August 4, 2000
Will That Be Paper or Pixel?
Kodak Rushes to Extend Its Brand to All Things Digital
By CLAUDIA H. DEUTSCH
he Kodak name is showing up in a
lot more places these days.
It sits above Lexmark International's logo on an inkjet printer, one of the
first to print photographs directly from
a digital camera.
It is on Duralite, Kodak's premium-priced new untearable photographic
inkjet paper, and on Kodak Picture
Processing, a new retail service that
gives customers the option of paying
more for prints made on Duralite.
And it is all over the Web. Eastman
Kodak has not only beefed up the photo-related services it offers on its own but
has also taken stakes in numerous Internet companies that put Kodak's
name on their sites. Then there are the
partnerships with other dot-coms that
trumpet their use of Kodak processing
Kodak-branded printers, papers,
Web services? "They are feeling things
out to see which channels will ultimately be the most valuable for extending
their brand," said Lia M. Schubert, an
analyst at the Boston-based Infotrends
Indeed, the unifying theme of the
latest products to carry the Kodak
brand is that they have nothing to do
with capturing images, Kodak's traditional forte, and everything to do with
"repurposing" them -- industry parlance for the many high-tech ways that
people now view, swap, manipulate,
store, print and display images. And
they are all part of the company's full-court press to associate its brand as
much with the output side of digital
photography as it has been with the
input side of silver halide film.
It is no small task. While consumers
often ask for Kodak film by name, they
usually associate the prints they get
back with the retail store where they
dropped the film off. "No one looks at
the back of a photo for the Kodak
watermark," said Ulysses Yannas, an
analyst with Buckman, Buckman &
Nor is the output process confined to
simple prints. Today, with scanners,
stand-alone kiosks that let consumers
doctor photos and print them, and digitally savvy photo-processing stores,
even users of the most basic cameras
can opt for electronic prints on a compact disc or delivered by e-mail, or
prints uploaded to a Web site.
"Bricks and mortar, clicks and mortar, just clicks -- online photo activity
is so embryonic that we want to be a
part of all of it," said Robert J.
Keegan, president of Kodak's consumer imaging unit.
For Kodak, that means a choppy
sail through uncharted, and possibly
shark-infested, waters. When Kodak
offers photo services on its Web site
or invests in photo-services start-ups, it is competing with its retail
customers. When its brand is on a
dot-com's Web site, it risks being
tarnished if the dot-com provides
less than stellar quality or service.
Still, Kodak is putting 65 percent of
its research budget into various digital technologies, hoping that at least
some of its bets are on winners.
"People free-associate Kodak's
brand with photography, but we want
them to associate it with pictures in
all their forms," said Daniel A. Carp,
Kodak's chief executive. "Still, we
can't know what consumers want
because consumers don't yet know
what they want."
Kodak had best learn fast. Its sales
of film remain strong, but digital
cameras are quickly gaining share.
And though Kodak's digital cameras
sell well, cameras are not where it
makes most of its money. Most photography companies get the bulk of
their revenue from consumables like
chemicals, papers and, most of all,
film -- a product that digital cameras make obsolete.
A new world in
In June, Mr. Carp promised investors that Kodak's revenue, which was
$14 billion last year, would hit $24
billion in 2005. But he conceded that
the faster that digital technologies
sweep through the photography
world, the slower Kodak's profits
will grow. Shareholders seem wary.
Kodak's stock, which closed unchanged yesterday at $57.75 , is
mired at less than 11 times earnings.
Even so, the digital revolution is
not all doom and gloom for Kodak.
Study after study shows that people
who use digital cameras take more
pictures and make more prints. The
same studies show that all but the
most diehard hobbyists are having
prints made in the conventional way.
"The sweet spot in this market
isn't the guy with the $4,000 digital
camera, but the people who are just
learning about e-sharing photos,"
said Daniel P. Palumbo, Kodak's
chief marketing officer for consumer
Indeed, when Tom Cruise's character in "M:i-2," the "Mission Impossible" sequel, used a Kodak digital camera, it gave a big lift to
digital camera sales -- and to conventional photo processing.
"Since that movie opened, more
people are asking us to make prints
from their new digital cameras,"
said Mitchell B. Goldstone, who owns
30 Minute Photos Etc. in Irvine,
Calif. " 'M:i-2' is doing for digital
photography what 'Men in Black' did
for Ray-Ban sunglasses."
Still, it is a big leap from the halo
effect on digital photography in general to a boost for Kodak specifically.
And Kodak is not just battling Fuji or
its other old-economy nemeses; in
the digital space it is up against
Sony, Hewlett-Packard, Panasonic
and other electronics experts.
