f22 u.s. retail photo output projections update 5.09

1coverRetail Photo Output Projections Update – May 2009

Confidential Property of [F/22] Consulting, Inc. - 2009

2

Forward

• Transformation and Recession continue to be the twin evils that challenge the retail photo business.– Transformation is too slow and uninspired– Recession is too deep and preoccupying

• The combination of evolving consumer behaviors (smaller share of digital images printed), an ever-lower “floor” for film print demand, and per print price pressure keep pushing down the available retailer revenue from conventional prints.

• Personalized photo output remains a potential bright spot with much untapped potential to produce new streams of daily demand, higher annual photo output market basket per household and much needed margin contribution. However, loads of barriers remain until the promise becomes a reality worth investing in. Who will lead?

• Share continues to aggregate among the top tier of retailers (really only 4 now) who control 75%+/- of U.S. retail prints. That could get worse.

• Kodak is “on the ropes.” Fuji is managing the segment like a twilight business. Noritsu continues to have marginal influence on the “big picture.” Xerox barely dabbles. Epson nibbles at the edges. Hp appears to be the only major manufacturing partner who is investing strategically in the future of retail output.

PAGE 2Retail Photo Output Projections Update – May 2009

3

Market Opportunity – Conventional Prints

PAGE 3

2008 2009 2010 2011 2012

$0.00

$1.00

$2.00

$3.00

$0.95 $0.76 $0.58 $0.47 $0.40

$2.56 $2.34$2.27

$2.15 $2.10

Retail Conventional Print Revenue (B$)

Digital & Film Totals

Source: [F/22] Consulting

The total U.S. retail revenue from conventional photo prints has declined steadily since the dawn of consumer digital imaging with no expectation

for future growth. From a peak of $6.5B in retail film print revenue in 2000 revenues have declined by >50% and that decline will continue

(though at a slower pace as film prints hit bottom).

Retail Photo Output Projections Update – May 2009

4

Market Opportunity – Conventional Prints

PAGE 4

2008 2009 2010 2011 2012

0

5

10

15

20

11.1 11.7 11.9 11.9 11.7

4.0 3.22 2.5 2 1.7

Total Conventional U.S. Retail Photo Prints

Digital & Film – B 4x6 Equiv.


The peak of retail film print volume was 32B prints. While film prints continue their decline toward zero digital prints at retail

are estimated to remain constant at +/-12B annual prints.


5

Market Dynamics – Conventional Prints

PAGE 5

2008 2009 2010 2011 201212.5

1313.5

1414.5

1515.5

15.214.9

14.213.9

13.4

Total Conventional U.S. Retail Photo Prints

Digital & Film – B 4x6 Equiv.


Though retail share of prints continues to increase total film and digital print demand at retail continues to decline as

consumers select alternative ways to share and preserve their images or postpone post-capture activities.


6

Shifting Production at Retail – Conventional Prints

PAGE 6Driving Critical Streams of Retail Output Revenue

2008 2009 2010 2011 2012

02468

1012 10.6 10.2

9.59.0

8.23.86 4.36 4.81 5.16 5.53

Minilab & Kiosk Produced Prints (B)


The share of prints made on kiosks continues to grow as consumers choose instant gratification and as retailers opt for lower cost, lower touch, more environmentally friendly print solutions. The deep recession has further dampened capital and labor investment tolerance, particularly in a small and shrinking category which could further accelerate the shift to kiosk printing. Kiosk=Red.

Central Fulfillment• The U.S. market has a

serious retail fulfillment void as years of poor resource management by both Kodak and Fuji have virtually eliminated all meaningful back-2-store fulfillment.

• With an industry increasingly dependent upon new product innovation and introduction the absence of back-2-store fulfillment strips retail of one of its most significant advantages.

7

Share


32%

40%

11%

10%

6% 1%

2008

Mass Discount Chain DrugWholesale Club

Photo Specialty

Food Other


Chain Drug and Mass Discount continue to dominate retail print activity with the 2 leaders in those channels combining for nearly ½ of all retail prints produced. This is a function, largely, of continued investment in technology, infrastructure and labor and that the underlying share drivers are likely to continue to consolidate volume within those chains who invest in new opportunities.

.

Trends• The category is very

dynamic and under extreme duress which could drive further individual retrenchment by specific key retailers.

• There is no major retailer in the photo print business in the U.S. that is immune to severe cost-reduction pressures nor to serious calls for continued investments in space, labor and, certainly, capital outlays.

• Recent events at Ritz and Rite Aid are examples of how share can shift quite dramatically from year-2-year.

8

Barriers

Barriers to Successful Transformation Recession (investment resources and determination diminished) Leadership (who shines a sustained light on success)

Retailer and Vendor Silos (failure of merchant organizations and .com organizations to collaborate effectively, failure of vendors to deliver the full-suite of possible products and services)

Continued failure to effectively connect the consumer from home to on-demand retail fulfillment.

Insufficient market penetration of critical enabling technology (e.g. duplex printing, CD/DVD publication, wide-format printing)

Failure of the industry to develop and deliver meaningful, high-volume everyday personalized products.


9

Personalized Printed Retail Products

PAGE 9

2008 2009 2010 2011 2012$0

$500

$1,000

$1,500

$388 $509 $651$917

$1,157

Printed Personalized Products (Millions)


Demand for popular products such as photo books, calendars, greeting cards, posters and pages will fuel growth trends and

promising opportunities.


Key Growth Drivers

• Dramatic improvements in create and order software.

• Create and print from home pc.

• Everyday products such as printed album and scrapbook pages.

• Proliferation of poster and collage options

• New retail products with print fulfillment components.


