79. School Photos

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Speaker 9 Hey there, it's Stephen Dubner from Freakonomics Radio, and I am busting into this Economics of Everyday Things episode to tell you that we are doing a live Freakonomics Radio show in Los Angeles on February 13th.

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Speaker 11 Every fall, kids across America take part in a strange ritual. In the middle of a school day, they're corralled into a gym or cafeteria, organized into lines, and photographed one by one.

Speaker 11 This is done by a for-profit photography firm that charges top dollar for 8x10s and wallet-sized prints. For the parents of these kids, it's an annual tradition.

Speaker 11 And for the companies that take all the pictures, it's a lucrative one.

Speaker 10 You walk into a school, you've got 500 kids organized in 25 different classes. Teachers need to get them in and out very quickly.
It is mass chaos.

Speaker 10 But if you can deliver, you can generate a very profitable business.

Speaker 11 That's Ken Murphy. He's the CEO of Lifetouch, the largest school photography firm in America.
The company photographs 30 million students each school year, from preschoolers to high school seniors.

Speaker 10 There is this interesting bell curve where families are quite keen to preserve imagery of their children early on.

Speaker 10 And then again, as they're graduating, there's a new class of preschoolers every year. You have graduating seniors.
So you have a replenishing customer base. The opportunity is really great.

Speaker 11 By one estimate, the school photography industry is worth $1.6 billion a year. People who work in the trade say it's more of a high-volume profit machine than an art form.

Speaker 11 But to survive in the business, you have to appease your customers. Not one, but two of them.

Speaker 10 First, we must earn the business of the school. They ultimately make the decision whether to invite us in or to keep us in.
And then we've got to deliver a benefit for parents as as well.

Speaker 10 The school votes with, yes, you can be my picture provider or not. Mom and dad vote with, yes, I'm going to buy this picture or not.

Speaker 11 For the Free Economics Radio Network, this is the economics of everyday things. I'm Zachary Crockett.
Today, school photos.

Speaker 11 For-profit photographs have been a part of America's school system for more than 100 years.

Speaker 11 Public schools and photography both became prevalent around the same time in the mid to late 19th century.

Speaker 11 By the early 1920s, schools began taking students' photos for record-keeping purposes, and an industry emerged to handle the work.

Speaker 11 Photography companies provided photos to the schools for free and made money by selling copies to students and parents for 10 cents apiece.

Speaker 11 Dozens of other companies would later form to serve regional markets around the country, and one of them came to dominate the industry, National School Studios, later renamed Lifetouch.

Speaker 10 We were not actually the first to the party.

Speaker 11 Again, that's Ken Murphy, the CEO of Life Touch.

Speaker 10 Our company was founded in 1936 by a couple of traveling salesmen who had an opportunity to work for a much smaller regional school photography business in the Midwest.

Speaker 10 And as those two saw that that business, they had the thought to start their own thing.

Speaker 11 Over the ensuing decades, Lifetouch rose to national prominence.

Speaker 11 They did this partly by developing special technology, like a camera that automatically printed data on a negative, linking it to the student being photographed.

Speaker 11 Until then, photographers had to manually keep track of which shot depicted which student.

Speaker 10 That invention was one of the really breakthrough moments for Lifetouch because it now could go at great speed. It could churn these images out.

Speaker 11 Today, Lifetouch contracts with around 50,000 schools and child care centers across the country. It controls somewhere between one-third and half of the entire market.

Speaker 11 That business is so valuable that a few years ago, the internet-based photography company Shutterfly purchased Lifetouch for $825 million.

Speaker 11 Although there are still hundreds of regional school photography companies in operation, Lifetouch is the only one with a robust national presence.

Speaker 11 It's acquired more than 250 smaller firms over the years and has often been called a monopoly.

Speaker 10 Yeah, I'd probably shy away from the monopoly word, but I do take a ton of pride that Lifetouch categorically and irrefutably is the market leader.

Speaker 10 The next largest competitor probably is five, six, maybe seven thousand schools.

Speaker 11 The school photo market encompasses many different products.

Speaker 11 There are yearbook photos, commencement photos, sports photos, preschool photos, senior portraits, and spring photography, where students can do silly freeform poses.

Speaker 11 But Lifetouch gets the bulk of its business, around 50%,

Speaker 11 from Fall Picture Day. Think those formulaic sheets of awkward teenage headshots buried somewhere in a box in your attic.

Speaker 10 When folks think about fall picture day, it's largely your child every year in a similar image. It presents for families the opportunity to look back and see the evolution, the growth of their child.

Speaker 11 Ultimately, it's schools and districts who choose which photography providers to entrust with this tradition. And earning that business isn't so simple.

Speaker 11 LifeTouch has account managers all over the country that build relationships with school officials. Every deal looks a little different depending on who's calling the shots.

Speaker 10 In some instances, it's a principal, in some, it might be a school secretary, in some, it might be the yearbook administrator or advisor, and some it might be the sports or the athletic director.

