The Photo Industry is Out of Control

There are those times when a new perspective comes out of the blue. That’s what happened during the PMA InnovationNow Photo Business and Technology Summit Sept. 27-28 in San Francisco, Calif. As part of the rejuvenated PMA agenda, the executive-level conference brought thought leaders, top-level retailers and service providers from as far away as Brazil, Europe and Australia.

After years of attending conferences, it’s safe to say most of them look and feel about the same. Sessions, breakouts, panels and networking cocktails all can lead to real conversations; yet, there aren’t many “ah ha!” moments.

InnovationNow was different, in that sense, since some uncomfortable truths were laid bare, and the conference program addressed those truths head-on. One of main take-aways for me was when Scott Brownstein, of Brownstein & McCabe Associates, set the stage with an overview of the challenges facing the photo-output business. This was far from the usual “Gee, our industry is great! We just have to convince consumers to print more” speech. Part of Brownstein’s discussion was the reality check the photo business is no longer being driven by the traditional photo industry suppliers, like Kodak, Fujifilm, Nikon and Canon, but by high-tech players like Apple, Amazon Photo, and Google.

Is this a negative for the photo business? Not at all, he said: Tech companies have solved many of technical challenges – like curation, interoperability, and cloud access – that vexed photo companies for years. Further, because of the wide availability of images and lower barrier to entry, the photo industry can capitalize by riding the wave of this growth, by providing ancillary products.

Two surprise speakers reinforced this point. Bradley Horowitz, vice president, Photos and Streams, Google, said the recently launched “Google Photos is culmination of a lifetime of innovation” in his career. He noted Google is just beginning – “at the base of the pyramid” – in its involvement in the photo industry. (Incidentally, during InnovationNow, it was reported elsewhere Google Photos users uploaded 50 billion photos in the first four months the service was operational.)

David Pearson, director business development, Amazon Cloud Drive, provided a full presentation on Amazon’s cloud strategy. He observed the “unconnected” populations are shrinking and, in 2016, up to 36 percent of content will be stored in the cloud. Consumers are adopting the cloud quickly, and Amazon is poised to be the platform for photo storage, sharing and product creation. Amazon is looking for partnerships to be the back-end provider to photo product providers, not only for storage, but also for other functions, like image recognition, organization, and categorization.

Leaderless, but no hopeless

The photo industry, as understood by most in that Parc 55 hotel ballroom, has been essentially leaderless for half a decade, maybe longer. Through the growth years of the 1960s, ‘70s and ‘80s was driven by one major vendor – Eastman Kodak Co. – carrying the weight of the industry on its shoulders. Research-and-development, category awareness, consumer marketing, standards and so on were driven by Rochester and later, by Tokyo.

It was a simple world, really. If the consumer wanted to see their pictures, they had to buy film, process it and print it, using industry-accepted practices at a very affordable price. The UI was the photofinishing envelope and, honestly, the UX needed improvement. (That’s what digital fixed.)

All that has changed. With the introduction of affordable digital cameras and excellent smartphone cameras, barriers to consumer picture-taking dropped rapidly. That resulted in a world where annually a trillion images are taken! With analog photography, each frame of exposed film had a monetary contribution to it; unfortunately, exposed CCDs have no such business model.

In essence, the value chain shifted downstream to output. Capture and storage aren’t viable profit centers any more, especially now that terabytes of safe, secure and universally accessible online storage can be had for the price of a cup of coffee (with whip). As such, the desirability to keep photo consumers in a walled garden – think Shutterfly – has decreased.

Brands matter, just not the ones you think

That leaves the output side of the equation, and this is where the market could really use some leadership. Without Kodak opening up the tap to allow promotional dollars to flow, most retailers have not picked up the slack. No Kodak yellow at the Olympics, at the Oscars, at NASCAR or on TV. No Fujifilm blimp, either, providing overhead views at sporting and cultural events. The economics of the digital photo business don’t reward this kind of brand advertising/promotion.

As mass-merchant category managers saw their in-store empires assaulted with declining product sales, their square footage declined as well. In some cases, entire photo departments have been reduced to single kiosk/computer, stuck in a corner next to the Western Union terminal and the fax machine. In other cases, in-store photo departments have been combined with CE and/or mobile communications.

On the other end of the spectrum is Walgreens, who has taken up the consumer awareness challenge. Rather than creating a separate app for photo and for prescriptions, the company combined the two. This sends the message to consumers photo printing is part of every day life.

At InnovationNow, Joe Rago, Walgreens’ director of mobile innovation, explained how Walgreens leveraged a core advantage – brick-and-mortar stores – to drive and to facilitate mobile and web traffic. This included creating a third-party photo API, which has led to 160 integrations in three years. Walgreens also reacted by doubling down on in-store photo products, where competitors were reducing the emphasis on the category. This even includes traditional snapshots:  “Never underestimate the power the 4-by-6 print (and square prints) to drive traffic to the store,” said Rago.

There’s still huge opportunity there, if retailers begin to understand Kodak and Fuji aren’t “the” photo brands anymore: The retailer is. The retailer is the brand trusted by the consumer to deliver price, value and quality. Nobody flips over a print anymore to see the watermark on the back. It’s just not relevant anymore. It’s up to retailers to be marketers, to establish their relevance to the consumer.

The stakes are “smaller” than ever

What is relevant, however, is the ability to quickly adapt to the changing market. Quality and service is a given in today’s digital marketplace. Photofinishers could differentiate on quality and price; if people paid $2 for mail-order film processing, they understood there were trade-offs in terms of delivery time and quality, just as other snap shooters paid $18 for one-hour d-and-p. Consumers today expect that 29-cent 4-by-6 print to be the same excellent quality everywhere. As keynote speaker Micah Solomon declared: “Today’s customers expect ‘digital parity.’ Every business in the real world needs to as good in the real world as the best of online: easy-to-use, as fast and have as wide as a selection.”

Consider today’s digital printing startups, represented at InnovationNow by the likes of Mixbook and Collage.com. At one time, table stakes in online imaging was providing a full-blown ecommerce/storage solution for customers. Storage and image archiving have become albatross’ around the necks of longtime photo sites. Some sites began closing accounts of consumers who just stored images, but never bought merchandise. Pro site Pictage collapsed under the weight of storing millions of images that would never be monetized through printing. Once consumers and pros start storing their images in the cloud through services like Google Photos, Amazon Cloud Drive, Dropbox, Box, etc. – which are paid-for with membership fees or advertising revenues – broad-based image access will be at hand. Throw in social sites like Instagram and Facebook, and together with value-added services like curation,  image-recognition and organization, and there’s a compelling reason to make the change, not just convenience.

This concept also allows for service providers in similar markets to expand their business into photography. Until recently, Circle Graphics was known primarily as the dominant U.S. billboard printer; leveraging its proprietary printing processes, Circle Graphics has become a major player in the photo canvas market. No one told Circle Graphics that print was dying and consumers weren’t going to print digital images. They saw the opportunity and acted on it.

By focusing closely on specific customer segments and niches – and with cloud storage and mobile apps making universal access possible – startups and apps can focus on providing amazing products and customer experiences. While none will likely reach the $16 billion in revenues achieved by Eastman Kodak Co. at its peak, there’s room for many to do extraordinarily well. And that’s the lesson here: Reducing the amount of friction between the various parts of the system – from image acquisition to access to storage – will enable entrepreneurs to build exciting new output services reaching new heights. Out of control is a good way to be.

(Full disclosure: PMA is a client; this post does not imply endorsement of these views by the association.)