Film Sales Tanking

A discussion about Kodak from the NY Times – what other business does this remind you of?

For decades, rampant picture taking made Eastman Kodak, the world’s biggest maker of film, an immensely profitable company. Film accounts for about 20 percent of the company’s sales, but up to 50 percent of its profit.

But digital photography, heightened competition and the weak economy have cut into sales. And last week Kodak, which eliminated more than 7,000 jobs last year, said it intended to cut as many as 2,200 more. Investors, who have flocked into the stock the last year, unceremoniously dumped shares on the news. They ended at $32.08 on Friday.

Benjamin A. Reitzes, imaging technology analyst at UBS Warburg, talked last week about the company’s prospects. Following are excerpts from the conversation.

Q. What caused Kodak’s problems?

A. Film demand peaked in early 1999 and has been on a slowing growth and declining trajectory ever since. As consumer confidence began to wane in 2000 and digital camera sales began to become more meaningful, film demand began to slow really markedly.

Kodak has thrown out numbers that last year digital cameras cannibalized its film unit growth by three percentage points. I think that number is even higher, because digital camera sales have been even stronger than expected and sales of digital printers have been stronger than expected.

Q. Is film becoming obsolete and is Kodak responding rapidly enough?

A. We think more and more people are taking advantage of digital imaging. The biggest problem is that it is more expensive, it takes time and requires a good quality printer.

….Q. What will Kodak look like in five years ?

A. You will see a lot more digital revenues and services. Kodak’s future depends on its ability to enable its retail customers to process photographs from digital cameras.

Right now Fuji Film has digital minilabs that allow you to print pictures from digital cameras. Kodak has several products coming out in this area this year. But they are going to have to invest a lot in sales, marketing and promotion on the launch of these new minilabs.