Gameface Media, a US event photo agency which gives images away for free, claims it will pay its freelance photographers promptly after securing a much-needed US$2.6 million from investors.
The agency, which has contracts in Australia to photograph Tough Mudder endurance events, has left some of its 1600 contracted photographers unpaid for almost a year.
The problem came down to the business model which ‘set out to disrupt a small corner of the photography market’, according to Boston Globe.
Gameface Media provides attendees free photos. It lands deals with event organisers or sponsors, which have a logo placed on each image. Attendees share the photos to social media and the logo is seen by friends and followers, creating ‘authentic marketing content’.
The company calls itself the ‘largest provider of free sporting event photos in the world’ (probably because its competitors actually charge money for photos!) To little surprise, it still hasn’t managed to finish a year with a profit.
After a long silence, with many photographers expecting an imminent bankruptcy announcement, Gameface Media CEO David Lavallee secured more funding and came clean. He told photographers the accounts became unbalanced as Gameface Media had promised to pay them within 15 days, while giving sponsors 120 days to make a payment.
‘We clearly mismanaged cash flow…. First, in our eagerness to sign up great event and sponsor clients, we didn’t include standard terms in our contracts that these clients would have been happy to agree to,’ he wrote in an e-mail to Gameface Media photographers. ‘For example, we accepted media sponsor contracts for hundreds of thousands of dollars with 120-day payment terms that compounded our cash flow problems.
‘In hindsight, we should have insisted on down payments and a payment schedule [with sponsors] instead of waiting for a lump sum. We faced similar challenges from many of our event clients.’
Prior to the latest investment round which will keep the company alive, Gameface Media has raised US$6.5 million since its launch in 2013. But remarkably these millions seem to have disappeared by last year.
‘Based on contracts already booked in early 2017, we expect to grow revenue again this year and are now on track for our first year of profitability,’ Lavallee said. He first anticipated this to happen in 2014.
Lavallee is hoping to earn back trust from photographers. He said payment will arrive no later than 45 days after an assignment. If there is a delay, the photographer will receive an additional 10 percent interest payment and this will be communicated beforehand.
‘Make no mistake about it, we screwed up and caused many of you a lot of problems that you didn’t need. We are committed to begin repaying you within two weeks and intend to pay everyone in full for their 2016 assignments,’ he said.
Read the entire e-mail from Lavallee below, but be warned, it’s very long:
Dear Gameface photographers,
I wanted to reach out to all of you who have done great work for Gameface over the past three years. Like any start-up, we have made plenty of mistakes in building this business, but none bigger than failing to communicate more effectively with all of you. That is my fault and I sincerely apologize for keeping many of you in the dark as we get our business model straight. As we have waited to collect additional funds from both investors and clients, we got too far behind in payments to many of you. We are committed to fixing this problem and will tell you how below. This situation has not been managed properly and we are terribly sorry though we know that rings hollow with many of you now.
So how did we get here? We clearly mismanaged cash flow in two basic ways. First, in our eagerness to sign up great event and sponsor clients, we didn’t include standard terms in our contracts that these clients would have been happy to agree to. For example, we accepted media sponsor contracts for hundreds of thousands of dollars with 120-day payment terms that compounded our cash flow problems. In hindsight we should have insisted on down payments and a payment schedule instead of waiting for a lump sum. We faced similar challenges from many of our event clients. They are used to paying a deposit for their other vendor services like t-shirts, fencing and porta-potties, but we didn’t add that provision to our standard contract. Beginning late last year, we made these changes to our standard contracts, but the damage was already done for 2016.
Second, we were too slow to take on more investor capital. When we founded Gameface we knew we were pursuing an aggressive growth strategy and that we would lose money in the first year of a race contract, but that we would make that up once we had more time to sell a sponsor. Since the inception of the business we have relied on new investor money to pay for operations and during early 2016 we were too slow to add more investors when we faced a big line-up of new events like NYRR and Bay to Breakers. We were also guilty of too much optimism on closing a couple of big new sponsorship deals. We thought they would come in soon enough to avoid raising more money. This led to delayed payments to many of you which then prompted the Runners World article. That came at a very bad time for us since we were attempting to close on another round of investor money. We eventually did close on more investor capital, but it came much later than we’d hoped and by that time it was clear that the amount we raised was not enough to cover the timing gap in collecting on our invoices. Again, my fault and I apologize that all of you had to bear the brunt of my mistake.
