Bill Gates, The World’s Richest Man For The Past 12 Years, Says Newspapers Are Going to Survive, But They Have To Adapt to the Digital World. And He Sees Anything With a Screen As The Perfect Customer for His Corbis Digital Pictures Business

And also not so well known is that Gates is the savior of the Bettmann Archive of some 11 million negatives, plates and prints that were turning literally to dust before he transferred them into very cold storage at an abandoned limestone mine in Pennsylvania.

When he did this in 2001 he was roundly criticized by the media for hiding away one of the world’s great picture collections; in fact he saved that collection from extinction and researchers today, dressed very warmly, have access to the archive in that mine.

Gates is now taking a higher-profile role with Corbis. Last year Corbis increased its revenue to some $228 million – petty cash to Microsoft -- but an increase of 34% over a year ago (mostly from buying companies; organic growth was just 4%). Corbis has still to make a profit, and now there is talk of the company possibly going public or at least expanding its ownership. The digital pictures market is worth some $2 billion a year, with the leader in the field, publicly quoted Getty Images, making about three times more than Corbis did last year and earning about $150 million profits.

In trying to lift the profile of Corbis at its annual meeting last week, Gates gave a series of exclusive interviews – actually many one-on-ones in which he said mostly the same things – but put them all together and you get a rather remarkable insight into how Gates views the traditional and digital media business.

He believes newspapers will outlast him but they will need to adapt – shades of what Rupert Murdoch said in a recent London speech. Gates told the UK’s Independent newspaper, “ We are seeing the shift where younger people appreciate the flexibility of the Internet to let them select the subjects that they have particular interest in, and to navigate links and see what’s hot. We are in the throes of a transition where every publication has to think of their digital strategy.”

What truly excites him in the new media world are all the screens coming into play – not just televisions or PC screen, but in particular mobile telephones He said that some 800 million new mobile phones will come on line this year, and every one of them will, in some way, be a customer for still pictures and video for advertising purposes, and it is a market in which he believes Corbin can excel.

Gates is not alone in seeing the future of the digital picture market. In addition to Getty Images, even news agencies like Reuters are getting in the act, Reuters having recently purchased Action Images, renowned for its sports pictures. The Washington Post has just updated its online photo store and now makes its digital pictures available for sale, teaming up with Pictopia.com in California that provides the hosting, processing and e-commerce facilities.

Whereas Getty and Reuters are also in the breaking pictures business, Corbis is not although it does have a relationship with Reuters based on the strengths of both companies – Reuters taking breaking news pictures and Corbis having the archiving and sales expertise. Might Reuters therefore be a natural for Gates to expand the Corbis ownership? Getty already has a close cooperation in sales and editorial coverage with Agence France-Presse.

Being the visionary that he is, Gates started Corbis back in 1989 because he saw a world in which every home would have large screens for a variety of purposes including the need for looking at still digital pictures. It has taken far longer than he thought for those screens to start showing up in the number he envisaged, and for the purposes he imagined, but meanwhile he has been steadily building his pictures archive.

And in doing so the media owes Gates a great debt of gratitude for how he saved the 11 million negative Bettman Archive, an irreplaceable picture history of the last century. Gates bought the Bettman Library in 1995 for a knockdown price of around $6 million. Some 10 years earlier United Press International (UPI) had sold its picture archives to Bettman in an attempt to stay out of its first bankruptcy (that strategy failed miserably) and with what Bettman had before plus the UPI archives it provided a truly unbeatable view of the history of the 20th century.

Shortly after Bettman had bought the UPI Library a senior UPI pictures executive took a young UPI newspaper salesman to the Bettman offices to show how Bettman handled archive requests made by UPI subscribers since the sales deal called for a revenue share in such business. What caught that young salesman’s attention right away, besides the file cabinets, were the shoeboxes. There were shoeboxes everywhere, including the hallways. That was the Bettman filing system! And then there was that smell. One would have sworn it was vinegar but that couldn’t possibly be?

That young UPI salesman asked his mentor how archived picture requests were handled since the filing system was, shall we say, primitive; he was told that the people working at Bettman had been there a long time and they knew where everything was. Looking at a couple of those workers, who certainly seemed no longer to be spring chickens, the young salesman lowered his voice and asked softly, “But what happens when these people die?”

The answer then as now is not printable, but it was a fair question. There were more than 11 million negatives etc, and barely a filing system. And that smell – yes it was vinegar – chemical reactions, particularly in acetate negatives, were destroying the negatives as they sat on the shelves or in the shoeboxes. This collection of the world’s greatest pictures from the turn of the century was literally turning into waste.

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To cut a long story short Gates sought advice on how to save the pictures and was told basically they needed to be stored in a very low temperature. He learned that the Defense Department was using a huge limestone mine in Pennsylvania for storing its archives, as were film studios trying to save their old negative reels, so Gates figured that was what was best for Bettman.

So having digitized some of the most important Bettman pictures for six years, Corbis sent the entire library to that underground strongly air-conditioned mine where editing tables and light boxes were set up so that researchers, dressed for the near freezing conditions, could continue their work.

But was Gates hailed as a hero for saving such a collection? Of course not, The New York Times in a front-page story disregarded the fact the collection was crumbling, but rather nailed Gates for sending such a collection away from researchers.

Guess it never dawned on writer Sarah Boxer that researchers could go to Pennsylvania to look at the pictures. Not as convenient as Manhattan, but at least there would be a collection to see which would not be true if those negatives had remained in Manhattan! The Times wrote:

“The Bettman Archive, the quirky cache of pictures that Otto Bettman sneaked out of Nazi Germany in two steamer trunks in 1935 and then built into an enormous collection of historical importance, will be sunk 220 feet (70 meters) down in a limestone mine 60 milers (100 km) northeast of Pittsburgh, where it will be far from the reach of historians.” And that was the main theme of most other news organizations writing about that day. No thank you very much for saving the collection!

Corbis has never seemed to have the sales and marketing drive of Getty, which is one reason Corbis has never turned a profit whereas Getty is very profitable. But Gates is now giving the impression of paying more attention to Corbis. He certainly isn’t hurting for product with some 80 million images including what Corbis claims is the world’s largest collection of celebrity portraits, and the biggest online collection of nature photography. Just last week Corbis bought Beateworks that probably makes it the global leader in home interior collections.

That all fits into Corbis’ belief that the growth in digital pictures is not going to be from the news business per se, but rather from women and lifestyle magazines.

One problem for the digital pictures business is that clients and competition are squeezing price changes in the business model from both ends. Lots of money was being earned by charging a license fee for each picture used, but now there are photo sharing sites, and sites charging just $1 a license that some advertisers are paying some attention to. At the other end, there is a move away from the lucrative individual license per picture towards a more general license fee that allows users wide latitude on how they use the archive based on a one-time fee for such use.

Gates firmly believes the digital revolution has finally come upon us – somewhat later than he had originally envisioned, but now it has arrived. He told Businessweek Magazine, “Many of the companies that were bought to create Corbis came from an industry where people were digging around in photo drawers to find things. Now it’s very much an online activity. You can navigate through the pictures according to exactly the characteristics you want.”

As long as there is a screen –high definition TV, PC, or the mobile phone, Gates believes Corbis is on the edge of providing that technology with the highest quality pictures possible. And that profits won’t be far away.

Assuming that the sales and marketing act is really put together, anyone care to argue with the world’s richest man?