Sunday, July 31, 2005

Pixels Prove Profitable for Kodak

With the increasing popularity of digital photography, one wonders what will happen to good, old-fashioned analog (meaning film) photography. Read any newsgroup dedicated to digital capture and you'll invariably find a thread about "digital vs. film" and which is better.

But just as television did not kill off radio, digital certainly will not be the death of film. It will, however, put a huge crimp in sales for companies that are still in the analog film business.

According to the Eastman Kodak Company (Kodak), its digital business is growing and its film business -- not surprisingly -- is shrinking.

For the second quarter of 2005, the "Great Yellow Father," as Kodak is sometimes referred to, reported net worldwide sales of $3.7 billion, up 6% from the same quarter in 2004. Net sales in the United States rose 1% in the quarter, to $1.4 billion.

The company said its net digital sales in the second quarter were $1.8 billion, up from $1.3 billion in the second quarter of 2004, or a 43% increase. Kodak's traditional products (film, paper, chemicals and other analog products) sales fell 15% to $1.8 billion in the quarter, from $2.2 billion a year earlier.

Digital sales were driven by Kodak's consumer digital and home printing businesses. The decline in its traditional photography sales was due to falling film sales and consumers making less and less use of retail photofinishing services.

So what does this all mean? Well, it means that until the digital market levels off (and it will eventually), Kodak will continue to lose money in a business it has been in for more than 100 years. Film sales will decline to a level where many other companies will get out of the business altogether, leaving just two or three manufacturers and a host of smaller distributors to handle just a few color and black and white products.

I doubt that Kodak will entirely abandon film altogether. There is a small but growing backlash against digital capture among "analog purists." While a small group now -- they will continue to grow. They prefer to use traditional films and darkroom techniques. Kodak will probably continue to make a few select B&W emulsions like Tri-X in various formats and chemicals like the venerable D-76, to keep the purists happy.

After all, television did not kill off radio. The Internet did not kill off television. Heck, you can still buy wet plate emulsions.

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