Many of you have asked us about the December 2016 Form D filing that showed we took on another $2 million in investment. We owe you much less than that amount in total so I understand why people would wonder why we didn’t just pay everyone in full at that point. That capital did indeed come into Gameface from many investors, including me. The large majority of that money had come in over the summer after the Runners World article in the form of a bridge loan from our current investors as we waited to close on the full amount of $2 million. That money went toward paying for operations over the late summer and fall, primarily to staff salaries and photographer pay. Some of you have wondered whether we spent too much money on the Photo Locker project rather than paying photographers. We spent under 5% of that amount on the Photo Locker and all of that was spent in the first five months of the year, so that really didn’t have much effect on photographer pay.
Our current financial position is much more positive than it was last summer in most ways. We always believed that this new way of providing event photos and social media sharing would prevail in the end. We have produced great results for brands that are much more effective than what they are doing with Facebook banner ads or by paying to put their logos on race t-shirts. Nonetheless, we’ve had plenty of sleepless nights wondering whether revenue would catch up in time to meet our expenses. I am very pleased to report that we are now on track for our first profitable year based on event and sponsor contracts that are already signed. We have also taken every possible step to reduce expenses at headquarters. I have never taken a salary above minimum wage at Gameface and many of our other leaders have made sacrifices to make sure we meet our financial goals. We now know this model will work and continue to improve in 2017 and beyond. The challenge we face is that we finished 2016 with money still owed to our photographers and to a couple of business service providers. (Many of you have asked whether we owe money to banks. We have never had a penny of bank debt at Gameface and don’t expect to change that policy.) So while this year looks good, we are still playing catch-up for our mistakes of 2016.
So how and when do we expect to pay all of you? There are two basic sources. First, we are still collecting hundreds of thousands of dollars owed to us from 2016 client engagements. The largest of these payables have confirmed that they are very happy with Gameface, will make their payments, and expect to continue doing business with us. Second, we have investors lined up to close the gap remaining. I am digging deep into family savings to participate in this round. Frankly these investors were waiting to see that we have the operating model at viability. In general they are willing to help pay off past debts, but not if they also needed to pay for big future operating losses, hoping for improvement.
We have been guilty of too much optimism on collections in the past, so I want to be very conservative on promising payment timing. I can tell you that our plan is to pay everyone in full. I can also tell you that as a practical matter, we need to be caught up before we enter the peak race season in April. We expect to make steady progress beginning in the second week of February and continuing through the end of March. In general, the most important factor is how long we’ve owed someone and we are generally paying off the oldest debts first. In some cases we make decisions on other factors such as tenure with Gameface, personal hardship and willingness to shoot new events. We still need to cover events for important clients every weekend and we understand when people say they are willing to shoot for us, but need to be paid at least part of what they are owed from past assignments before accepting a new assignment. I understand that this system isn’t ideal, but we need to continue to operate in order to be able to pay all of you in the future.
We know that we have lost the trust of many of you and that you will choose not to work for Gameface again. We are deeply sorry that we have let you down and understand this decision. Others of you may want to “stay in touch” and see how things shake out. Some of you are currently shooting and others will choose to jump back soon. We turned off access to event scheduling for those of you who indicated they don’t to be considered for future assignments. If you have changed your mind and would sincerely consider new assignments, please send me an email and I will work to re-start your account.
Every 30-60 days we will be updating our trusted photogs regarding the status of the business. While we may not be able to share all of the “secret sauce with you” we want to reassure you that we are executing the business plan and most importantly honoring our payment commitments. Our lack of communication is inexcusable and you can hold me accountable for fixing this starting now. You deserve nothing less.
The next step is being very clear about how we are going to function for the 2017 season. We want to put a clear agreement in place that will pay people no later than 45 days after an assignment and will pay 10% annual interest if such a delay occurs. If we foresee any change in this whatsoever, we will notify all of you and tell you in advance of accepting a new assignment.
Make no mistake about it, we screwed up and caused many of you a lot of problems that you didn’t need. We are committed to begin repaying you within two weeks and intend to pay everyone in full for their 2016 assignments. I appreciate your patience and look forward to correcting these mistakes as soon as possible. I have spoken to many of your personally and am happy to schedule a time to discuss any questions you may have.
P.S. I would make a humble request that we avoid sharing this message online broadly since I am afraid that may complicate communications and a quick solution. I understand that you may not feel we deserve that courtesy, but I can tell you that confusion in the market harms our ability to collect client revenue and investor money that we need to resolve this situation.