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2006 Imaging Industry Outlook
Imaging Business asked a number of industry anaylists how 2005-06 is shaping up, and here’s what they had to say:


Ed Lee, InfoTrends/CAP Ventures
By Don Franz, Photofinishing News
Patti Williams, I.T. Strategies

Modest Growth Predicted for Digital Minilabs and Photo Labs In Wide Format
By Ed Lee, InfoTrends/CAP Ventures

There are several emerging trends in the photo market that we see driving growth for different areas of the business that we cover at InfoTrends/CAP Ventures.

More and more consumers are printing their digital photos at a retail store and as a result retail photo printing will account for over one-third of the total digital photo print volume in 2006. Digital minilabs will produce the majority of prints in retail.

However, the sales of digital minilabs have been in decline for the past couple of years. Two of the main factors behind the decline are the fact that big box retailers such as Wal-Mart and Costco are fully saturated with digital minilabs that they just purchased a few years ago and only a few of the second tier mid-to-low volume retailers are ready to invest in an expensive digital lab. Small sales growth is expected for 2006. The growth will come from replacement sales of aging minilabs and continued competitive pressures on retailers to offer digital photo printing services. Overall, we see digital minilabs growing 7%.

InfoTrends/CAP Ventures research indicates that many digital photo labs were also the early adopters of wide-format inkjet printing equipment. Many of those companies are now investing in wide-format solvent-based and UV-curable inkjet printers so they can more cost effectively produce a wide variety of applications from window graphics and trade show signage to outdoor durable signs and banners. In recent surveys with photo labs, we found that those that are already into wide format are expecting it to grow more than 10-percent over the next two years.

Recent wide-format printer introductions from some of the photo industry’s traditional suppliers, like Durst and Noritsu, mean that labs don’t even have to go outside of their comfort zone to get into wide-format digital printing. On the other hand, there are highly productive wide-format solutions from a wide variety of companies like VUTEk, Océ, ZUND, and of course the aqueous inkjet suppliers such as HP, Epson, Canon, Kodak, and others that offer exciting capabilities and the ability to create new revenue streams through applications such as fine art printing.

Ed Lee is the director, Consumer Services and Photo Printing Trends Service at InfoTrends/CAP Ventures.

More Pros Going Digital
By Don Franz, Photofinishing News (dfranz@photo-news.com)

Recent statistics from a joint PMA/PPA study of the U.S. professional photography market indicate that a high proportion of studios are already shooting only with digital: commercial - 41%; senior - 66%; sports - 76%; wedding - 49%; family - 56%. In this same study, 65% of these studios stated that they are using in-studio printing equipment.

As a result of the ongoing decline in film orders, more and more prolabs are discontinuing their film services. And, for those professionals who still shoot film, and many digital shooters are choosing film for specific applications, that poses a dilemma: where to go for processing? Are prolabs that offer comprehensive film processing services really marketing and promoting this activity? For some, it could represent a good business opportunity.

Sports photography has been growing lately. At the 2005 PSPA convention there were numerous programs devoted to this market segment. As noted above, the greatest percentage of digital-only photographers are found in the sports segment. And these sports photographers also overwhelmingly use in-studio printing equipment. But, as shown in Figure 1, they percentage that they print “out-of-studio” is not too much less than those in the family, senior or wedding segments.

Besides offering merely prints, prolabs provide a variety of accessory products and services, such as CD/DVD production, mini-albums/photobooks, composites/collages, and trader cards.

During an APCI presentation, Ed Monahan, WW Strategy Director, Professional Output at Kodak stated that the portrait industry must move from capture & print to capture & publish; from making a single image per print to making multi-image composites and multi-page books; from considering the economy of 8 x 10” prints to considering the economy of content distribution and fulfillment; from producing static prints to making a dynamic display; from creating annual records to generating personal chronicles; from capturing portrait sittings to directing memory experiences/content regeneration; and from providing portrait packages to staging multimedia broadcasts with “movie clips.”

We hear stories about studios that had been printing their own work again sending work to prolabs. These are prolabs who have evolved their product and service offerings to reflect changing consumer interests. Even our comprehensive research programs show that those labs which adapt to the dynamic professional market are growing.

