Kodak films direct from Eastman Kodak (was: Kodacolor 100. New)

[MattKing]

I've had the benefit of some reasonably well informed information about how Eastman Kodak approaches the issue of cost recovery when they are pricing their products - no specifics, but lots of sense of how the accountants reign supreme.
After the costs associated with one of the world's largest (in the photography world) distribution and marketing systems dove them into bankruptcy, they reconfigured the company to essentially only be a B2B manufacturer, selling almost exclusively in large volume orders to large corporate customers. They left in place only the thinnest possible layer of administration, marketing and distribution resources.
Selling still film to a single customer was the least resource intensive option, and the most efficient way to keep costs manageable while earning the management demanded return on investment.
Having to market and distribute still film worldwide will exponentially increase their costs if their intention is to maintain volumes, and those costs will be fully recovered, with a healthy markup to boot.

 

[benderscameracorner]

In reality, the market for film will show dynamics that are somewhere in-between those of a fixed price monopoly and a quasi-perfect "cost price +" free market dynamic.

Certain brands/manufacturers - usually those with an enviable market positions and a very select dealer network - are able to exert heavy price controls over their distributors and retailers to basically fix street price to MSRP. This prevents 'race to the bottom' discounting, ostensibly to 'protect' brand image but of course maintain everyone's profit margin along the chain.

Kodak kinda fits this description... but also kinda not. Kodak's dominance in film, particularly colour film, is of course massive, especially with Fujifilm basically treading water now and showing little commitment to analogue photography beyond Instax. Fair to say Harmon - as awesome as Phoenix is - won't be a serious Gold competitor, let alone Ektar/Portra challenger - for colour film for another decade at minimum. Lucky will probably get there sooner, but again it's early days for them.

That said, photographic film is fundamentally a mass produced commodity product in a now very niche market. A growing niche market, but one still badly misaligned with Kodak's miles-long high-volume production system. It's in their best interests to grow consumption of film as much as the modern day market can handle... basic logic says that more production, more availability and lower costs will remove one of the main barriers to more people partaking - that being price.

However the prevailing attitude still seems to be to make film precious unobtanium and charge as much as the existing market will bear. Might work in the short term - though Kodak's expenditure to profit ratio is pretty terrible - but long term? Hmmm.

 

[koraks]

one still badly misaligned with Kodak's miles-long high-volume production system

If this means to say that EK's production system is presently geared towards higher volumes than they're selling: this does not appear to be the case. They recently increased finishing capacity by 50% because that was a hard bottleneck. What the situation w.r.t. coating is, we don't know for sure since coating capacity was dramatically reduced a few decades ago and presently it's shared by a number of product groups. I assume there's excess capacity on coating. How much excess there is elsewhere, including upstream supply of ingredients, I don't know. But a chain is only as strong as the weakest link.

basic logic says that more production, more availability and lower costs will remove one of the main barriers to more people partaking - that being price.

Sure, if you look from a couple of thousand miles away through your eyelashes. A little closer by, it turns out to be a bumpy road with non-perfect relationships between volume and sales price.

the prevailing attitude still seems to be to make film precious unobtanium and charge as much as the existing market will bear

This implies that someone in the value chain is reaping excess rents from the manufacture and/or sale of film. Oddly, neither EK's nor Alaris' annual figures (insofar they've been made available) ever supported that notion, nor is it plausible that this is true for downstream distribution. So we may have to accept that the reason for the high prices are simply high costs.

 

[Alan Edward Klein]

More competition among distributors will lower prices. That's how markets work.

I should have said that more competition among distributors will lower costs.

Of course, the final price is affected by Eastrman's greed, devaluation of the currency, tariffs, competition among film suppliers, transportation costs, and all the other costs involved in selling a product. If these remain as they are, final prices will be lower because of the change from Alaris.

 

[Alan Edward Klein]

I've had the benefit of some reasonably well informed information about how Eastman Kodak approaches the issue of cost recovery when they are pricing their products - no specifics, but lots of sense of how the accountants reign supreme.
After the costs associated with one of the world's largest (in the photography world) distribution and marketing systems dove them into bankruptcy, they reconfigured the company to essentially only be a B2B manufacturer, selling almost exclusively in large volume orders to large corporate customers. They left in place only the thinnest possible layer of administration, marketing and distribution resources.
Selling still film to a single customer was the least resource intensive option, and the most efficient way to keep costs manageable while earning the management demanded return on investment.
Having to market and distribute still film worldwide will exponentially increase their costs if their intention is to maintain volumes, and those costs will be fully recovered, with a healthy markup to boot.

