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Digital Railroad Closes

October 28th, 2008 · No Comments

To the disappointment of many and the surprise of no one, Digital Railroad announced today that it’s suspending operations. On October 15th Digital Railroad announced that it was seeking a buyer and would liquidate its assets if no other organization was willing to acquire the company as a whole.

This is especially unfortunate because what photographers need most at this point in time are services that help them to manage their image collections, collaborate with clients and host stock sites. In other words, exactly what Digital Railroad provided. With the consolidation of the major stock agencies and the seismic shift of photography dollars going towards microstock, services like Digital Railroad promised to at least somewhat level the playing field by offering tools and services that are beyond the ability of most individual photographers to develop on their own.

There are many opinions as to why Digital Railroad failed. These include poor management, overpaid executives, a venture capital mentality (look for huge growth, if it doesn’t happen soon, pull the plug), shaky technology and a poor user experience. Other causes cited include those outside their control including the rise of microstock and the downward price pressure that put on almost all areas of photography, and the recent economic downturn. It’s likely that to one degree or another each of these reasons played a role.

My own theory is that Digital Railroad tried to serve two different markets, photographers and photo buyers, and was ultimately unable to serve both well enough. Their cost structure was too high to support a business that could survive and grow only with fees paid by photographers for providing image storage and collaboration tools. And Digital Railroad never understood how to address the needs to photo buyers, or even to make a significant number of photo buyers aware that Digital Railroad could be a source of stock. And external factors, such as the rise of microstock, also played a role in their demise.

PhotoShelter realized they couldn’t serve both markets well and closed The PhotoShelter Collection, their stock service, last month. Both the PhotoShelter Collection and the Digital Railroad Marketplace made the promise that they would attract buyers to those sites but they failed to do so in any meaningful way. That leaves a market opportunity for a company to offer a service that allows photographers to host their own stock service and market their work directly to photo buyers. While this puts burden of marketing on the photographers, it’s a more realistic approach to allowing photographers to market and license their own images.

Will another company step into the breech and seize this opportunity?

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