This Film Market Just Isn't Developing
The launch in 1996 was the photography industry's most hyped--and heavily budgeted--in years. Given the imposing name Advanced Photo System (APS), the new film-and-camera combination was supposed to reignite waning consumer interest in photography. It was backed by the best marketers in the business. APS' blue-chip roster of developers--Canon (CAJ ), Fuji (FUJIY ), Kodak (EK ), Minolta, and Nikon (NINOY )--poured more than $1 billion into perfecting and promoting the format. Kodak executives predicted that APS would overtake traditional 35mm film as the primary format for consumers.
Maybe they were looking into the sun when they envisioned those prospects. Far from displacing traditional film, APS barely dented the market. Already, the format is fading fast. A series of marketing snafus, along with a serious misreading of how quickly digital cameras would win over consumers, undermined the new system. The failure has been costly, especially for Eastman Kodak Co., which had the most riding on the new format. By the mid-'90s, Kodak was mired in a brutal price war with Fuji Photo Film Co. that was costing it both market share and profits--all while Kodak struggled to prepare for photography's digital future.
APS was billed as a bridge between traditional and digital photography. Each roll of film carries a magnetic coating that records data--lighting conditions, for example--that helps processors improve picture quality. The system also offers a choice of three print shapes off the same roll. The real appeal, however, was the product's simplicity. The cameras were smaller and more versatile, and the film came in foolproof cartridges.
For all those benefits, though, APS camera sales peaked at about 20% of film-based cameras sold in 2000, according to the Photo Marketing Association, and have been sagging ever since. In the six months ended Mar. 31, unit sales in the U.S. skidded 40% from the same period a year earlier, according to market researcher NPD Techworld. Meanwhile, digital camera sales popped 42% in the same period.
Small wonder, then, that key players are now jumping ship. Nikon Corp. has withdrawn from the U.S. market. So has Pentax. Konica (KNCAY ), Minolta, and Olympus have all halted new models. Kodak and Fuji say they are still committed to APS but have cut back on new APS products. "We recognize the format won't achieve some of the goals we had originally hoped for," concedes Mark A. Schneider, a vice-president for consumer imaging at Kodak.
That's a stunning admission, considering how much was riding on APS. Backers figured that the format could ease consumers through a transition to digital photography while carving out a permanent role for special-occasion use. But digital cameras hit the consumer market much faster than APS developers anticipated, and the industry failed to position APS as a worthwhile alternative. "APS was like a half-caffeinated cup of coffee," says marketing consultant Gary Stibel, principal of New England Consulting Group. "It was never compelling for the consumer."
APS struggled from the start. In the system's first year, consumers couldn't always get their hands on the new cameras because the industry underestimated demand. When they did get them, it often took days for their APS film to be processed because one-hour minilabs balked at buying costly APS processing equipment. Minilab owners worried that APS would suffer the same fate as Kodak's failed Disc Film in the 1980s, says Jerry Lansky, president of MiniLab Consultants Inc. in Colts Neck, N.J. "APS was very divisive right from the start," Lansky says.
APS backers made even bigger goofs in marketing and pricing. Every photo company marketed APS products under a different name: Advantix for Kodak, Smart Film (changed to Nexia in 1999) for Fuji, and Elph for Canon. True, that strategy was partly driven by antitrust considerations, which prevented the format's five co-developers from jointly marketing APS. But by going with widely divergent approaches, they created "a lack of clarity as to what the product category was and what the brands were all about," says Kevin Lane Keller, a marketing professor at Dartmouth's Amos Tuck School of Business.
Despite lavish budgets, they couldn't get the advertising right, either. For a holiday ad in 1996, for example, Kodak tapped Dennis Rodman, the basketball bad boy with the multicolored hair, to promote its Advantix cameras. But the volatile Rodman quickly became known for such crybaby stunts as spouting profanities during a live TV interview and kicking a photographer in the groin. "That was definitely not a Kodak moment," says Dartmouth's Keller.
Pricing was another trouble spot. APS film costs at least 15% more than 35mm film, and many consumers balked at the premium price tag. Customers also never knew how much they would pay for processing. It was difficult to understand the selection process for the three available print shapes, and people who ordered pricey panoramics by mistake experienced severe sticker shock.
APS marketers didn't fumble everything. Kodak went to a more benefit-driven approach in a $100 million advertising "relaunch" of the product in 1997, highlighting such advantages as klutz-proof film loading. The effort helped to juice sales, but it was too late to assure APS a strong position against by-then ascendant digital cameras.
With digital rapidly taking over the market, many camera makers believe APS' days are numbered. Martin Lee, vice-president for marketing at Olympus Optical Co. (OLYOY ), says: "I don't know if the advantages of APS are enough to support the product going forward." And retailers are souring on the concept. "APS is dead," says Jack Farber, president of Hunt's Photo & Video, a chain of five camera shops near Boston.
That assessment is too severe. APS still accounts for about 40% of traditional camera sales in Japan, and sales of disposable APS cameras are still rising. But as a mass-market product for U.S. consumers, APS may go down as one of the industry's costliest fiascoes yet, right up there with Disc Cameras and Photo CDs.
By Geoffrey Smith in Boston