The Economics of Everyday Things: Episode 79 - School Photos

Hosted by Zachary Crockett, Freakonomics Network

Introduction to the School Photography Industry

In Episode 79 of The Economics of Everyday Things, host Zachary Crockett delves into the lucrative world of school photography, uncovering the intricate economics behind the annual tradition of school photos in America. This episode provides an in-depth analysis of how for-profit photography firms like LifeTouch have turned a simple school photo day into a billion-dollar industry.

The Dominance of LifeTouch

Ken Murphy, CEO of LifeTouch, the largest school photography firm in the United States, provides foundational insights into the industry's structure and dynamics.

Ken Murphy [02:56]: "There is this interesting bell curve where families are quite keen to preserve imagery of their children early on 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."

LifeTouch photographs approximately 30 million students each school year, commanding between one-third to half of the national market. The company's rise to prominence is attributed to innovations such as automated camera technology that links negatives to individual students, significantly enhancing operational efficiency.

Business Model and Revenue Streams

The school photography industry's estimated value stands at $1.6 billion annually. LifeTouch's business model is heavily predicated on high-volume sales rather than artistic endeavors. Success hinges on satisfying a dual customer base: schools and parents.

Ken Murphy [03:48]: "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 benefit the parents as well. The school votes with yes. You can be my picture provider or not. Mom and dad vote with yes. I'm gonna buy this picture or not."

LifeTouch secures contracts with schools by offering significant commissions, which can range from 15% to 50% of photo package sales or flat fees per package. These commissions are integrated into the pricing structures charged to parents, creating a symbiotic revenue system where both schools and the photography company benefit financially.

Operational Efficiency and Technology

LifeTouch's success is underpinned by its advanced technological infrastructure. Automated face detection and head sizing software ensure consistency in photo quality, mitigating issues like the "big head effect" often seen in yearbooks.

Jeremy McComb [21:00]: "Nobody wants to be that kid. In the yearbook, we have automated face finding that does auto head sizing. Basically, it'll find your eyes, chin, and forehead, and then basically place each kid at the same spot."

Photographers are equipped with high-efficiency cameras and software that upload images to a centralized cloud system in real-time, streamlining the production and distribution process. This technological edge allows LifeTouch to handle large-scale operations seamlessly, photographing up to 250 students per day under tight time constraints.

Workforce and Field Operations

The backbone of LifeTouch's expansive operations lies in its seasonal workforce. Each fall, the company hires up to 6,000 seasonal photographers who manage photo shoots across approximately 50,000 schools and childcare centers nationwide. These photographers are trained to handle diverse age groups, from eager kindergarteners to more reticent middle schoolers.

Jeremy McComb [17:15]: "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."

The training emphasizes not only technical photography skills but also interpersonal skills to engage with children effectively, ensuring a smooth and efficient photo-taking process.

Challenges and Market Shifts

Despite advancements in technology, the industry faces significant challenges, notably the rise of smartphones. Parents now have the option to capture countless candid moments of their children, potentially reducing the perceived need for professional school photos.

Ken Murphy [22:16]: "I think you would be naive not to think that that's a seismic shift in the reality of the landscape. Twenty 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."

However, Murphy remains optimistic, asserting that the tradition and heritage associated with school photos offer a unique value proposition that personal snapshots cannot replicate.

Ken Murphy [22:45]: "There is something about the tradition. There is something about the heritage... 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."

Financial Sustainability and Profitability

LifeTouch operates on a model where initial costs are front-loaded, encompassing equipment, labor, and logistics. Profitability is achieved through high sales volumes, with the company aiming for at least 30% of parents purchasing a photo package averaging $25 to cover costs.

Ken Murphy [09:26]: "So much of our cost structure is front loaded... ultimately customers get to vote with their wallet whether they want to participate this year."

While occasional losses occur due to unforeseen issues like equipment malfunctions or low participation rates, LifeTouch mitigates these through its extensive market presence and diversified customer base.

Conclusion: The Enduring Appeal of School Photos

Despite the challenges posed by digital photography, the school photography industry, led by giants like LifeTouch, continues to thrive by emphasizing tradition, quality, and the sentimental value of professionally captured memories. The episode underscores how everyday elements, such as school photos, are deeply intertwined with economic principles, showcasing a blend of technology, business strategy, and consumer behavior.

Notable Quotes:

• Ken Murphy [03:48]: "First, we must earn the business of the school... And then we've got to benefit the parents as well."
• Jeremy McComb [21:00]: "Nobody wants to be that kid... it'll find your eyes, chin, and forehead, and then basically place each kid at the same spot."
• Ken Murphy [22:45]: "There is something about the tradition. There is something about the heritage... to capture that one moment in time."

Produced by Zachary Crockett and Sarah Lilly, mixed by Jeremy Johnston with assistance from Daniel Moritz Rapson.