10

Personalized Products Seasonality

PAGE 10

The current concentration of demand for personalized printed products around the year-end holidays results in poor manufacturing and distribution efficiencies as well as lost revenue opportunities. The industry must develop and market suites of products that

have year-round relevance and demand.


Key Opportunities• User-friendly client

software for PC creation and ordering for print-in-an-hour.

• Album and Scrapbook Pages on demand from PC or kiosk.

• Posters and collage prints • Everyday greeting cards.• Self-Service, low-cost,

low-touch personal DVD on demand.

• Licensed products of all sorts.

• Open systems to enable on-ramps from any internet site.

Distribution of Retail Print Output Revenue

by Month (B$)Conventional

Prints

Printed Personalised

Prints

J an 9% 3%

Feb 5% 3%

Mar 5% 3%

Apr 5% 4%

May 7% 7%

J un 11% 5%

J ul 11% 4%

Aug 11% 4%

Sep 9% 3%

Oct 8% 2%

Nov 6% 22%

Dec 13% 40%


11



2008 2009 2010 2011 2012$0

$500

$1,000

$1,500

$388 $509 $651$917

$1,157



Demand for popular products such as photo books, calendars, greeting cards, posters and pages will fuel growth trends and

promising opportunities.


Key Growth Drivers

• Dramatic improvements in create and order software.

• Create and print from home pc.

• Everyday products such as printed album and scrapbook pages.

• Proliferation of poster and collage options

• New retail products with print fulfillment components.

12


PAGE 12

2008 2009 2010 2011 2012$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$3.51 $3.10 $2.85 $2.61 $2.50

$0.59 $0.75 $0.99 $1.32 $1.58

Total Retail Printed Output (B$)

Conventional PrintsPersonalized Printed Products

Dramatic growth of printed personalized output turns a contracting category into a growth opportunity.



13

New Revenue -Personalized Consumer Photo Printed Output • Photo Books• Photo Art for Home Décor• Licensed Content• Notebooks• Bragbooks• Photo Calendars• Greeting Cards,

Announcements & Notecards• Printed Album Pages• Printed Scrapbook Pages• Posters & Collages• Photo Restorations• Photo Postage Stamps • Address Labels

– ….and much more!

PAGE 13

2008 2009 2010 2011 2012$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$388$509

$651

$917

$1,157



14

New Revenue -Personalized Consumer Photo Merchandise

• Mugs• Mousepads• Photo Plates• Apparel & Personal

Accessories• Keepsakes &

Acknowledgements• Puzzles• Household Décor• Personal Product

Embellishment• Licensed Content• …..much more!

2008 2009 2010 2011 2012$0

$100$200$300$400$500$600$700$800$900

$105$202

$372

$534

$773

Photo Merchandise - Millions

Photo Merchandise


15

New Revenue -Personalized Event Celebration Bundles

• Birthday• Anniversaries• Family Gatherings• Class Reunions• In Rememberance• ….and much more!


16

• Flyers• Menus• Direct Mail • Catalogs• Image-Rich Business Cards• Banners• Interior and Exterior Signs• Variable Data Advertising

(circulars, handbills, etc.)• Variable Data Direct Mail

Materials• ….and much more!

PAGE 16

New Revenue - Commercial Image-Rich Printed Output


17

New Revenue -Commercial Image-Rich Merchandise

• Employee Recognition and Awards

• Logo Apparel• Logo Keepsakes

and Promotional Products

• Licensed Products• ….and much more!


18

New Revenue - Retail Products with Output Components

• Photo Albums & Software Bundles

• Digital Scrapbook & Software Bundles

• Collage Frame and Software bundles

• Album, Scanner & Software Bundles

• ….and much more!

PAGE 18

See www.siannaimages.com


http://www.siannaimages.com/

19

New Revenue - Licensed Content for Consumer and Commercial Output

• Disney Characters & Movie Releases)

• Mattel• Hasbro• Martha Stewart• NFL• NBA• MLB• NASCAR• Warner Brothers (Characters &

Movie Releases)• Pixar (Characters & Movie

Releases)• Celebrities• Events (Festivals, Major Sports

Events, Concerts, etc.)• And Much More


20

New Revenue - Consumer Digital Archive & Celebration Products

• Scan-2-DVD• Transfer Tape-2-DVD• DVD Personal Movies

from Still & Video Images.

• Archive Image Collections on DVD.

• Event Celebration and Sharing on CD or DVD.

• ….and Much More!20082009201020112012

$0

$50

$100

$150

$200

$250

Media Retail Revenue (Mil-

lions)

Movie DVD CDDVD


21

New Revenue - Commercial Digital Archive & Promotion Products

• Archive DVD for

Company Records.• Company and

Product Promotions on DVD.

• DVD Demo Promotions for P.O.S. Education.


22

Total Retail Photo Output Revenue Opportunity – B$

2008 2009 2010 2011 2012$0.0

$2.0

$4.0

$6.0

Total Retail Category Output – $B

Conventional PrintsPersonalized Printed OutputMerchandiseMedia

PAGE 22

Increased awareness, easier create and order access, improved merchandising, new product development

disciplines, and new technology will all drive category growth opportunities at retail.


23

Summary

PAGE 23

Conventional printing will continue to decline Personalized printing can offset the lose of

conventional print revenue Photo Merchandise probably will add annual

category revenues exceeding $750 million within 5 years.

There are major barriers to harvesting new streams of revenue and margin that will take resolve and urgency to address.

The opportunity for substantially more revenue growth than herein projected is real.


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[F/22] Consulting, Inc.

PAGE 24

Frank Baillargeon208-939-3301

[email protected]

For information please visit our website www.f22consulting.com


mailto:[email protected]

http://www.f22consulting.com/

f22 u.s. retail photo output projections update 5.09

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