Kodak 3Q: Traditional business down 18% YoY

SamWeiss · Oct 30, 2008

From today's press release:

http://www.kodak.com/eknec/PageQuerier.jhtml?pq-path=2709&gpcid=0900688a809d78e6&ignoreLocale=true&pq-locale=en_US&_requestid=1397

Film, Photofinishing and Entertainment Group third-quarter revenue was $764 million, down from $928 million in the year-ago quarter, representing a decrease of 18%, attributable to decreased sales volume of Film Capture and Traditional Photofinishing. Earnings from operations for the segment were $77 million, compared with $113 million in the year-ago quarter. These results reflect the effects of lower industry sales volumes and higher year-over-year commodity costs for the quarter, partly offset by decreased SG&A costs and lower depreciation expense related to the companys change in useful life assumptions regarding traditional manufacturing assets.

The decrease in traditional business is accelerating. The previous couple of quarters the decreases were 14% and 15% I believe.

So, APUG members don't want to hear doom and gloom about film, and I know this is my first post, but I think this is important news. I prefer film over digital for some photography (and I am selling off a couple of digital cameras). Yet, I was thinking of taking a color class at my local CC (and they do wet printing of color still), but I have to wonder if there will be any traditional color prints done in a couple of years.

digiconvert · Oct 30, 2008

If you're doing them there will be !!
I believe the expression is use it or lose it

I admit that a lot of my colour film is scanned and then printed from a digital file , mainly because of the need to have a fair number of prints to make wet printing worthwhile in terms of chemical costs etc.

If you are a commercial photographer the case for colour film work is probably less compelling than for BW (which is a product that cannot be replicated fully by digital methods at present) but for a hobbyist colour printing is fun and once you have a method sorted it's pretty easy to get reasonable quality prints . easier than BW anyway because flesh tones are either right or wrong there's less darkroom manipulation with colour (at my level anyway).

Film is also a lot easier to use if you want anything other than basic mementos. With digital you have to choose your files , download them and then work in pshop - with film I send it off for processing (or do it myself) and can get a developed film with a reference CD for about £3 within 30 min. I can then choose to scan or wet develop in order to get the prints I want , for 6x4 the CD will give 'consumer' quality prints.

I would really hate to lose Portra C41 or Velvia/Provia so I keep using it and hope others do the same.

Cheers ; CJB

coriana6jp · Oct 30, 2008

On a positive note, a recent talk with a Fuji rep said professional film sales have stabilized and there was a slight increase in demand here in Japan. They also said the same for the North American Market. So at least Fuji seems to be holding somewhat steady, if the rep was correct.

Gary

DWThomas · Oct 30, 2008

Given the current economic situation, I would think many companies' 3rd quarter results might be down. I'm not sure I'd wring my hands over this report or draw any long term conclusions.

DaveT

Dietmar Wolf · Oct 30, 2008

10% profit out of sales. That is really very good.

Photo Engineer · Oct 30, 2008

The decrease in 2005 was 32% in one quarter. Remember what happened back then to Ilford and Agfa?

So, things are doing a bit better now, considering the economy.

PE

Nigel · Oct 30, 2008

As Ron has pointed out many times in the past, the bulk of film sales are in the entertainment sector - i.e. the motion picture industry. With an economy on the rocks, we have already seen a downturn in entertainment spending (and therefore revenues for the entertainment industry). We are now seeing the trickledown through the support industries.

As Ron points out above, the big losses of customers to digital are in the past. There are few that are now giving up film for digital - those that were inclined to switch, have done so. And as Gary points out, pro film sales appear to have stabilized - a good indication that the migration is finished.

Dietmar points out something very meaningful - that the net profit margin is over 10%. Should Kodak choose to exit the film business, a 10% net is the type of business that is interesting to private equity funds. However, I don't think private equity is knocking on the door because there is little improvement from a management point of view - that is, Kodak appears to be running that business unit very well. Use the cash cow (motion pictures) to support R&D that can then be used in the other segments as well. Although the cashflow from an operation like this is sweet, there is more money to be made in fixing broken businesses. But if a good business goes up for sale, it is worth bidding...

Also, the recent price increases are positive moves. Sure, we will all pay more for film, but the fact that we are willing to do so indicates that there is money to be made here.

