THE TWILIGHT OF A TECHNOLOGY:
Fall of Film Sales Exceeds Forecast Done by Kodak
By NISHAD H. MAJMUDAR Staff Reporter of THE WALL STREET JOURNAL June 14, 2004
U.S. film sales appear to be withering faster than industry leader Eastman Kodak Co. expected, as consumers turn to filmless digital cameras and picture-taking mobile phones.
The slide could pose additional challenges to Kodak, Fuji Photo Film Co. and other film producers as they seek to make the transition from highly profitable film to digital imaging, where many technology competitors are vying for the market.
Data from Information Resources Inc., which compiles numbers from retail-checkout scanners, show film sales have decelerated markedly so far in 2004, in a trend that worsened in recent weeks as the industry heads into the important vacation season.
In January, Kodak forecast a 10% to 12% industrywide decline this year in unit volume of rolls and single-use cameras -- essentially a single roll with a disposable case. But in 2004 through May 16, IRI charted a 16% decline compared with the same period a year earlier. And in the four weeks to that date, the drop was 19%. For both periods, the decline in overall dollars paid at retail was smaller, as pricing remained firm for single-use cameras.
Fuji, of Japan, fell 40% in film-roll volume in the year-to-date numbers, and Kodak, based in Rochester, N.Y., was off 22%.
Kodak isn't revising its forecast for the year, according to Gerard Meuchner, a company spokesman. Mr. Meuchner said the IRI data "represent less than half the industry. We look at data on a monthly, quarterly, and annual basis that is all inclusive of the industry." He wouldn't elaborate on that data. A Fuji spokesman declined to comment.
IRI data cover a swath of mass-merchandisers, supermarkets and drugstores but exclude Wal-Mart Stores Inc. It is widely used by analysts to track retail trends. The softness in disposables, whose gains had offset the decline in rolls during the recent past, was interpreted by some analysts as a sign of surging use of mobile phones with digital-picture-taking capabilities. For the four-week period, roll volume was off 27% and single-use volume edged down about 1%.
One-time-use cameras are often impulse purchases for consumers who want to snap a shot but don't have their regular cameras with them, said Gary Pageau, a group executive with the Photo Marketing Association -- but "if you've always got a camera phone with you then you don't need a single-use camera."
Ulysses Yannas, an analyst with Buckman, Buckman & Reid in New York, was skeptical that film sales were falling as rapidly as IRI indicated. He also said he expected a summer rise during the "big time" for picture taking.
Kodak is cutting its work force as it consolidates film-production facilities. A sharper-than-expected film drop this year could force it and competitors to speed up such actions, and curb resources for digital investment.
Richard Stice, an analyst with Standard & Poor's, said film sales are falling fast because technology improvements have made higher-quality digital cameras more affordable. The affordability, he added, could dim Kodak's hopes that developing-country consumers would stick with film. "Because of the prices in digital and because the growth in those economies is starting to pick up, people are skipping the conventional film and going straight to digital," he said.
Yankee Group, a research and consulting firm in Boston, estimates 6% of cellphones in the U.S. last year were camera-equipped, but the percentage will jump to 19% this year and 42% next year.
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