The Economics of Everyday Things - 79. School Photos

Episode Date: February 3, 2025

Picture day is an annual tradition for American families — and, for the companies that take the photos, a lucrative one. Zachary Crockett smiles for the camera. SOURCES:Ken Murphy, C.E.O. of LifetouchJeremy McColm, senior manager of photography at Lifetouch RESOURCES:"The money and stress and failed hairdos of school picture day," by Kaitlyn Tiffany (Vox, 2019)"The School Photo Industry Is a Master Class in Drama," by David Gauvey Herbert (New York Times, 2019)"With Lifetouch Acquisition, Shutterfly Claims Leadership In Picture Memories Market," by Pamela Danziger (Forbes, 2018)"Exclusive School Photography Agreement" (Vernon Public School District, 2019) EXTRAS:"Money Schools Earn From Student Portraits Varies Widely," by Scott MacFarlane, Rick Yarborough, and Jeff Piper (NBC News Washington, 2016)

Hey there, it's Stephen Duvnor 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, and I hope you'll join us. Guests will include Ari Emanuel, the CEO of the sports and entertainment firm Endeavor, the filmmaker R.J. Cutler, and the Freakonomics Radio house band led by Luis Guerra. For tickets, go to Freakonomics.com slash live shows. A portion of our ticket sales will go to wildfire relief efforts. Again, that's Freakonomics.com slash live shows, February 13th in LA.

I hope to see you there. 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. 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. And for the companies that take all the pictures, it's a lucrative one. For the companies that take all the pictures, it's a lucrative one. 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. But if you can deliver, you can generate a very profitable business. That's Ken Murphy. He's the CEO of Life Touch, the largest school photography firm in America. The company photographs 30 million students each school year, from preschoolers to high school seniors. 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. 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. But to survive in the business, you have to appease your customers. Not one, but two of them. 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 well. 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.

For the Freakonomics Radio Network, this is the economics of everyday things. I'm Zachary Crockett. Today, school photos. For-profit photographs have been a part of America's school system for more than a hundred years. Public schools and photography both became prevalent around the same time, in the mid to late 19th century. By the early 1920s, schools began taking students' photos for record-keeping purposes, and an industry emerged to handle the work.

Photography companies provided photos to the schools for free and made money by selling copies to students and parents for 10 cents apiece. 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. We were not actually the first to the party. Again, that's Ken Murphy, the CEO of LifeTouch. 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. And as those two saw that business, they had the thought to start their own thing. Over the ensuing decades, LifeTouch rose to national prominence. 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. Until then, photographers had to manually keep track of which shot depicted which student.

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. 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. That business is so valuable that a few years ago, the internet-based photography company

Shutterfly purchased LifeTouch for $825 million. Although there are still hundreds of regional school photography companies in operation, LifeTouch is the only one with a robust national presence. It's acquired more than 250 smaller firms over the years and has often been called a monopoly. Yeah, I probably shy away from the monopoly word, but I do take a ton of pride that Life Touch categorically and irrefutably is the market leader. The next largest competitor probably is five, six, maybe 7,000 schools. The school photo market encompasses many different products.

There are yearbook photos, commencement photos, sports photos, preschool photos, senior portraits, and spring photography, where students can do silly free-form poses. But LifeTouch gets the bulk of its business, around 50%, from Fall Picture Day. Think those formulaic sheets of awkward teenage headshots buried somewhere in a box in your attic. 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. Ultimately, it's schools and districts who choose which photography providers to entrust with this tradition. And earning that business isn't so simple. Life Touch 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. In some instances, it's a principal and some it might be a school secretary and some it might be the yearbook administrator or advisor and some it might be the sports or the athletic director. And that's just for schools that make their own independent decision.

A lot of the business today is moving to district based decision. The photo provider does not get paid by the school or district to show up on picture day. The deals they sign are merely for the right to work the job. And they make their money back when parents order photo packages. Oftentimes to win business, LifeTouch will promise to pay the school or district a kickback on its sales. 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. Commissions paid back to the school or district can range anywhere from 15% to 50%. 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 LifeTouch. 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 and hope that revenue is made back down the line. So much of our cost structure is front-loaded.