Speaker 10 And that's just for schools that make their own independent decision. A lot of the business today is moving to district-based decision.

Speaker 11 The photo provider does not get paid by the school or district to show up on picture day.

Speaker 11 The deals they sign are merely for the right to work the job, and they make their money back when parents order photo packages.

Speaker 11 Oftentimes, to win business, Lifetouch will promise to pay the school or district a kickback on its sales.

Speaker 10 Some may say, I want a percentage of every photograph that your parents purchase. There are some regions where it's an expectation.
We'll cut the school a check at the end of the school year.

Speaker 11 Commissions paid back to the school or district can range anywhere from 15% to 50%.

Speaker 11 In other cases, it's a flat fee, like $2 or $3 per package ordered. Some schools have a guaranteed minimum commission and even receive signing bonuses for working with Life Touch.

Speaker 11 These fees are baked into the prices that the company charges parents. On the surface, it's a bit risky to commit to provide an expensive service for free.

Speaker 11 and hope that revenue is made back down the line.

Speaker 10 So much of our cost structure is front-loaded.

Speaker 10 You know, all of the camera equipment, all of the photography labor, you take everyone's picture, and then you're hoping that enough families will decide to purchase that.

Speaker 10 If we don't do a good job, we're not going to get paid because ultimately customers get to vote with their wallet whether they want to participate this year.

Speaker 11 Before each photo day, parents receive order forms and have the option to buy photos ahead of the shoot.

Speaker 11 But some portion of the revenue also has to be made on the parents who commit to buy after the photos are already taken.

Speaker 11 Murphy says that to break even on a photo shoot, Lifetouch generally looks for a school with at least 200 students per photographer.

Speaker 11 The company also needs around 30% of parents to buy a photo package with an average order of $25.

Speaker 11 That's enough to cover the cost of labor, transportation, equipment, printing, and shipping. Most schools meet these criteria.

Speaker 10 We have smaller schools where a single program is sub $2,000 in total packages all the way up to some schools that would be, you know, six figures.

Speaker 11 But Murphy says Life Touch sometimes takes a loss on a job.

Speaker 10 It happens every year. Across 50,000 schools and child care centers, you're going to have some schools where you had a bad day.

Speaker 10 There was something wrong with the equipment, or you had photographers that hadn't been trained well, or they were more focused on just getting people through the line and, not stopping to try to encourage a smile or a more natural picture.

Speaker 10 And there are some schools where there are not enough students, families participating, where on an individual school basis, we know that we'll lose money.

Speaker 10 But if they're part of a district and the district's, you know, 88 schools, you got to have the ones that we know are going to be prolific and those who aren't as well.

Speaker 11 Most of the time, though, Lifetouch is able to make a substantial profit on a shoot, partly because its photo packages aren't cheap.

Speaker 11 Lifetouch offers all kinds of packages, various combinations of 8x10s, 5x7s, and miniature wallet prints. Prices can vary by school or district, but most packages fall somewhere between $15 and $100.

Speaker 11 And the company takes the design and pricing very seriously.

Speaker 10 We've got a team of data scientists looking at purchasing behavior, propensity to buy, how folks work up and down what we call the package ladder.

Speaker 10 We know if a family participates in year one, but not in year two, we can go back and see perhaps why they didn't.

Speaker 10 We know if a family participates in two consecutive or three consecutive years, but their buying behavior within the purchase decision is different.

Speaker 10 That also informs if we've got an opportunity to tighten pricing or to expand the offering.

Speaker 11 These decisions are all made by Life Touch at its corporate headquarters in Eden Prairie, Minnesota.

Speaker 11 But the real work happens out in the field, where photographers have to wrangle unruly children into gyms and capture a saleable product.

Speaker 13 The period starts. You've got 300 kids that flow in.
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Speaker 11 Every fall photo season, Life Touch hires up to 6,000 seasonal photographers and deploys them to schools all over America. The duty of overseeing them falls into the hands of regional managers.

Speaker 13 My name is Jeremy McComb. I am a senior manager of photography for Life Touch.

Speaker 11 McColmb started out as a photographer with Lifetouch in 1995 in Riverside, California. He was 19 at the time, a new father.
and he needed a part-time gig to make ends meet.

Speaker 13 I saw an ad for a part-time photographer. I thought, well, it's photography.
I like kids. Let's give it a shot.

Speaker 11 When hiring for school photographers, McCollum doesn't necessarily care about photography experience.

Speaker 11 In its job postings on websites like Indeed, Lifetouch advertises for candidates that are willing to work mornings, have a valid driver's license, and have good rapport.

Speaker 13 We actually advertise for customer service. I just want somebody that enjoys kids, can make kids smile, and then I can teach them the photography stuff.

Speaker 11 The photographers the company hires are part-time workers, paid an hourly wage, usually somewhere between $15 and $20 per hour.

Speaker 11 They're given six cases full of life touch equipment: a camera, a lighting kit, a background screen, a reflector, and stands.

