August 4, 2000

Will That Be Paper or Pixel?

Kodak Rushes to Extend Its Brand to All Things Digital


Researchers at Kodak have combined old knowledge of dye chemistry with growing knowledge of electrons to create an organic light emitting diode for sharper display images on electronics.

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The 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 and papers.

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 Research Group.

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 & Reid.

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 which competitors are sometimes partners.

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 imaging.

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 officer.

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, the company's interactive Web site; most of them report to Robert L. LaPerle, director of operational excellence for -- 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 audio systems.

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 chips.

"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, which offers online photo processing;, an online photo archivist;, 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, 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, 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."

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