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of APS seen in market

After one year, impact
of APS seen in market

The key combatants in the photo industry–including rivals Eastman Kodak Co. and Fuji Photo Film Co. Ltd. –joined hands a year ago to launch the next generation of cameras and film.
Twelve months and more than $115 million in advertising later, experts say the Advanced Photo System–and Kodak’s version, the Advantix–has begun making an impact on the consumer photo market.
Experts differ, however, on the status of Kodak chairman and CEO George Fisher’s vision of the APS as the “reinventing of consumer photography.”
The APS’ first birthday passed Jan. 31 without fireworks, cake or actress Jamie Lee Curtis on stage with Fisher.
A first-year recap:
–The APS, while hampered by slow camera production by Kodak competitors, gained market acceptance and recognition, and fueled modest industry growth.
–Kodak, aided by a big advertising budget and slower competitors, grabbed the lead in the U.S. and worldwide APS camera market, company officials say.
–Competitors’ slow rollouts caused APS film sales to lag.
–Industry officials expect the APS to dominate the consumer market, perhaps as soon as 2000.
“We are the No. 1 seller of APS cameras,” said William Smith, Kodak’s director of worldwide marketing for the APS. He estimated Kodak’s sales at 4 million to 5 million Advantix cameras in 1996, at an average price of $125.
“Our share … is significantly stronger in APS than in the 35mm (market),” he said.
Kodak already has seen Advantix’s impact on its bottom line, company officials and analysts said. Consumer Imaging segment sales rose 13 percent for the fourth quarter and 12 percent for the year. Earnings climbed 7 percent for the quarter and 6 percent for 1996 as a whole.
Analysts credited Advantix for much of Kodak’s better-than-expected fourth quarter and 1996.
“(Advantix) is a success in huge terms,” said Barry Mills, director of research for Howe & Rusling Inc.
At Scott’s Photo on East Avenue, owner Scott Sims said APS cameras attracted almost every new camera dollar plunked down during the holidays.
“We are very enthusiastic. I expected it to be slow progress,” he said. “It accounted for almost every sale.”
An informal poll by the Photo Marketing Association International on post-holiday APS processing showed the format represented 2 percent to 3 percent of roll volume.
For cameras, the format accounted for 10 percent to 15 percent of sales for the holidays.
Ted Fox, group executive of marketing information for PMAI, said final 1996 data is not available for the APS.
“(Last year) was a mixed result, partly because of the supply of the cameras them-selves,” Fox said. “There was some frustration by the dealers.”
Sims said supply shortages kept sales down and proved frustrating for both dealers and customers. He expects an excellent year for APS cameras in 1997.
“There weren’t cameras to be had,” he said. “We have the cameras now.”
Kodak underestimated the demand for APS cameras and miscalculated how fast other manufacturers would bring their APS cameras to market.
“We misjudged the strength of consumer demand and we misjudged the level of the other competitors,” Smith said.
Kodak expected its APS collaborators– Canon Inc., Minolta Camera Co. Ltd. and Nikon Corp.–to introduce cameras much faster.
A year after the APS launch, it is still hard to find Canon’s Elph model, considered by many to be the best of the first generation of APS cameras.
Beating the competition to market usually is good news–but Kodak expected to sell film and processing for pictures taken with their foes’ equipment.
“The good news is our camera share in APS was higher,” Smith said.
The expected first-year APS impact on film and processing sales was delayed into 1997. Industry sources described the impact of APS on film and processing as negligible because of the camera snafus.
Smith said the APS, despite those first- year glitches, ranks as the most successful camera launch in industry history.
“It is the most significant launch ever in consumer photography,” he said.
Kodak’s internal benchmark for its camera success compares it with the Kodak Instamatic camera introduced 34 years ago. Consumers last year bought four APS cameras for every Instamatic sold in 1963.
PMAI research projects by the year 2000 APS cameras will make up 40 percent to 50 percent of the camera-sales market, and APS film will claim 20 percent to 30 percent of the film market. Its research puts the APS share of cameras sold at 10 percent to 20 percent.
APS’ share of film processed is estimated at 1.1 percent of the market in 1996, and is expected to grow to 7.1 percent this year and 27.6 percent by 2000.
Smith predicted that half of the 100 million cameras sold in the United States would be APS as soon as 1998. APS film sales are lower than expected–he estimated some 3 percent of all film sold worldwide is APS format.
Sims said 35mm cameras will remain on the market for top amateurs and professionals. He expects Advantix to grab the lead in the consumer markets.
“It will be the predominant line in the autofocus-and-shoot market,” he said.
The arrival of the new photo system contributed to a rise in overall film sales, PMAI’s Fox said. Through the third quarter, total film sales rose some 2 percent, compared with flat sales in recent years. The millions spent on advertising APS helped photography overall.
“To have photography back in the top of (the) mind of consumers–it cannot help but be beneficial for the photography industry,” he said.
Kodak spent more than $40 million on Advantix brand advertising last year in this country, Smith said. Advertising industry estimates, according to Advertising Age, put total APS advertising by all manufacturers in 1996 at $115 million.
Do not expect to see more of Dennis Rodman–Advantix’s cross-dressing, tattooed spokesman with the multicolored hair and bad-boy reputation–in Kodak ads this year.
The company tracked consumer awareness and found it jumped dramatically during the campaign. The end analysis: the campaign “did help sell cameras,” Smith said.
But he added: “We will not be utilizing Dennis Rodman in the future.”
PMAI officials said the two prime reasons for launching APS were to provide customers with smaller, more convenient cameras and allow for market expansion in photo taking and reprints. APS clearly met both.
Industry officials said the higher cost of APS photofinishing remains a concern. Camera prices are expected to go down, Smith said, but the premium cost of APS film will remain.
In addition, there are some customer concerns about refinishers not supporting all the IX (Information Exchange) features.
Kodak’s research shows Advantix owners take 40 percent more pictures than those with 35mm cameras. Part of the surge, however, comes from initial experimentation.
Even so, Kodak expects photo taking to increase 10 percent with Advantix.
Smith said increased Advantix sales translates into a better local economy. Kodak has increased its Advantix manufacturing by more than 30 percent through 1996 and plans to double its capacity this year.

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