of current
events and images from professional baseball games to Kosovar refugees.
Closely held Art.com, based in Lake Forest, Ill., has been selling
prints of paintings and posters and framing them for online purchasers
for just a year. It typically doesn't own the rights to the works it
displays online, but acts as a sales intermediary.
Under the terms of an agreement expected to be announced today, Getty
Images will initially pay 4.5 million of its shares to Art.com, plus up
to $84 million in additional cash and stock, depending on operating
results and stock price over the next four months.
Getty founder Mark Getty said the company wants to build on the
"knowledge base" of Art.com to reach consumers and expand beyond its
traditional business buyers. Getty can print some of its photos to order
from its digital files, avoiding the expense of physical inventory. "We
have four million pictures of sports events and add 5,000 a week," Mr.
Getty says. "If I was 14, I'd have them all over my walls."
Mr. Getty, 37 years old, started Getty Images in 1995 and has since
bought a stock photo house, a historical archive, a photojournalism
company and PhotoDisc Inc., a provider of digitized royalty free photos.
Last year, Getty Images reported a net loss of $36.4 million on an 85%
sales increase to $185.1 million. Mr. Getty's family holds a 28% stake
in the company, which has been based in London but is moving to Seattle.
Started by William Lederer, a 37-year-old onetime money manager,
Art.com carries 100,000 prints that users can order online. It has sold
30,000 customers about $2 million worth of goods, and says it is now
growing more than 50% a month.
The deal with Getty provides a quick return for the three
venture-capital firms that invested $10 million for a 50% stake in
Art.com last November. They are Benchmark Capital, Palo Alto, Calif.;
Softbank Technology Ventures, San Jose; and Sandler Capital Management,
New York. Robert Kagle, a partner with Benchmark, said they contemplated
an initial public offering, but "we were all captured by the strategic
fit between Getty and the ability to print those images on demand and
offer a complete, framed work of art."
Getting the venture money was a key point in Art.com's development
because it allowed it to acquire its current Internet address for
$450,000 from its previous owner, Advanced Rotorcraft Technology, a
helicopter consulting firm. "Our order rate doubled," Mr. Lederer says.
A consumer visiting the Art.com site has the option of searching for
artworks by artist, key word or index. Offerings span the gamut from
Rembrandt to Rothko to H.A. Rey, the creator of "Curious George." Some
80% of sales are unframed art, but Mr. Lederer is looking to build
framed sales.
When buyers pick a print, they can choose a mat, using a palette of
50 choices, then a frame and glass or plexiglass. An 11-by-15-inch print
of Curious George goes for $10; adding a mat and metal frame brings the
total to $53.48. A larger, more elaborate, framed print of say, an
expressionist work can fetch $400 or more. Pamela Miller, a Southern
California writer, says she has started buying and sending unframed
Art.com prints to friends and relatives rather than greeting cards.
Mr. Lederer says the art-framing business is ripe for consolidation,
in part because "I'm a capitalist in a sea of communists. Very few
participants in the art industry are interested solely in making the
greatest amount of money, believe it or not."
Mark Getty's vision isn't unique. Microsoft Corp. Chairman William
Gates owns Corbis Corp., a Seattle company that has built a 25 million
photo collection that includes photos by Ansel Adams and of John F.
Kennedy Jr. saluting his father's casket. Corbis recently started
selling downloadable images to consumers. A small Cambridge, Mass.,
company, Barewalls.com competes with Art.com in the poster market,
although it doesn't provide framing.
Copyright (c) 1999 Dow Jones & Company, Inc.

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