In short then, no more reason to think that film is going to go away than to think that horses are going away due to the automobile.

Alex Bishop-Thorpe · Oct 30, 2008

My university runs wet printing classes for colour, and they're full up each semester. If no one does it, yeah, I'm pretty sure it'll cease to exist...if you're worried, take the class. It's not gonna disappear overnight. We're still trying to work through all that Agfa Black and White film, and there's a hell of a lot of RA-4 paper in the world right now. Even if they stopped all production tomorrow, there'd be materials there. And currently it's far to profitable for Kodak and Fuji to stop all production tomorrow.

mabman · Oct 30, 2008

These results reflect the effects of lower industry sales volumes and higher year-over-year commodity costs for the quarter, partly offset by decreased SG&A costs and lower depreciation expense related to the company’s change in useful life assumptions regarding traditional manufacturing assets.

I think the above here is the key, although it's wrapped in accounting-speak. I'm reading between the lines, but it sounds like "higher year-over-year commodity costs for the quarter" means some raw materials cost more - I'm guessing at least part of that was due to the weaker US dollar. "partly offset by decreased SG&A costs" sounds like they did less marketing, laid some office/sales staff off, or some combination thereof.

It doesn't sound terribly doom-and-gloom to me, esp. considering Kodak is a US company, subject to fluctuations in purchasing power and (to some degree, anyway) domestic consumption there in whatever its economic climate is.

nc5p · Oct 30, 2008

The economy is a big part of this. Every industry is experiencing reduced sales. My employer has a near complete travel ban, some layoffs, and we can't purchase any equipment.

AgX · Oct 31, 2008

As I guess I pointed out before, a great part of the issue is related to how the managers look at the analogue way. If they don't find it sexy, that, I assume, will have its implications on how they judge the pure figures.

Over here there was just an interview published in an imaging business magazine with the departing head of Fuji Germany on the future of imaging. He did not mention film at all.

Well, he did in way. Complaining that once film-users had to visit the retail shops repeatedly, to by buy film, having it processed and for ordering and taking in the prints, something which sadly has gone with new technologies.

AgX · Oct 31, 2008

As the economy as well as the entertainment industry have been mentioned: an incline in that industry would make cinema operators stick to their projectors and film rather than investing in a new technology.

Steve Smith · Oct 31, 2008

AgX said:
As the economy as well as the entertainment industry have been mentioned: an incline in that industry would make cinema operators stick to their projectors and film rather than investing in a new technology.

I'm sure most cinema owners are reluctant to invest thousands in new equipment which may be outdated in a few years anyway.

Steve.

2F/2F · Oct 31, 2008

We still do RA-4 as well, with a 24 in. Kreonite, but it is old, run all day every day, and temperamental. As soon as it blows its final gasket (figuratively or literally, I suppose) and can no longer reasonably be fixed, they are going to 100% inkjet printing, with analog or digital capture being the choice of the individual student (as long as they have taken the digital class). Never mind the fact that you can't give away a Kreonite, so they could get one with light use for practically nothing.....bleeding idiotic IMO, but there is one asshole tenured professor who is pushing like hell to do away with wet color printing.....yet who seems so utterly useless and miserable 100% of the time, that I don't know why he is even there in the first place. Hopefully the demand for Lambda/Lightjet prints from pro labs will be enough to keep RA-4 around for us, because I reckon it is on its way out in schools as Kreonites get older and older and chemicals get more and more expensive.

mhanc · Oct 31, 2008

As long as we create a demand, someone will fill it. It would definitely help to get more people to return from digital and more people using film for the 1st time. If Kodak or someone else puts a motivated person in charge of traditional image businesses who then sells and markets the benefits of film, that in itself will create more demand. Image is everything ;-)

Hopefully we are nearing the saturation point for digital and the economy rebounds, which should help the film numbers.

Naples · Oct 31, 2008

Ford and GM auto sales are down, too, and it has little to do with film.

Michael W · Oct 31, 2008

Sony, Nikon & Canon have all just reported bad numbers on digital revenues & not predicted to improve in the near term.

ajuk · Oct 31, 2008

I would have though it would be steadier by now.