Kodak would use existing regional distributors who already distribute other manufacturers' film and photographic products. My understanding is that's what Alaris was doing. Now Eastman can ship directly to these other distributors. The Alaris markup is eliminated less Eastman giving a royalty to Alaris for each roll sold and/or some multi million payment for buying out the exclusive Alaris rights.

 

[MattKing]

And if Alaris' costs and required return on investment are/were lower than publicly traded Eastman Kodak's, and their distribution resources and efficiencies are better than Eastman Kodak's, prices will go up with Eastman Kodak setting up their own, brand new distribution infrastructure.

 

[mshchem]

All this is pure total speculation. All we know for sure is that there is new packaging.

If Alaris is getting something in return that's cost. Unless Alaris simply decided to walk away and let EK deal with the business, I doubt that.

I wouldn't be surprised if we see more to come. Are employees transferring from Alaris to EK?

I just hope it all works out.

 

[mshchem]

And if Alaris' costs and required return on investment are/were lower than publicly traded Eastman Kodak's, and their distribution resources and efficiencies are better than Eastman Kodak's, prices will go up with Eastman Kodak setting up their own, brand new distribution infrastructure.

+1

 

[benderscameracorner]

If this means to say that EK's production system is presently geared towards higher volumes than they're selling: this does not appear to be the case. They recently increased finishing capacity by 50% because that was a hard bottleneck.

Interesting. I won't pretend to be intimately familiar with Kodak's current production line, but based on all the available public info and video tours etc. it's clear film production isn't exactly geared to small batch runs. Obviously Kodak have done what they can in the last decade or so to re-optimise their lines to better match demand in a post-digital world, and it is extremely encouraging to see active investment in what was not that long ago seen as a questionable/faltering business... but one doesn't need to be an engineer or chemist to understand that the 'machine' that made Kodak such a profit powerhouse in the 1970s-80s-90s through sheer economy of scale, doesn't scale down so well. That's where film and say, vinyl record production differ quite significantly.

Bearing in mind that Kodak had what, six or seven film production lines across the globe back in its heyday? Even here in little ol' Australia we had our own lines (until 2004 if I remember correctly). I'm taking an educated guess here, but Kodak's current annual film output is probably equivalent to what, a few days or maybe a week's worth back in 1987?

A little closer by, it turns out to be a bumpy road with non-perfect relationships between volume and sales price.... So we may have to accept that the reason for the high prices are simply high costs.

Perhaps, but the fact remains price is a really significant barrier to entry to new generations of film photographers. For every single younger person I've managed to get into film consistently (and there's been a few) there's been 10+ who've quickly lost interest primarily due to cost. People can argue that film isn't any more expensive than it was 30-40 years ago accounting for inflation (somewhat true in the USA, but definitely not the case elsewhere in the world) but when you're competing against "free" digital imaging, be it smartphones or 2000s-era digicams (weird but each to their own) that's the reality. Patchy availability and things constantly being out of stock (arguably more a hangover of COVID) doesn't help to maintain enthusiasm either.

I certainly don't envy Kodak's position trying to make all this work in the current state of the world, and really really really hope recent developments allow them to move on from the various post-bankruptcy limitations and get into a better position for both their business and the film photography business... but I've also seen them make 25 years of questionable (offloading their medical business) or downright braindead ($5K Super 8 camera anyone?) decisions, so I'll reserve a healthy amount of optimistic cynicism until proven otherwise.

Unless Harmon/Lucky somehow play catchup in record time (unlikely) or Fujifilm suddenly wakes up and decides to take photographic film seriously again (also unlikely), the health and size of the colour film market is basically in Kodak's hands. It's theirs to grow, restrain or destroy.

 

[Alan Edward Klein]

And if Alaris' costs and required return on investment are/were lower than publicly traded Eastman Kodak's, and their distribution resources and efficiencies are better than Eastman Kodak's, prices will go up with Eastman Kodak setting up their own, brand new distribution infrastructure.

But Alaris didn't distribute. The film was actually distributed by second tier distributors. I assume Eastman was shipping to the second tier directly. Alaris took its superfluous middleman take on the transaction. Now, they're gone,

 

[Alan Edward Klein]

All this is pure total speculation. All we know for sure is that there is new packaging.