Lesser-known players are often
happy to piggyback on the Kodak
name. "What better way to build a
photo-printer business than to tie up
with the best-known name in photos?" asked Gary E. Morin, Lexmark International's chief financial
But the digital world's leading
lights are competitors first and partners second, if at all.
Kodak and Hewlett-Packard, for
instance, just introduced a jointly
branded miniphotography lab that
lets photo processors make prints
from digital cameras. But Hewlett,
which once had a cobranding agreement with Kodak on printer paper,
now sells its own branded paper. It is
a competitor in digital cameras and
inkjet printers. It is also offering
numerous photo-related services on
its Web site -- including a free service for creating online photo albums
-- and is establishing links to its site
from other Internet sites.
"We'll work with whoever we
think has a world-class product,"
said Vyomesh Joshi, general manager of HP Inkjet Imaging Systems.
So will Adobe Systems, which
makes photo-related software. It has
links from its Web page to various
photo-related companies. It does not
disdain brand names, but it does not
seek them out.
"We want to find the most compelling services, whether from established companies like Kodak or from
one of those start-ups that pop up like
mushrooms after a rain," said Dennis A. Marshall, Adobe's director of
consumer digital imaging.
The growing competition has
spurred Kodak's marketing mavens
to action. In November, they began
to set a strategy for disassociating
Kodak's brand with emotional but
mundane picture-taking and linking
it instead to high-tech innovations.
"In the old economy our branding
strategy revolved around making familiar things desirable," said Carl E.
Gustin, Kodak's chief marketing officer. "In the new economy, we have to
make novel things familiar."
Kodak now has 105 people working
exclusively on building Kodak.com,
the company's interactive Web site;
most of them report to Robert L.
LaPerle, director of operational excellence for Kodak.com -- a position
just created last month.
Kodak's researchers, meanwhile,
are looking into ways to let solid-
state image sensors, the piece of
silicon that works as a digital camera's "film," capture more than just
images -- to, say, embed the photographer's name for copyright protection, or include crucial information
that makes it easier to retrieve the
image from an electronic archive.
The researchers also have combined the company's age-old knowledge of dye chemistry with its growing knowledge of electrons to create
an Organic Light Emitting Diode,
called the Oled (pronounced OH-led),
which provides a sharper electronic
image than the liquid crystal diodes
normally used in cell phone displays,
automotive dashboards and the like.
The Oled already is the guts of the
display on Pioneer Electronic's car
Kodak's name is nowhere on those
items now. But Kodak has prototype
Oleds that can display games, movies and other complex images on cell
phones and hand-held digital devices.
And when those are ready for market, the company has every intention
of fighting to get its technology noted, à la the ubiquitous "Intel Inside"
stickers on computers that use Intel
"First we must nurture the technology, prove that it works," said
James C. Stoffel, Kodak's chief technology officer. "But down the road,
we see this enhancing our brand."
Kodak is nurturing the technologies of numerous Web-based start-ups, too. It has invested in Snapfish.com, which offers online photo processing; ememories.com, an online
photo archivist; MyFamily.com,
which helps families set up home
pages; IFilm, a Web service for filmmakers; and Weave Innovations,
which makes a picture frame that
displays photographs downloaded
from the Web without a computer.
In doing so, Kodak is walking a
customer-relations minefield: many
of these companies offer free film,
developing or other services that Kodak customers sell.
"Kodak is taking equity in companies that give away everything on
which our revenue models are
based," said an annoyed Gary Tashjian, marketing vice president for
PhotoWorks Inc., a photo services
company that has long used Kodak
papers -- and that itself offers archiving and other online freebies.
Kodak's archrival in conventional
photography, Fuji Photofilm USA,
has taken a different tack, promoting
fujifilm.net, its online page of Web
services, more as a service for retailers than for consumers.
"We want retail customers to use
our online photo finishing and storage to promote their own brands,"
said Rod H. King, Fuji's vice president for consumer markets.
Kodak executives insist they feel
the same, saying that the company
will not sell film online or offer discounts for online printing services
ordered on its Web page.
Its much-ballyhooed "You've Got
Pictures" agreement with America
Online enables Kodak-affiliated photoprocessors to deliver electronic
versions of pictures to customers via
e-mail. And Kodak designed and runs
the photo services section of
CVS.com, the drugstore chain's interactive Web site. Kodak would certainly love it if CVS's photo-processing customers registered their
names on Kodak's own Web site, but
it realizes that it must sometimes
remain behind the scenes.
"Retailers aren't fools -- they
don't give away customers capriciously," said Philip Gerskovich,
chief operating officer for Kodak's
digital and applied imaging unit.
"We're establishing an infrastructure for handling images on the Web,
and for now, we're not going to get
hung up on who owns the customer."