From their Q3 SEC submittal:
Originally Posted by Photo Engineer
"Revenue and profitability for the nine months ended September 30, 2011 declined primarily due to non-recurring intellectual property licensing arrangements in the prior year period, and were also negatively impacted by industry-related volume declines and increased commodity costs, particularly silver, in the Film, Photofinishing, and Entertainment Group (FPEG) segment. The Company has been utilizing price increases and silver-indexed pricing models, as well as continuing its silver hedging program to mitigate the impact of historically high 31 silver prices on FPEG. Given the time necessary to implement these actions, results were affected more positively in the third quarter from the pricing actions than in the first half of 2011."
The part about revenue and profitability declining is a giveaway.
The income (revenues) from film have to be ploughed back into their print operations because the revenues for print are stabilizing (commercial and consumer services) and the film revenues are on a steady clip downwards.
And film does not have a larger revenue stream. Consumer Digital as of Q3 2011 was $1,142, Graphic Communications was $1,975, and Film and Entertainment $1,152.
If you look at the non-group losses from restructuring and rationalization, most of which is attributable to the FPEG, the measly $2 million "profit" the film side shows is completely wiped away by the $39 million attributable to their share of the costs for R&R. If you split the pension obligations as well this makes the film side unable to finance itself nor support a larger corporate structure.
The critical issue is revenues. Film revenues are in free fall at over 10% per. What you notice in the statements is that the Net sales for FPEG decline, but guess what? The Cost of sales is staying constant. This means that the FPEG group cannot sell down any more assets (close factories, sell land, lay off people) and break even. It has to draw on the other group revenues to stay solvent. This is not a case of film miraculously being profitable when the customer base is declining; this is a case of the cost to manufacture and distribute film products and services hits a floor. Film has no marketing because they cannot afford it and no one would listen.
This cannot continue. The decline of film revenues is breaking Kodak's back.
I am not saying that the digital push on at Kodak is a success, certainly not the consumer division. I have grave doubts about that. But digital is not dragging down the film side or capturing needed resources that could revive film. The staggering loss of film consumption has destroyed the company's equity and goodwill positions and it is pretty clear the Kodak management cannot see a way to stabilize the losses. It's pretty certain an outside group will have to take the film side over, find the bottom with the risk of private capital, and create an ecosystem of sales and production based on a whole new model and market space for traditional film emulsion. If this happens, look to some deep pockets in the motion picture industry to find the money.
from the The British Journal of Photography
"Film division is still profitable," says Kodak
some updates from BJP technical writer and Silverprint
"....BJP's technical writer Jonathan Eastland, Kodak is not doing enough to sustain the business. "Kodak needs to look at what is its core business. What make them think that digital printing will push their share price up? For Kodak to make digital printers their core business is laughable."
Instead, says Eastland, Kodak should truly embrace its historical status as a master of film photography. "Each time Kodak has discontinued a film, they used the excuse that it represented less than a certain percentage of their turnover, but it's still a percentage of a very large niche market. There are still millions of photographers around the world that are using film, and not hundreds as Kodak seems to suggest [see Jonckheer's statement above]."
Eastland adds: "Kodak's got to go back and crunch their numbers about the film market. All people want are these little yellow boxes of film, and that should be their core business, even it means reducing the company's size further. Kodak needs to hire people that actually know about film photography. It needs to market it properly and set up some great labs in strategic places with great customer service."
Silverprint, a UK distributor and retailer of film equipment, agrees, stating that "over the last 12 months our sales figures of traditional film and paper have risen." It adds, on its Facebook page: "Silverprint has never been more determined in our commitment to supplying all our analog users worldwide, with everything they require to enjoy and develop both their careers or simply their love of analog photography. We feel that the press has currently converted the KODAK Story from "133 Year Old Company...Dead!"...to "Film...DEAD!". This is simply not the case, both in terms of sales figures and the current online buzz surrounding analog imagery and techniques. Variety is the spice of life and surely we are all commited to that idea!"
Last edited by zinzin; 01-20-2012 at 07:16 AM. Click to view previous post history.
Reason: article updated
"A photograph is not created by a photographer. What he does is just to open a little window and capture it. The world then writes itself on the film. The act of the photographer is closer to reading than it is to writing. They are the readers of the world."
Ferdinando Scianna, Magnum photographer
Like many others, my reaction to hearing the news of Kodak's problems was one of shock, horror and disbelief. OK, so we'd guessed that something like this was on the cards, but when such an iconic company falls on hard times (Woolworths, already mentioned. was another example) it's inevitably a bit of a wake-up call. However, in the cold light of day, since Kodak stopped making B/W paper, and since Kodachrome processing went to pot a few years ago, the only Kodak product I use is Elitechrome, though even that is up for debate, as not so long ago they discontinued my preferred 100ASA version. Consequently, I concluded that my reaction was based 90% on nostalgia for the Good Old Days of cardboard bikini-clad Kodak girls and promotional Kodak beach balls and hold-alls, but only 10% on anything tangible.
