How timely. On March 1st Kodak discontinued its remaining slide films.
When things shift in the modern world, they shift fast. And when you make mistakes, you pay for them quickly, too. Film as we know it is in deep jeopardy at the moment. No, it won't go away, but it's likely going to end up much like high end audio did: a handful of players catering to a small pond occupied by an analog crowd.
One thing that's hastening the shift is Kodak. They used to be the big boat in a huge pond. Now it seems that they simply are going to hold onto their sinking boat right to the bottom. Three interesting data points: (1) they're closing down and selling off almost all their digital imaging assets (cameras, sensors, patents); (2) they're counting on printers to be their main business in the future; and (3) if your local theatre doesn't change over to digital projection this year, it won't have anything to show next.
It's sad to see Kodak abandon the digital world they helped create. But they've always had Big Company mentality in what was essentially a startup business. It was product margins that caused Kodak to not embrace digital as they should have. Film, paper, and chemicals have huge product margins, consumer electronics have thin ones (Apple notwithstanding ;~).
Kodak never embraced the TI perspective on semiconductors that pervades consumer electronics (volume eventually creates product margin). Kodak acted much like Xerox did with its R&D: invent the future but not productize it (I'm referring to Xerox PARC here). Kodak made strange and inconsistent decisions, too: first they used contract manufacturing, then they bought a manufacturer, then they mostly abandoned that. At almost every turn in digital photography you see Kodak's Labs doing interesting things and the company waffling around making inconsistent and contradictory decisions, or worse, no decisions at all. This part of the story is a management case study writ large.
Of course, the rest of Kodak's business decisions haven't been all that wise, either. Kodak is pinning it's future on another dying market: printers. Even industry leader HP is having a tough time finding future growth in printers, as overall printing demand is down at the consumer level. The pond is getting smaller. How becoming a printer company will save Kodak is beyond me. So mismanagement isn't a thing of the past at Kodak: it's ingrained in their culture now.
Even if Kodak were to succeed, they're electing to swim in a pond that's drying up. The modus operandi in consumer printers is this: build a printer at a loss, make big profit and volume on supplies. Unfortunately, to make a printer and not make too big a loss, you cut corners, so the printer eventually fails, creating a new event a couple years down the road where the customer needs a new printer (which you'll make another loss on). Yes, I know that Kodak says that they're trying to change that model by making the printers more expensive and the supplies less expensive. That model hasn't really made a dent in the marketplace after several years of trying. And going up-scale in price in a down market is another of those big fish in a pond that is drying up things.
From Kodak's mismanaged perspective printing looks like a "win" because they have enough volume to make a "profit" at this business. The problem is that, if Kodak was reduced to just a printing business, its legacy overhead costs pretty much kill that. Which, of course, is the real reason why it is in bankruptcy.
I'm betting, however, that the post-bankruptcy Kodak will continue to have the same problems in its new business as it had in the old. They went for printers over cameras for a simple reason: the supply business is akin to the old Kodak business (paper, chemicals/ink). They got margin-centric in their thinking. However, I'd argue that digital photography could have had a "supply" component: the cloud. The Internet's create-the-site-first-do-the-business-model-later aspect probably confused them on that. But if there was one business Kodak should have owned, it was social sharing of images. Seems like others have figured out to build a pretty darned good profit margin doing social net stuff. Some of them are growing a pretty darned big pond. So, more Kodak mismanagement.
The last of the three data points I pointed out is the real killer, though: film is going away in moviemaking, and specifically, this year. Hollywood was a nice highly-profitable business for Kodak (and Fujifilm). It's directly tied to the legacy film business in all aspects, R&D, manufacturing, and so on, so running stock off for Hollywood was a no-brainer operation. There's only one problem: the biggest aspect of this business, the printing of films to be distributed to theaters, is about to die completely. Several studios have already gone all digital for projection. The rest are now following. Small theaters are struggling with the costs associated with that transfer, and we have estimates that we'll see at least a thousand of them die this year, maybe more. But by the end of 2012 almost all movies you'll see in a theatre in the US will be projected from encrypted hard drives, not film. There's a permanent drought drying up this pond!
What I find strange is that everything that's causing Kodak problems has been predictable, and some of it has been predictable for a very long period of time. The predictions don't get any better for Future Kodak than they are for the current in-bankruptcy version or their previous incarnation. Their projected post-bankruptcy future is mostly defined as trying to take market share away from industry leaders in a market that's shrinking. Hmm. Doesn't that usually mean taking less margin and competing on price? Wasn't that what they didn't want to do and caused them to skip digital photography in the first place?
So let's circle back to my third sentence: Film as we know it is in deep jeopardy at the moment. Even the things that Kodak was counting on keeping some healthy volume going with film, e.g. Hollywood, are disappearing. It won't be long now before they have to jettison film altogether, I think.
With the Kodak domino falling, that really only leaves one last big film domino, and that's Fujifilm. Fujifilm has been smarter at dealing with transitioning their legacy business (and by far). They'll likely ride fllm for as long as any significant volume holds up, as they've already written off plant and equipment. They'll get a slight boost, actually, if Kodak really drops the ball as I expect them to. But the handwriting is very much on the wall: film is already a small pond, and it's about to become a very small pond. It's not a great time to be a fisherman.