Don Franz is the editor of Photofinishing News.

What’s Ahead for Photo Labs
By Patti Williams, I.T. Strategies

I.T. Strategies estimates that in the U.S. in 2004 there were more than 80,000 print-for-pay (PFP) shops that have the potential to have or to buy a wide-format inkjet printer. This number comprises more than ten different types of PFP shops. They are: 1. Color photo labs, 2. Reprographic houses, 3. Digital print shops 4. Graphic arts service bureaus, 5. Exhibit builders, 6. Quick printers, 7. Screen printers, 8. Sign shops 9. Commercial print shops, and 10. Others.

Color Photo Labs are Elite Group

In number of shops, color photo labs represent about 4% of all shops however, as a group they represent a power channel in wide format graphics applications. Color Photo Labs are known for color expertise for both photo and digital prints. They probably have the widest and most varied range of products of any of the PFP channels

Color photo labs historically produced large-format photographic images primarily for indoor POP applications and as such had a pre-existing large-format color mentality and connections with customers that wanted short-run, high-quality, big color images. They were among the first group to adopt wide-format digital color printers because they already had customers for large color images. Their history of color expertise coupled with the relatively high installed base of aqueous inkjet printers has also meant that demanding indoor applications such as fine art and photography are a natural application for them to pursue.

I.T. Strategies estimates that about 50% of wide-format aqueous printers are found in Photo labs, Reprographics Houses and Digital Print Shops. Aqueous inkjet printers are primarily used for indoor applications such as POP collateral, trade show graphics and for high-quality applications such as fine art and photography.

The larger photo labs are also purchasing flatbed inkjet printers. I.T. Strategies research shows that two primary groups of print shops have purchased flatbed inkjet printers: photo labs and screen printers. For both groups, POP is a primary application. In the past, photo labs and screen printers could easily share POP customers because film output is very different from screen printing output. This is no longer true. Digital printing means that no longer is the output differentiated.

Today many photo labs consider that film is a dinosaur and feel the need to change to keep up with new technology – or go out of business. These companies are changing from a photo shop offering digital services to digital shops with photo services.

Market Trends

Photo labs are unique in their history and entry into the wide- format graphics market but, as part of the larger PFP community, will find that the trends affecting the larger PFP community will also impact them.

These include:

• Continued consolidation and mergers among PFP shops

• Increased wide-format inkjet penetration into PFP segments

• Shift in focus from just printing to offering solutions

• Blending legacy printing/imaging equipment and digital printing equipment to offer customers an attractive portfolio of imaging/printing capabilities

• Focus on profitability versus growth

• Search for new, niche applications such as decorative printing

The total number of PFP shops continues to decrease every year as shops go out of business or merge with others. This is happening in every segment except Digital Print Shops which continue to grow in two ways: from new companies entering the wide-format graphics business and as other types of companies redefine themselves from their roots by adding digital capabilities.

Every year, more and more PFP companies are buying wide-format digital printers. This is causing the previously distinct PFP to become homogenized. This in turn results in more competition for the same customers, causing PFP shops to begin looking for newer, niche applications and to focus on profitability as traditional wide format graphics applications such as POP become commoditized. By 2007, I.T. Strategies expects that more than 90% of photo labs will have a wide-format inkjet printer.

Although the total number of photo labs continues to decline, that does not necessarily mean that they are going out of business. More and more labs are redefining themselves to more fully define their offerings to customers. Today, even the term “Digital Print Shop” is undergoing a metamorphosis. As more competitors enter the market and as margins fall, PFP shops are beginning to move customers towards solutions, such as signs and mounting systems or signage plus database management, in order to create closer relationships with customers. They are offering innovative solutions in order to lock in customers. The move towards solutions is evident in the ways that PFP shops describe themselves: They are changing from “Printing” to “Imaging” and from “Digital” to “Solutions.” POP is a large application for photo labs. It could be that it will be the channel that will offer electronic displays to POP customers.

Most of the PFP shops have legacy printing equipment in their shops. This is expected to continue as PFP shops offer attractive portfolios of capabilities to customers.

Patti Williams is a consulting partner at I.T. Strategies.


   







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