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

But some portion of the revenue also has to be made on the parents who commit to buy after the photos are already taken. Murphy says that to break even on a photo shoot, LifeTouch generally looks for a school with at least 200 students per photographer. The company also needs around 30% of parents to buy a photo package, with an average order of $25. parents to buy a photo package, with an average order of $25. That's enough to cover the cost of labor, transportation, equipment, printing, and shipping. Most schools meet these criteria. 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. But Murphy says LifeTouch sometimes takes a loss on a job.

It happens every year. Across 50,000 schools and childcare centers, you're going to have some schools where you had a bad day. 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, you know, not stopping to try to encourage a smile or a more natural picture. 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. 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. in the district's 88 schools, you gotta have the ones that we know are gonna be prolific and those who aren't as well. Most of the time though, Life Touch is able to make a substantial profit on a shoot, partly because its photo packages aren't cheap. Life Touch 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. And the company takes the design and pricing very seriously. 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. 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. We know if a family participates in two consecutive or three consecutive years, but their buying behavior within the purchase decision is different. That also informs if we've got an opportunity to tighten pricing or to expand the offering. These decisions are all made by Life Touch at its corporate headquarters in Eden Prairie, Minnesota. But the real work happens out in the field, where photographers have to wrangle

unruly children into gyms and capture a saleable product. The period starts, you've got 300 kids that flow in. It's like clock ticking, right? You've got 45 minutes to get these kids out of here. That's coming up. Every fall photo season, LifeTouch 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. My name is Jeremy McCollum. I am a senior manager of photography for LifeTouch. McCollum started out as a photographer with Life Life Touch 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. I saw an ad for a part-time photographer. I thought, well, it's photography. I like kids.

Let's give it a shot. When hiring for school photographers, McComb doesn't necessarily care about photography experience. 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. 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 photographers the company hires are part-time workers,

paid an hourly wage, usually somewhere between $15 and $20 per hour. They're given six cases full of LifeTouch equipment. A camera, a lighting kit, a background screen, a reflector, and stands. 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. You're up out the door at 515, 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, we'll unload our gear, takes about an hour, get everything dialed in, and get the schedule from the school, and then the kids start rolling in. 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. Once the students are on site, photographers have to move very quickly. 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. In most cases, you'll photograph maybe 200, 250 kids a day with a good schedule.

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. Sometimes with the younger kids, flowing can be a literal description. I've obviously dealt with all the things you would assume. They pee on your posing stool and- Oh God. Yeah, a lot of throw up.

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. Usually, there's a scheduled makeup day where kids can get a do-over. But in general, McCombs says kindergartners are easier to deal with than middle schoolers. 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. And that's pretty much the case up through third grade, fourth grade.

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. Are they trying to be a tough guy? Or are you trying to help them out? Okay, is that really what you want to look like? Let's try it again. 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. We call it a head and shoulders picture, right? It's pretty simple. 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. Getting 200 heads perfectly placed in a frame is harder than it sounds.

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. Today, the cameras that LifeTouch uses are loaded with software to prevent this from happening. Oh yeah, 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. But the tech isn't perfect. The one caveat is hair. You can't predict how high the hair is. So we do have a high hair algorithm that will place that hair in a reasonable spot. 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. So as we're photographing, those images are basically going into our lab. Once photos are finalized, they're printed out at regional labs across the country and shipped out for delivery.

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. Parents now have hundreds of photos of their children on their devices. 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. 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. 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. 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. There's something about being able to see Nolan Murphy as a preschooler, as a kindergartener, as a third grader, as a seventh grader, as a high school senior. 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. 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. For the economics of everyday things, I'm Zachary Crackett. This episode was produced by me and Sarah Lilly and mixed by Jeremy Johnston. We had help from Daniel Moritz-Raps.

You know, cheese is obvious. My thing was like, okay, I'm gonna say every word I could think of that has cheese in it. In each kid, I'm gonna to say every word I could think of that has cheese in it. In each kid, I'm going to do something different. The Freakonomics Radio Network. The hidden side of everything.