Publishing, Retailers and Assorted Cheese Moving

In 2001, I was working as Director of Marketing for PictureVision, a Dotcom start-up that was digitizing photos to burn to a CD or upload to the Internet.  The company had a dual business model that included running the services for online photo sites like AOL’s “You’ve Got Pictures” and Kodak PhotoNet, while also building scanners that enabled retailers such as Walgreens and Walmart to add digital photos to their highly profitable photo processing businesses.

I remember thinking what a cool business model – both consumer products had fantastic margins and the retailers could capitalize on a very loyal stream of customer traffic. Remember, photography created three separate trips to the store, first to buy film, then to drop off film for developing and finally to pick up pictures.  Each trip was an opportunity for the retailer to capitalize on foot traffic by getting other products into the basket (Redbox provides a similar opportunity today).

In the spring of 2001, Kodak purchased the remainder of PictureVision it did not already own and also purchased a photo-sharing service called Ofoto.  It combined these services with PhotoNet and created the Kodak Picture Network.  Several other companies were also running photo-sharing services at the time including Shutterfly. It was an amazing time to watch an industry in a state of rapid change and how firms were exploiting disruption to provide new and more efficient services to consumers.

Not long after the PictureVision sale, the leadership team from Kodak was down visiting it’s Herndon, VA, offices for strategic planning.  I was excited to see what the combination of a strong brand and retail relationships could do in this new marketplace, after all, Kodak was making strategic moves to reinvent itself as a digital company.

As the marketing folks led a conversation about the brand equity of the Kodak name and how it basically was synonymous with photos I asked a simple question.  How would that equity transfer as consumers shifted their understanding of what a photo was?  In the future, the 4X5 piece of glossy paper we all knew as a picture probably wouldn’t exist, at least not in an economically viable format.  I literally thought the VP of Marketing was going to come unglued.  ”We have tons of data that show Moms are NOT going to trust their memories to a bunch of pixels,” he said condescendingly.  I tried to suggest that a consumer blueprint for digital adoption was already available since consumers in Japan rapidly converted to digital cameras and images in a space of about 18 months.  The Kodak folks glared so I relented and went home that evening and updated my resume.

It was not with satisfaction that I read the headline on Friday’s WSJ detailing how Kodak was seeking a buyer for its digital photo business.  It was sad actually, especially since the market cap of Shutterfly was now larger than all of Kodak.  How could this happen?  The company had amazing margins in film that could have allowed it to easily transition into the future.  The marketing team had even identified sharing as the killer app for photos. Facebook is now the king of photos on the web dwarfing all other photo sites combined online by a magnitude of 10.

How many other industries are primed for this type of disruption?  Many in my mind. Some key hallmarks to look for:

1. An inefficient delivery system – Newspapers and snail mail fit this description
2. Belief that there are no alternatives to current distribution channels – Movies, TV and Video
3. Discounting new technology based on current adoption rates – All of the above, Retailers

I love the tactile feel of the New York Times and the smell of pages in a new book, but both models are doomed to the economic headwinds of the resources needed to produce and distribute those products in their current form.  Sure, there will always be books and newsprint (there are still record stores) just not ones that are scaled the way today’s current models are, the marketplace will see to it.  Marketer’s should take heed to these changes and aggressively seek to understand how consumers will respond, because when the cliff arrives, it will be steep and brutal.

I’m framing the article as a reminder to myself and to our company to never become complacent.

And as to my morning paper? I didn’t buy it: it was free in my hotel lobby.

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