If Alaris is getting something in return that's cost. Unless Alaris simply decided to walk away and let EK deal with the business, I doubt that.

I wouldn't be surprised if we see more to come. Are employees transferring from Alaris to EK?

I just hope it all works out.

It will. Remember, the only reason for the original arrangement was that a US Federal bankruptcy court set it up to protect British retirees' pensions. That's not the right way to run a corporation under normal circumstances. Now, Eastman can make arrangements that are most beneficial for sales. The extra Alaris charge is gone except for whatever payment Eastman made to buy out the Federal court's decision.

 

[MattKing]

It will. Remember, the only reason for the original arrangement was that a US Federal bankruptcy court set it up to protect British retirees' pensions.

No, the US Bankruptcy Court order gave the bankrupt estate almost $600,000,000.00 in cash, that would otherwise have been unavailable to it, if Kodak Limited's assets weren't released from the super-priority claim that the Kodak Limited pension plan enjoyed.
It also approved what was effectively a release from entitlement to claim against the bankrupt estate a huge number of employee claims, by setting up replacement employment for many of those claims.
That settlement is what produced the cash and reduced the obligations that resulted in Eastman Kodak not being broken up, and the film manufacturing resources being allowed to continue.
Unless they have recently hired a bunch of people around the world, set up a bunch of offices, made a whole bunch of new contractual arrangements with intermediate distributors and essentially set up an entirely new and different business for the purpose, Eastman Kodak will have no internal capacity to replace what Kodak Alaris did for them - they are not setup for it.

 

[mshchem]

This makes me wonder if this is a bit of "marketing" I can't believe that the Alaris people who've been doing a fine job all this time are out. Doesn't make any sense to me. Who knows what is happening. I don't understand why Alaris is considered the bad guy?

 

[koraks]

I should have said that more competition among distributors will lower costs.

Errr...no.

I'm taking an educated guess here, but Kodak's current annual film output is probably equivalent to what, a few days or maybe a week's worth back in 1987?

Probably something in that order of magnitude. A few percent of what it once was.

Also, as to Lucky - they're moving pretty fast. The color product they have out on the market is far off quality-wise from Kodak's offer, but for the vast majority of 35mm color photographers, this difference is not very meaningful as they don't have particularly high requirements on objective product quality. They want a film look and film experience, both of which Lucky will give them. It's presently a matter of how fast Lucky wants to move with global distribution. It seems they've decided to hold off for now.

 

[Alan Edward Klein]

No, the US Bankruptcy Court order gave the bankrupt estate almost $600,000,000.00 in cash, that would otherwise have been unavailable to it, if Kodak Limited's assets weren't released from the super-priority claim that the Kodak Limited pension plan enjoyed.
It also approved what was effectively a release from entitlement to claim against the bankrupt estate a huge number of employee claims, by setting up replacement employment for many of those claims.
That settlement is what produced the cash and reduced the obligations that resulted in Eastman Kodak not being broken up, and the film manufacturing resources being allowed to continue.
Unless they have recently hired a bunch of people around the world, set up a bunch of offices, made a whole bunch of new contractual arrangements with intermediate distributors and essentially set up an entirely new and different business for the purpose, Eastman Kodak will have no internal capacity to replace what Kodak Alaris did for them - they are not setup for it.

Do you know how they;re set up currently? I don't. Does Eastman ship to Alaris who reships to the second tier distributors? That double shipping seems superfluous adding costs. Or does Eastman already ship to the second tier distributors? If the latter, all they have to do is continue what they've been doing. Their distribution setup stays essentially the same.

 

[Alan Edward Klein]

Errr...no.

More distribution competition lowers costs for a manufacturer, which reminds me of a joke if I can take a moment:

So the photo bug goes to the film store to buy a roll of Ektachrome 100 and asks "How much is it?"

The dealer responds, “Well, it’s $20 a roll but we’re all out right now. It’s back ordered.”

So the photo bug leaves the store and goes to another store down the block.

“How much is a roll of Ektachrome and do you have any?”

The second dealer responds, “Oh, it’s $30 a roll and we have loads.”

“$30?” complains the photo bug," raising his voice. “The other dealer only charges $20 a roll.”

“Well,” says the second dealer. “When we’re out of Ektachrome, we only charge $15 a roll.

