Digital imaging--whether via digital cameras hooked up to PCs or traditional photographs processed and stored in a digital format--does not yet offer enough benefits to replace traditional photography, according to Carl Gustin, chief marketing officer for Kodak.
"To make a new model work, the old model has to be broken," Gustin asserted in an interview with CNET News.com. "Today, digital imaging doesn't offer anything [better] besides sharing."
Analysts, however, contend that the turn toward digital has already occurred. Wall Street has hammered Kodak's stock in the past year because of the perception that the coming digital revolution could eventually decimate film and film processing revenues.
"Honestly, this sounds like something someone would say two years ago," said Carl Holec, a digital imaging analyst with market research firm ARS, calling Gustin's comments "astounding." Still, Holec said that "the ongoing profit stream from digital photography is probably not as significant as the one from traditional cameras, which certainly has to scare them."
Gustin's tepid enthusiasm for the burgeoning technology reflects the difficulty Kodak has had in its somewhat unique position as a major supplier of both digital and traditional photography products. Like any traditional company attempting to alter its strategy to include Internet-based businesses, Kodak must worry that aggressively promoting digital product lines may cannibalize traditional sales.
Digital photography will not achieve mass-market status until a variety of issues are resolved, Gustin said. Digital cameras capable of capturing pictures with a resolution of two million pixels will have to drop in price to under $100, he said. Meanwhile, the PC and software industry will have to simplify the process of downloading, manipulating and printing the digital images.
"Digital cameras are still too hard to use," he said, including Kodak's cameras in that criticism. "They're not great, but they're better than anything else that's out there," he said. In addition, with digital photography, consumers can't save the negatives of pictures they don't want to print right away, or at least, not easily, he said. "Putting it through the PC is a pain."
Analysts disagree. With technology advances and price drops, digital cameras are generally $200 more than high-quality traditional cameras, but they come with the flexibility to manipulate and preview images, as well as share them via the Internet.
"It's a completely different paradigm," Holec said, noting that many of Kodak's digital cameras offer traditional image quality with the flexibility of digital technology. "Kodak has always been one of the leaders in the digital segment."
Gustin's comments are somewhat surprising considering the strides the company has made in its digital businesses. Kodak's "You've Got Pictures" promotion with America Online and its PictureCD partnership with Intel are growing in popularity, he says, and the Kodak.com Web site's traffic is strong enough to support third-party advertising.
But those successes still don't compare with the company's traditional business, where it accounts for 70 percent of the 540 million of rolls of film processed each year. This compares with worldwide digital camera shipments of 4.7 million this year, according to market research firm IDC, and 22 million shipments by 2003.
But despite his individual skepticism about imminent widespread adoption of digital photography, Gustin is confident that Kodak is well-positioned to profit. "The mass market is not going to happen until the cost and time of digital imaging isn't [better] than the old model," he said. "We don't care when it happens because we make money on every link in the chain."
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