Survival of Traditional Chemical Photo Producers in the Digital Age

Abstract:
Shares in Eastman Kodak plunged by a quarter on September 26, after the world's largest photographic company warned of an unexpected shortfall in earnings. At first glance it would seem reasonable to assume that the rapidly expanding market for digital photography was the culprit, but closer examination reveals that digital photography has had only a small effect. Furthermore, both Kodak and Fuji, who together control 70% of the conventional photo-finishing, will be able to both survive and thrive in the coming digital onslaught.


Introduction:
When a new technology is introduced, it generally comes at a premium price. The market for this new technology is usually "early adopters" , a segment where price is not the object but having the latest technology is most important. Even thought this technology may be superior, the initial costs make it unattractive to the majority of the market. Since the marginal cost of the technology is so high, the demand is very low. The v...