I just read this article, which some here might find interesting.
The author has some quotes from Kodak and Polaroid executives that discuss the margins that they used to get making film. The numbers quoted are quite high. Margins of 70% are off the charts! I work for a specialty chemical company and we are doing EXCELLENT work if our margins are 40%. If we hit 45% we would get an enormous bonus.
Why are film margins so high? Since the volume of film sold used to be enormous (billions of rolls!), couldnt Kodak sacrifice some of that margin to keep customers from switching over to digital? Or is the overhead so high making film that enormous margins are needed just to make an average profit?
I wonder what margins are like on film today.
I don't think that's the reason people are switching to to digital. Just the other day I was in my local grocery w/ my Nikon EM. When one of the employees saw it, he said "I can't believe someone is still using a film camera". I suspect he was the only guy in the store that even knew it was a film camera. I explained that a lot of people still are shooting film, but "a lot" probably isn't many, and the number is surely getting smaller every day. He said that he used to shoot Canon FD and a Mamiya medium format camera. He also developed his own stuff. His reason for going to digital was that film just required too much work.
In most businesses a 40% margin would be only a dream, much less 70%. It depends on the other numbers though. I think that Kodak had huge machines, huge factories, and a sizable workforce devoted to film production. As the amount of film that was sold went down, no profit margin in the world was going to pay for all that, along w/ what I understand were hefty retirement and health care packages for the employees.
I don't think however much the margins were reduced, there would still not be a terrific change in the progress of digital. It has become all too easy and to be honest people get better results from a digital card on the computer than they ever did from a mini lab where most of the film was processed. Plus, that method is a damn sight cheaper too.
Film users will battle on with a few more cuts in what is available until the companies sense that they have reached the bedrock of what is being used and can estimate what they expect the projected sales will be. I only hope tht slide film lasts a good while longer.
I too wonder how the margins are nowadays. I could guess they are decent but quite far from those values. It was striking to read that it was comparable or higher than drug, trafficking and prostitution activities. Anyhow, I bet everyone in other industries would have loved such a hefty margin and for sure, being a big candy, it should have been a factor for the immobility of the company.
Originally Posted by RattyMouse
I read a very interesting article back in August, which was linked from the "Perez" topic IIRC and I think it was this one:
However, I agree with margins not being a factor to a switchover. They might affected the management as it was a comfortable position but the customers would have moved anyways.
So, why so many companies stopped? There are companies that can be happy to make a profit at all.
Originally Posted by Prest_400
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Actually for a wedding and portrait studio here in the United States the normal Gross margin is about 60 to 80% based on cost of goods sold (COGS). (Source is Professional Photographers of America) It varies based on film vs digital and home vs store front.
Considered by itself a gross margin number doesn't mean much because we don't know what costs are in it and it may not reflect any of the other costs involved like rent, electricity, transportation, paying your helpers, paying yourself, marketing, replacing broken and worn-out tools...
For example a film based storefront studio has a COGS of about 30% according to PPA. Digital store front, 20%. That film studio though has a depreciation cost of about 1%, while at the digital studio depreciation costs about 10% (gotta keep up with PS and the like). Even though the digital studio looks like it makes more based on COGS margin, it doesn't.
The actual profit for a well run studio after all the costs, including paying the photographer (which may or may not be the owner) a reasonable wage is normally closer to 10%.
Mark Barendt, Beaverton, OR
"We do not see things the way they are. We see things the way we are." Anaïs Nin
Maybe someone could define the term "margin". That would help the discussion.
Margin is simply the difference between a certain set of costs and revenue.
It is not a measure of profitability.
In the studio example I used a film based storefront studio may use the COGS to determine the selling price of prints or services. If for example the cost of a roll of film, mailing to and from the lab, processing and proofs is $40 that means $40 should be 30% of the fee charged to the client, $133.
The 70% margin or $93 in this case pays all the other bills.
Margin is measured differently in every type of business.
Oh, you mean profit margins, you threw me because "film margins" in a photographic context usually means something else
Yes, I though this would be a thread about printing the rebate or processing defects...
Originally Posted by AgX