Despite digital, 35 still very much alive - Photo Update - 35mm film market still strong - Industry Overview

DSN Retailing Today, Feb 24, 2003 by Laura Heller

Mark Twain may have uttered the famous line "Reports of my death are greatly exaggerated," but the same may be said for traditional silver halide film. The attention may be on new advances in the burgeoning digital imagining category, but "there are [many] millions of people who have 35mm cameras," said Richard Rabinowitz, vp and group publisher of American Photo and Popular Photography magazine and chairman of the Photographic Information Council. "People still own them and are still using them with film. This is still a huge business."

"It's certainly where the volume is, people tend to forget that," said Gary Pageau, associate publisher with the Photo Marketing Association (PMA).

"Traditional cameras are declining in unit sales in the United States," said Gary Briddon, vp, gmm of business development at Kodak consumer imaging. "Approximately 10 million units will be sold this year and that's on a huge installed base, there's something like 40 million traditional cameras in use."

According to PMA, approximately 9.4 million digital cameras were sold in 2002 and 14.2 million conventional units sold through to consumers. That compares to 16.3 million conventional cameras sold the year before and 6.9 million digital units.

The scales are about to be balanced as 2003 is expected to be the first year in which digital and conventional cameras sell in near-equal numbers. PMA anticipates digital will have a slight edge, however, with 12.8 million units compared to 12.1 million film cameras, making this the first year digital outsells traditional units. Film sales are also declining and were down 1% last year, according to PMA. But those numbers are bolstered quite a bit by the still-robust growth in one-time-use cameras (OTUC), the one bright spot in this category. Excluding OTUC sales, the film category declined 12% in 2001, 9% in 2002 and is estimated to decline 8% this year. OTUC is expected to show continued strength in 2003 as consumers increasingly show a preference for these units. According to PMA, 9% of U.S. consumers said they use OTUC for all their photographic needs.

But given the continuous decline in the category, it's no wonder that film manufacturers are anxious to not only figure out a way to profit from the shift to digital, but to bolster film sales as well.

"We are very upbeat and positive about the silver halide film business," said Stephan Aps, product manager for brand and private label film at Agfa. "We see it as a great opportunity for some of our new films."

Specifically, Agfa announced a premium high-speed film last fall called Ultra. Kodak also recently announced its High Definition 400-speed film, meant to capitalize on the growing shift to high-speed films.

"We have not forgotten about silver halide in terms of continuing innovation," said Kodak's Briddon. "Mound half of all Kodak film sold is in the 400 and 800 speeds, which used to be film for more advanced consumers." Thanks to strong marketing efforts and improvements in quality, consumers have been moving up in film speed in the last few years, that's good news for retailers, he said. "It's higher revenue and higher margin for the same roll of film."

SLR cameras are also enjoying a brief surge in popularity with consumers apparently trading up to more complex film units. The category hardest hit on the hardware side is the point-and-shoot models in the $299 to $399 price range, according to PMA's Pageau. "In that price range people can get a decent digital camera, and they want to buy what they think is going to be around for a while."

And sales associates are typically more inclined to steer consumers to the digital models when given a chance. Retailers-be they CE, specialty or discount department stores-are posting strong growth in the digital category and often base future financial estimates on the continued strength of digital imaging.

"Sure, a digital camera is more fun to sell for a sales clerk," said Briddon. "But from a management standpoint, that sale isn't necessarily the best one for the consumer." Or for the retailer, depending on how strong a photofinishing business they might have.

Undoubtedly, most of the excitement and attention at the annual PMA convention and trade show March 2 to March 5 in Las Vegas will be on digital: cameras, printers, kiosks, minilabs and services. New film cameras will most certainly be introduced, and Canon continues to expand its Elph line in the APS format. "There were three billion APS exposures worldwide last year," points out Pageau. "Nobody wants to walk away from that."

And even though camera sales are declining, the number of cameras still in use has not declined as rapidly as the number of traditional cameras being sold. In fact, the growing popularity of digital cameras may actually help keep film sales from declining more dramatically. "When you buy a digital camera, you don't stop using your film camera; you don't throw it away," said Tom Edwards, senior industry analyst with the NPD Group. "Some consumer surveys indicate that digital cameras have spurred interest in film cameras."