The Hidden Costs of Zillow's Acquisition of ShowingTime+

In the dynamic world of real estate, high-quality photography and digital media are crucial. However, Zillow's recent acquisition of ShowingTime+ and the subsequent changes to its business model have sparked concerns among industry professionals and beyond.

Zillow's Strategy: A Closer Look

Zillow, a leading real estate marketplace, has shifted its strategy, ending partnerships with professional photographers to sell its services directly. This move is seen as an attempt to monopolize the real estate photography market by acquiring the cheapest labor possible and undercutting professionals.

The company now pays photographers and editors between $16 - $19 per hour, significantly lower than the industry standard. Moreover, Zillow charges real estate agents $239 for a standard real estate photo package in the Atlanta area, and $359 for a package that includes standard items plus drone photo and video.

The True Cost of Equipment

Zillow's minimum requirements for photographers include a DSLR camera with the ability to shoot in AEB mode and a wide-angle lens, such as a Canon EOS 80D with the Canon EF-S 10-22mm Ultra Wide Angle Lens or better. This gear is considered amateur level, and professionals typically do not use crop sensor DSLRs. The daily rate to rent this gear is approximately $55 per day.

Zillow anticipates that photographers in this role will typically work 20 hours per week, depending on their location and business needs. The weekly rental for this gear is $224.

Zillow's preferred equipment includes a Ricoh or Insta360 3D camera, a drone with AEB photography and 1080p/60fps videography capabilities, and interior video equipment capable of 1080p/60fps. Professionals typically use drones and video equipment with large sensors and 4K video capabilities, so Zillow's preferred equipment requirements are for amateur level, consumer equipment. The weekly rental for Zillow's preferred equipment is $323.

Calculating Photographer Profits

Given that the average time to shoot a real estate project is less than an hour, let's assume that each project takes approximately 45 minutes. This would mean a photographer could potentially complete up to 27 jobs in a 20-hour week.

If a photographer is paid at the higher end of Zillow's scale, $19 per hour, for 20 hours of work, they would earn $380 for the week.

However, if the photographer is using Zillow's preferred equipment, the weekly rental cost is $323. This would leave the photographer with a pre-tax income of $57 for the week.

In Georgia, the state income tax rate is 5.75%, and the federal income tax rate for this income level is 12%. This results in a total tax rate of 17.75%.

Applying this tax rate to the pre-tax income of $57, the photographer would pay approximately $10 in taxes, leaving them with a net income of $47 for the week.

The Uberization of Real Estate Photography

This business model is eerily similar to Uber, where drivers often don't make enough to cover the depreciation and costs of operating their vehicles. The "gig economy" model, where workers are classified as independent contractors rather than employees, often shifts costs onto the workers themselves. In this case, photographers are expected to provide their own equipment, which can be a significant expense.

The Downside of Disruption: A Look at Other Industries

While the real estate industry is currently grappling with the effects of Zillow's new strategy, it's not the first sector to experience such a shake-up. Let's take a look at some other industries that have faced similar challenges.

Uber and the Taxi Industry

Uber's disruption of the taxi industry initially seemed like a win for consumers, offering lower prices and a user-friendly app. However, as Uber gained market dominance, it began to increase prices, particularly during peak times with its surge pricing model. This led to higher costs for consumers, especially in areas or times when other transportation options were limited. Furthermore, the earnings of many drivers decreased, leading to a decline in their living standards.

Amazon and the Retail Industry

Amazon's impact on the retail industry is another prime example. While Amazon offers convenience and often lower prices, it has been criticized for its treatment of workers. Furthermore, with fewer physical stores, consumers have fewer options to see and try products before buying them, leading to increased returns and dissatisfaction. The closure of many brick-and-mortar stores also led to job losses and impacted local economies.