In the worst case scenario, if Kodak analogue products are to be no more, it'll be sad, but I'll live with it. Alternatively, if at this time there's a willingness by "someone" to re-invent the film division, they must by definition think that the products have a future, and that attitude must inevitably be better for all concerned than Kodak's attitude in recent times. Though the scale may be different, there must be things to be learned from Ilford's story.
I can understand "horror," in this case (at least in the figurative sense; I'd probably say "dismay," myself.), but not shock or disbelief. For at least 10 years now, it has been pretty-much plain as day that this day would come. Nothing lasts forever. Here's hoping that at least one good thing comes out of this that the other film companies pick up customers due to it.
"Truth and love are my law and worship. Form and conscience are my manifestation and guide. Nature and peace are my shelter and companions. Order is my attitude. Beauty and perfection are my attack."
- Rob Tyner (1944 - 1991)
That Kodak's film sales, and revenue, have fallen deeply, is not the real issue. The real issue was that Kodak ceased marketing these products. At all. Try and find film on their web site. Show me a print ad in a recent photo magazine. They gave up on film and hoped legacy loyalty (and of course, the finest film products in the world) would suffice. It didn't.
Kodak as a company would probably have been better off coming clean. Abandoning film altogether.
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I did qualify my "shock, horror and disbelief" wording with the sentence that followed. I was indicating that however much this had been anticipated, it still came as a pretty momentous event when it actually happened. Getting back to the Woolworths parallel, I've always wanted to title this shot "Wo, wo and thrice wo" - and that's exactly as the sign was - no tweaking!
Originally Posted by 2F/2F
Wow, whatever Eastland is smoking, I want some!!!
Originally Posted by zinzin
But it's true, Kodak's film sector could be profitable. Highly profitable.
Aristophanes, what I think you are perhaps missing is that in order for any sector to remain profitable, you first have to invest in it. This is not like selling heroin to a bunch of desperate junkies. Not quite that simple. The film market needed to be nurtured... with advertisements, announcements of continued commitment, working with distributors etc. No product that I can think of will simply earn profit indefinitely without that kind of brand cultivation. Professionals and labs and even amateurs won't commit to a product line if they think it will soon be gone- most of us migrated away quickly because Kodak sent very clear signals that they were leaving film altogether. So to blame their film numbers (which I do not deny, of course) on the atmosphere of declining film sales is too simple. This is a crisis of their own making- no upfront investment, no return.
My worry would be the raw materials suppliers, who could get hurt or even go out of buisness if the courts decide their outstanding invoices are to be paid out at pennies on the dollar. I would guess the manufacture of film is more in line with market demand than digital cameras comming out of china and therefore, could suffer if suppliers are effected.
That being said, Kodak's digital cameras use to be OK, my mom still enjoys printing from her print dock right out of the camera. But lately, their digital offerings have been disappointing.
Disposable film cameras however, still show a huge potential. I get 35mm cartridges from a local lab who saves them for our club to use for bulk loading - the majority of that film is from disposable cameras.
No one looking at a digital screen wants to delay their gratification about getting an image, and pay the costs to get their product when they incur no additional processing costs with a digital. It's a complete consumer slam dunk for digital.
Originally Posted by Wolfeye
Kodak will abandon film because as a publicly traded company with creditors, the film division bleeds revenues due to the scenario above. It will never get those customers back again no matter how much it plows advertising back into film.
Local labs are disappearing as print services are losing out to online sharing. Most print services will be centralized mail order systems. I have 3 national chains of drugstores in Canada about to suspend all association with film processing, and all supermarket chains have already done so. They will only deal with digital from now on. Film processing is going to be a custom process only in large population centres, or mail order at even more cost and delay to the consumer vs. digital.
Ideally Kodak's film assets need to go into a private capital corporation that can find a bottom to the demand and scale down production likewise. It can then apply its resources to satisfying a niche market with integrated film production, processing, and perhaps even go back to incorporating camera manufacture (likely through outsourcing). Ideally they would do this with motion picture assets first because for every roll of 135 coming off the line, there is a kilometer of film stock rolling out. That's the basis for an economy-of-scale. Kodak's creditors will put zero down on the film side because there is no end to revenue decline. the motion picture industry over the last 24 months is now in the last stages of completely abandoning film output to cinemas, and the switch to digital production is relentless. To survive, film needs vertical integration of assets and a small niche. It cannot compete against digital; it has to be a market different and apart.
Ron could say whether this is possible, but it seems to me that Kodak's current filkm product formulas and key techniques could be sold off very quickly. There is *certainly* profit there for a company that can catch that ball and run with it. Your Ektar and whatnot might be made in India...