An American Icon…Turns to Dust
I will never forget the sheer amazement that I felt when I joined Kodak in 1971. Rochester’s “Kodak Park” was a beehive of activity with trucks and rail cars streaming in literally all directions and high volume, state of the art consumable manufacturing virtually everywhere you looked. I loved to walk or drive through the “park” as we called it, and watch the frenzied activity at a true, “gold plated” American manufacturing icon.
But, as some would later remark, “Kodak was a franchise that turned into a business…and no one noticed!”
We did some great things there, but the technology and market vision left the company many years ago. I haven’t thought about those early days for many years as I moved on to other companies who chose to embrace the developing digital market.
Today I got a link to a video from an old Kodak colleague…a very sad day and a warning to all who believe that they can unilaterally hold back progress for their own business reasons!
You can find a pretty good version of the video at http://bit.ly/KodakDust. It’s all too bad, but perhaps not, as crumbling buildings in Rochester, NY are perhaps best forgotten as has the powerful franchise created by “you push the button and we do the rest!”
Digital Photography’s Relevance Challenge…A Call to Arms
Get Everything Digital from a Retailer Down the Street!
I read a tremendous amount of excitement about the ability to buy software published “while you wait” at the new Microsoft retail stores http://bit.ly/MicrosoftPublishing . With a little help, consumers could be a lot closer to this than anyone thinks; we don’t need to wait for a new Microsoft store; and we really don’t have to limit ourselves to desktop software only from Microsoft! Consumers could get virtually anything that comes on a CD or DVD…with packaging, quality and reliability identical to conventional mass produced copies. Imagine no inventory, no distribution, no floor space… all from a friendly retailer just down the street. While we’re at it, why not publish your own professional demo CDs or business presentations, or just make yourself some personalized CD or DVD blanks that just say you in style!
As I write this, there are already more than 2,000 fully networked, geographically distributed retail stores that burn and full color label CDs and DVDs. Some also offer personal entertainment hardware, computers and peripherals...and many have a wide variety of software for all of it!
The reason you didn’t know about it is because these systems currently masquerade as retail digital photofinishing counters; but with a little help, they could easily add the capability of on demand manufacturing for virtually every kind of digital content imaginable. Today most are in Walmart locations, but the number would approach 10,000 if others like Walgreens, CVS, Ritz and Cord added full color disc printers to address an exciting new market opportunity. All they really need to fulfill this vision is an innovative digital industry partner that is willing to step in and help them move the data from the store end of the wire to their existing CD/DVD manufacturing and printing equipment!
The photo companies have no reason to invest and nothing to gain. We need somebody smart enough and big enough who cares! Palo Alto how about you? Redmond, remember Itunes? You can’t wrap a download and put it under the Christmas tree! This could change everything!
HP’s New Beachhead at Walmart…
By now many know that during their earnings call, Kodak acceded to losing the US Walmart account, even though they intimated that it shouldn’t be terribly material. I believe that the $100M or so in lost sales could turn out to be pretty significant, and their inclusion of the contract loss in their Q3 10Q, followed by the comment that “The Company plans to replace a significant portion of this volume of business, although the timing and extent is uncertain” certainly sounds a little ominous.
Perhaps far more important than the lost revenue itself, assuming that Kodak plans to stay in the consumer imaging business, is the loss of the customer facing brand exposure provided by the nearly 8,000 Picture Maker kiosks currently located in Walmart US locations. These stores, in aggregate, represent the largest retail photo operation in the entire world. Since Kodak consumer ink jet (and commercial printing) products generally compete head to head with HP, losing the brand exposure to HP just represents more salt in the wound.
From my own experience with Walmart, a chain wide kiosk and printer switch out on the retail floor is a logistical nightmare and I would estimate that HP won’t manage to convert more than 500 stores before the Christmas holiday “lockdown,” when photo gifting seasonality is at its peak. The remaining Kodak systems will still burn a tremendous amount of Kodak branded consumables, and this should go a long way to soften the earnings blow for Kodak in Q4.
As time passes, it will be very interesting to see how Fuji responds to the HP incursion into Walmart. Fuji enjoys a somewhat broader product portfolio than Kodak, supplying production software, Fuji branded consumer kiosks and “behind the counter” printing equipment, not to mention almost all of the conventional photo paper and ink jet consumables used by Walmart associates to produce 1 hour photo orders. Fuji also performs “off site” production of a significant number of prints and photo gifts which can be ordered on 12,000 Fuji 1 Hour kiosks located in Walmart photo departments. These orders are transmitted “by wire” from Walmart stores and delivered back to the store in 3 to 5 days, but are produced by Fuji’s wholesale labs or subcontractors. Fuji has also integrated and installed full color, plain paper printers, sourced from their Fuji/Xerox joint venture, at a growing number of Walmart locations, but has yet to really develop a “photo document” market for consumer retail.
With this one deal, HP has made very significant progress in positioning themselves to become the “Kodak” of consumer digital imaging. Walmart will add immense brand visibility at retail (not to mention consumables burn) to their already powerful arsenal of competitive weaponry.
Without a doubt I’m sure Fuji would be much happier looking across the isle at Kodak!
The air is draining from Kodak and Rochester
After having spent almost 40 years in the photo industry with both Kodak and Fuji, driving innovations ranging from dye sublimation printing to 1 hour web to in-store printing, there are some major issues “between the lines” of today’s Kodak Q3 press release. Although not specifically mentioned in releases, their 10Q contains this ominous statement:
“The Company and one of its significant Retail Systems Solutions customers will not renew a contract that expired on September 30, 2009. The Company plans to replace a significant portion of this volume of business, although the timing and extent is uncertain.”
As many industry observers have noticed, it appears that Kodak Picture Makers, Kodak’s last remaining customer facing brand presence at retail, have recently begun being replaced in some Walmart stores by a new HP instant printing system. In addition, Walmart was noticeably absent from their upbeat enumeration of major and minor “dry lab” and kiosk customers which was released yesterday. We can now be pretty sure that this “significant” customer is in fact Walmart US. While Walmart stores in the US represent less than 4000 of Kodak’s 100,000 “locations”, US retail print volume numbers would predict that this loss should represent at least $100M in annual media sales. In the US market, mass merchants are where the retail printing volume is and Walmart is by far the leader in the category.
While an ongoing loss of $100M in annual sales to Kodak is a very serious issue, their complete loss of customer facing brand presence at US photo retail locations could be even more important. What will this mean to the remaining Kodak retailers, like CVS with its 15,000 Kodak kiosks? Where will Kodak media cost (and therefore price) go with such a significant loss of thermal dye transfer media manufacturing volume? Time will tell, but at least we finally have some closure on the death of the world’s original photo market mover.
The digital transition has been difficult for everyone in the photo industry. Traditional market movers have abdicated leadership roles due to very significant consumable and service volume losses. Many retailers have either disappeared entirely or abandoned the photo category, while the consumer has been left to figure out how to personally manage the entire transition themselves, at the risk of losing personal memories forever.
This now leaves retail photo dependent on HP, Fuji and a few others. While HP has installed systems at much smaller retail chains, Walmart would be their first major, mass merchant “print at retail” customer. Fuji has enjoyed the dominant share in “behind the counter” solutions for quite some time, and while challenged to lead or follow the industry’s evolution to all digital, is still quite comfortable in this market. Clearly, Kodak and Fuji practiced détente for years; retail photo is a very unique market and where we go from here is much more complicated, depending on how Fuji reacts to HP and whether HP can adjust its focus to become a real “turnkey” retail photo solution provider.
Even at today’s digital printing volume, there is a lot of money on the table!