 

[MattKing]

I'm taking an educated guess here, but Kodak's current annual film output is probably equivalent to what, a few days or maybe a week's worth back in 1987?

In their heyday, their numbers were a lot higher.
From a reliable source: "As we no longer manufacture upwards of 70 master stockrolls a day of Kodacolor…each and every day – enough to make nearly 3.4 million spools each day".
A spool represents a single roll - irrespective of format.
And yes, that referred only to Kodacolor. All the other films, colour negative, colour slide, Super 8 movie, black and white film - they were in addition to that.

 

[MattKing]

Kodak Alaris was responsible for all the different international importation requirements, all the different packaging requirements and regulations in the various target marketplaces, all the specialized shipping requirements.
They organized information and orders from the various segment market distributors - those who serviced the drug store and grocery store industries (display card mounted film), those who serviced the camera store environment, those who serviced the technical and commercial distribution systems, dealt with the various international requirements of all those distributors, organized orders from all those disparate distributors, coordinated the needs represented by those orders with the production schedules of EK and then presented one or more confirmed orders to EK.
E K had/has no infrastructure capability to deal with an order from a distributor in, e.g. Portugal, who services a few retail outlets in Spai and Portugal, and needs product labelled in Spanish and Portuguese.

 

[polaromar]

Maybe I missed something but isn't the whole idea that EK distributes directly in North America only, while Alaris handles ROW? I remember a few of us speculating earlier that it was a move by the owners of both, to get around the new Trump tariffs.

 

[MattKing]

Tariffs are based on country of manufacture, so the effect of the current US tariffs is to increase manufacturing cost. A lot of the constituent components for Kodak films - including all the acetate base that is still used in some of them - are imported into the US by Eastman Kodak.
All of those countries that have responded to the US tariffs with tariffs of their own on US manufactured items will still add those to the cost of Kodak film, no matter who is doing the distribution.
And I don't know that is in any way clear that there is a division of markets between distribution options, or for that matter on a myriad of other issues.

 

[Nopo]

The obvious lack of economic knowledge of those who argue that a greater number of distributors (according to them, greater competition?????) will lead to lower prices makes my eyes and head hurt when I read it.

The manufacture and sale of film is now a niche market.

This places this market in the area of the economy known as zero elasticity, which means that demand only generates price increases due to the inability or slowness of supply to respond.

The same applies to the number of distributors, whether there are 100, 10,000, or 1,000,000. The amount of product to be distributed is the same, so it is obvious that the price will rise instead of fall.

If you want a better explanation, read Paul A. Samuelson's book.

 

[MattKing]

The cost of distribution for film usually greatly exceeds the per roll cost of manufacture.
So the goal really should be, what is the most efficient and effective method of distribution.
Replacing at the front end of the chain one specialized and experienced and fully resourced distributor with a brand new one that lacks any existing personnel resources or infrastructure is not likely to improve the results.

 

[Prest_400]

In their heyday, their numbers were a lot higher.
From a reliable source: "As we no longer manufacture upwards of 70 master stockrolls a day of Kodacolor…each and every day – enough to make nearly 3.4 million spools each day".
A spool represents a single roll - irrespective of format.
And yes, that referred only to Kodacolor. All the other films, colour negative, colour slide, Super 8 movie, black and white film - they were in addition to that.

I can paraphrase PE who had insider, or rather, contact knowledge at Kodak when we had production downsizing discussions in the forum a decade ago. IIRC For certain products, a coating run was enough to cover yearly demand. Motion Picture wasn't also in its heyday and I recall he mentioned a very good downsizing project by a Kodak engineer.

Interestingly, 2014-15 were some of the darkest days for Kodak film manufacturing. I tend to re-write about how Jeff Clarke mentioned that he there was a plan handed to him by Kodak's board to discontinue film manufacturing. Ironically, I'd have bet for Fuji to have been the prime color film manufacturer yet see how little they are producing and distributing nowadays. And somehow it has nicely worked out at Kodak.
Anyways, those 2014-15 prices and 220 film, miss it! Distribution wise, I recall how I looked up to Japan for the film availability and prices (Japanexposures, what was of it?) but that reversed sometime 2016-18 and now they see quite higher prices than in the west. It's dearly priced nowadays, but at least we have film choices...

 

[mshchem]

Fujifilm just holds product from the market to keep pricing. Smart, short term. Hopefully what is happening now with Kodak film isn't a major F*%* up, like the sale of the photopaper and chemical business was.