We present a model for demagnetization in photomagnetic films, and investigate different regimes for the magnetizing process using finite element analysis. It is found that the demagnetizing factor may depend strongly upon the high-spin fraction of the film, and the specifics of the dependence are dictated by the microscopic morphology of the photomagnetic domains. This picture allows for facile interpretation of existing data on photomagnetic films, and can even explain an observed photoinduced decrease in low-field magnetization concurrent with increase in high-spin fraction. As a whole, these results reiterate the need to consider demagnetizing effects in photomagnetic films.