Streaming Services and the Entertainment Industry

The rise of streaming services like Netflix, Amazon Prime, and Disney+ has revolutionized the way we consume media. However, as each platform develops its own exclusive content, consumers are forced to subscribe to multiple services to access all the content they want to watch, which can become costly.

The Bigger Picture

In each of these cases, while the disruption brought by these companies has led to initial benefits for consumers in terms of cost and convenience, over time, the negative impacts have started to emerge. These include increased prices, decreased quality or choice, and potential negative effects on workers in those industries.

It's a reminder that while innovation and disruption can bring benefits, it's also essential to consider the long-term impacts on all stakeholders, including workers and consumers.

The Next Step: Cutting Out Real Estate Agents

But Zillow's strategy doesn't stop at photographers. The company appears to be setting its sights on real estate agents next. Zillow is encouraging people selling their homes to use a Zillow Listing Agent, effectively cutting out traditional real estate agents.

Zillow currently has a job listing titled "Seller Consultant, Sales + Service," with responsibilities that include corresponding with customers looking to sell their homes, working directly with sellers to uncover their specific needs, and offering solutions leveraging Zillow Group’s products and services. The standard base pay range for this role is $23.50 - $37.50 hourly.

What Can Real Estate Agents Do?

The changes brought about by Zillow's acquisition of ShowingTime+ may seem daunting, but real estate agents are not without recourse. Here are some strategies that can help agents navigate this new landscape:

1. Leverage Personal Relationships

One of the strengths of real estate agents is their ability to build and maintain personal relationships with clients. This is something that a large corporation like Zillow can't replicate. Agents should leverage these relationships, emphasizing the personalized service and local market knowledge they can provide.

2. Collaborate with Professional Photographers

Agents can collaborate directly with professional photographers, bypassing Zillow's services. This not only supports local photographers but also ensures high-quality photos for listings. Agents can highlight the superior quality of these photos compared to those produced by Zillow's use of getting the cheapest, amateur photographers.

3. Educate Clients

Agents should educate their clients about the implications of Zillow's business practices. This includes explaining how Zillow's low pay rates for photographers could lead to a decline in the quality of real estate photos and how Zillow's strategy could potentially impact the real estate industry in the long run.

4. Advocate for Fair Practices

Real estate agents can join or form groups to advocate for fair business practices in the industry. This could involve lobbying for regulations to prevent monopolistic practices or working to raise awareness about the importance of fair pay for all industry professionals.

5. Diversify Services

Agents can diversify their services to offer more value to their clients. This could include providing comprehensive property management services, offering virtual tours, or specializing in certain types of properties or areas.

6. Utilize Other Platforms

While Zillow is a major player in the real estate market, it's not the only platform out there. Agents can utilize other platforms to list properties and reach potential buyers.

In conclusion, while Zillow's acquisition of ShowingTime+ presents challenges, it also provides real estate agents with an opportunity to underscore their value, advocate for fair practices, and innovate in their services. By taking proactive steps, agents can not only survive but thrive in this changing landscape.

Conclusion

In conclusion, Zillow's acquisition of ShowingTime+ and its subsequent changes to pay rates and business model may increase profits for the company, but it raises serious concerns about the impact on photographers, real estate agents, and consumers. It underscores the importance of fair pay and sustainable business practices in the gig economy. While innovation and disruption can bring benefits, it's also essential to consider the long-term impacts on all stakeholders, including workers and consumers.

The real estate industry, like many others, is grappling with the effects of these disruptive business models. As we've seen in other sectors, such as ride-sharing and retail, the initial benefits of lower costs and increased convenience can be overshadowed by the long-term impacts on workers' livelihoods and consumer choice. It's a reminder that while innovation can drive growth and change, it should not come at the expense of fair treatment and compensation for those who make it possible.

In the case of Zillow and ShowingTime+, the low pay rates for photographers and the potential for real estate agents to be cut out of the process entirely could have significant implications for the industry. It's a development that warrants close attention from industry professionals, policymakers, and consumers alike.