Speaker 11 And they shadow another photographer for a few days before going out on the job. For a school photographer, the day tends to start early.

Speaker 13 You're up out the door at 5.15,

Speaker 13 probably driving an hour on average to your school. Then it's looking for the custodian, which usually involves walking around the campus, knocking on windows.
We get there an hour ahead of time.

Speaker 13 We'll unload our gear. It takes about an hour.
Get everything dialed in and get the schedule from the school. And then the kids start rolling in.

Speaker 11 Depending on the size of a school, Lifetouch may send out multiple photographers for each job. That's partly because schools tend to be strict about their time allowance for a photo shoot.

Speaker 11 Once the students are on site, photographers have to move very quickly.

Speaker 13 Typically, you're photographing during a period of time, so say English class, PE class. So you're there for the duration.
And that just waves the kids.

Speaker 13 In most cases, you'll photograph maybe 200, 250 kids a day with a good schedule.

Speaker 13 It's fairly easy to execute if you got them flowing and you just can get them in their spot and make sure they look good.

Speaker 11 Sometimes with the younger kids, flowing can be a literal description.

Speaker 13 I've obviously dealt with all the things you would assume. They pee on your posing stool and

Speaker 6 a lot of throw up.

Speaker 11 In cases where there's an irredeemable accident or where a kid just can't sit still, a photographer might take a pass on the photo.

Speaker 11 Usually, there's a scheduled makeup day where kids can get a do-over.

Speaker 11 But in general, McComb says kindergartners are easier to deal with than middle schoolers.

Speaker 13 As we get into kindergarten, they're just eager and precious as all can be. So they're pretty easy.
Just smile at them. They'll smile back at you.

Speaker 13 And that's pretty much the case up through third grade, fourth grade.

Speaker 13 When you get into fifth grade through eighth grade, that's kind of that awkward age where you have to be a little bit more creative on how you might get them to smile.

Speaker 13 Are they trying to be a tough guy? Where you're trying to help them out. Hey, is that really what you want to look like?

Speaker 5 Let's try it again.

Speaker 11 For school photos that are taken in the fall, there's a certain pose that McCollum and his staff members try to coax out of students.

Speaker 13 We call it a head and shoulders picture, right? It's pretty simple.

Speaker 13 It's put the hands here, forward lean, nice expression, make sure the details are nice, put the head in the box, and we're in business.

Speaker 11 Getting 200 heads perfectly placed in a frame is harder than it sounds.

Speaker 11 If you flip through an old yearbook, you're bound to see at least one photo where a kid's head looks way bigger than those of his peers. That dreaded big head effect.

Speaker 11 Today, the cameras that Lifetouch uses are loaded with software to prevent this from happening.

Speaker 13 Oh yeah, nobody wants to be that kid in the yearbook. We have automated face finding that does auto head sizing, basically.

Speaker 13 It'll find your eyes, chin, and forehead, and then basically place each kid at the same spot.

Speaker 11 But the tech isn't perfect.

Speaker 13 The one caveat is hair. You can't predict how high the hair is.
So we do have a high-hair algorithm that'll place that hair in a reasonable spot.

Speaker 11 A photographer might take multiple photos of every student to get the right shot. But after each student, they select the best one and upload it to a centralized cloud system on the spot.

Speaker 13 So as we're photographing, those images are basically going into our lab.

Speaker 11 Once photos are finalized, they're printed out at regional labs across the country and shipped out for delivery.

Speaker 11 While tech has made the school photo business more efficient, it's also introduced a threat. In some ways, the industry's biggest nemesis is the cell phone.

Speaker 11 Parents now have hundreds of photos of their children on their devices.

Speaker 11 And Ken Murphy, the CEO of Life Touch, says that some of them are deciding they prefer their own work over that of the school photographer.

Speaker 10 I think you would be naive not to think that that's a seismic shift in the reality of the landscape.

Speaker 10 20 years ago, it would be quite characteristic for three out of four families to participate in School Picture Day. There are less that will do that today.

Speaker 11 But Murphy says he thinks his line of work is still safe, perhaps more than ever. Because in his eyes, the school photo is more than just another shot in your phone.

Speaker 10 I got a million pictures of my five kids in my phone, in my pocket. What's the big deal of school photography? There is something about the tradition.
There is something about the heritage.

Speaker 10 There's something about being able to see Nolan Murphy as a preschooler, as a kindergartner, as a third grader, as a seventh grader, as a high school senior.

Speaker 10 The chaos of running down to the gym, you got Calyx sticking up, you know, you spilled breakfast on, it is chaos, to be sure.

Speaker 10 But to be able to capture that one moment in time that you can then go back and look at your child's development and growth through the years is really remarkable.

Speaker 11 For the economics of everyday things, I'm Zachary Crackett.

Speaker 11 This episode was produced by me and Sarah Lilly and mixed by Jeremy Johnston. We had help from Daniel Morritz Raps.

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