Kodak Targets Mass Market With Digital Services
By Doug Olenick -- TWICE, 2/3/2000
Giving consumers something to do with their digital photographs is the focal point of Kodak's digital strategy for the coming year.
Kodak chairman Dan Carp called the digital camera market the most competitive category in which Kodak participates, but while profits are difficult to come by with the camera hardware the photographic services Kodak provides to digital camera users is extremely profitable. To take advantage of this Kodak this year will start bundling digital cameras and photo printers with free online services, such as printing, in order to get consumers hooked on doing something more than emailing their digital images.
"We want to take digitization to the mass market and be a low-cost provider of digital services and maintain our position in the digital camera area," Carp said.
The first bundles to become available will feature a Kodak digital camera and one of the Lexmark-made, Kodak-branded PictureMaker inkjet printers, said Will Shih, president of Kodak's digital and applied imaging division. A bundle that involves services will follow. Shih would not be more specific on the availability of these bundles other than to say they would hit stores this year.
Carp said he expects 2000 to be a big year for digital photography, although he also expects tough competition from other hardware manufacturers. To get a jump on the competition, earlier this month Kodak announced price cuts on several digital cameras. These are the Kodak DC290 Zoom digital camera, cut to $899 from $999, and the low-end Kodak DVC325 digital video camera, reduced to $99 from $149.
"There will be a lot of pushing and shoving as companies try to carve out their space," he said, adding Kodak also must deal with the plethora of online companies offering digital services.
Carp said Kodak does have a huge advantage over these companies with its worldwide brand recognition, something on which the online newcomers must spend millions of marketing dollars. Despite this built-in advantage, Kodak will attempt to bolster its position and blow these firms out of the water with a massive advertising and marketing campaign this year. The end result, Carp hopes, is a stream of customers coming to Kodak.com to order photo prints and other items.
The company reported Kodak.com receives about 3 million hits per day and 420,000 new visitors each week. The site has three "neighborhoods:" The Picture Playground, PhotoQuilt and an online store. The Playground is where consumers got to select and order prints, greeting cards and other items using either digital images or traditional photos that have been scanned and digitized. The PhotoQuilt is a free site where families can post a picture that will become part of a digital photo quilt.
By making these services available and simple to operate Carp is banking on consumers increasing the number of photos being taken. This will create a loop where consumers take their digitized images to Kodak.com, which will make prints, or make a hard copy on a printer, using Kodak inkjet media. Kodak research has found a direct correlation between digital camera ownership and the number of photos taken, Carp said. When a family has a digital camera the number of rolls of film used is halved, yet the number of overall pictures taken dramatically increases.
In addition to its online offerings, Kodak will expand its retail kiosk program from the 15,000 now in use and take the program international. A test program is now running in Australia.
Despite Kodak's focus on digital imaging, Carp does not expect this to have an immediate impact on the company's traditional film business. He is projecting the film business will grow at a 4% rate per year for the next five years. Kodak will use profits made from this and its other business areas to fund its growth in the digital domain, he said. This business is expected to grow at a remarkable 30% to 40% per year resulting in a 20% home penetration rate for digital cameras in five years. After this point is reached the film side of the business could start to fade.
"The crystal ball gets foggy [for film] beyond 2005. But a lot of things can happen; there is still room for innovation to take place with film," Carp said.
Even with this level of projected growth, Kodak's Shih refused to guess when the digital camera category would become profitable.
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