SamWeiss · Nov 8, 2008

Follow-up

2F/2F said:
We still do RA-4 as well, with a 24 in. Kreonite, but it is old, run all day every day, and temperamental. As soon as it blows its final gasket (figuratively or literally, I suppose) and can no longer reasonably be fixed, they are going to 100% inkjet printing, with analog or digital capture being the choice of the individual student (as long as they have taken the digital class).

Well, my local CC still does color wet printing, but no color (C41 or E6) processing. However, on open lab days I've hardly seen anyone do color in the color darkroom. Students opt to use digital.

Sorry to hear about your local Scrooge of a professor. Sad it is when someone whose task it is to inspire and counsel young people has such a sour mood.

In follow-up to some of the other posters: for me it is simply a matter of managing time and money. I can only take so many classes, and buy a limited amount of material... so I need to make choices. It's not that I dislike color film, but IMO 35mm is too small for what I want, and LF color is expensive (though I like the look!) No place near me does 4x5 C41 so I'd have to mail out the negatives, etc. I still might go through with taking the class, but in all honesty I really think wet color is not long for this earth.

On Sony, Nikon, and Canon business: looking at their quarterly reports, digital imaging is doing bang-up business, however the profit margins are shrinking in digital cameras because competition is driving prices quite low. Oh, and the companies are also quite clear that it is the Yen appreciation that is killing their profits. (Additionally, Sony has other problems, but those aren't relevant here.)

Thanks all for the input. I was going to post about the latest Fujifilm news, but it is gloomier than Kodak... and I fear I've been spreading enough doom as it is. Fortunately I also like b&w and that should be around for quite some time to come (probably longer than I will be around!)

Ian Grant · Nov 8, 2008

Part of Kodak's problems now are poor marketing and distribution. In the last 2 years since moving from the UK I have found buying the Kodak B&W films I was using more and more problematic, in contrast I can buy Ilford & Foma films far ore easily off the shelf. In addition Kodak films are no longer competitively priced.

The consequence is I've totally stopped using Kodak films, B&W and Colour.

Ian

Anon Ymous · Nov 8, 2008

Ian Grant said:
Part of Kodak's problems now are poor marketing and distribution. In the last 2 years since moving from the UK I have found buying the Kodak B&W films I was using more and more problematic, in contrast I can buy Ilford & Foma films far ore easily off the shelf. In addition Kodak films are no longer competitively priced.

The consequence is I've totally stopped using Kodak films, B&W and Colour.

Ian

Ian

A lot of it depends on the local distributor I suppose. Last time I checked, I could buy TriX and HP5+ for the same price (3,50 in Athens). That was few months ago and these are probably the best prices in Greece. I can also buy any TMax variant, but PlusX is something I haven't seen. AFAIK most mainstream Ilford films are available too (not very sure about SFX and PanF). So, how much do you pay for HP5+ at the other side of the aegean?

haris · Nov 8, 2008

Answer to OP.

I would note one thing. Not all people using film go to labs for printing them. Some do it by themselves, but lots of people scan films either to print on their own inkjet (and other) printers, and some kekep them scanned on CDs, DVDs, etc...

Even if less lab prints from film is somethnig to consider, it is not definitive answer about film.

Ian Grant · Nov 8, 2008

Anon Ymous, I only use HP5 in LF, and I bought rather a large supply from a US LFPI member last year 100 sheet boxes

Yes it's always possible to buy Kodak Tmax films in most major cities, but I couldn't find any Tmax 120 at all while I was in Chile last year but Ilford films were readily available. Also when back in the UK I can buy Ilford 120 in most towns but not Kodak, same when I'm in Izmir, Turkey.

Ian

B&Wpositive · Nov 11, 2008

Are prices going to go stratospheric, forcing many of us to abandon certain certain materials?

http://photo.oktett.net/index.php?/archives/48-Massive-price-increase-on-K64-coming-up.html

Goldfellow · Nov 12, 2008

Kodak's recent launch of Ektar should speak for itself that they are still investing in and committed to film. Pick any major trade show over the past few years, and there has been a new or improved film introduced by Kodak, targeted in particular to the kind of people who make up APUG.

Kodak 3Q: Traditional business down 18% YoY

haris

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