Magazine Article


On-line Photofinishing Gets Down to Business

On-line Photofinishing Gets
Down to Business
But Looming Price Wars Could Spell Trouble for Some Sites

by Jerry O'Neill

Alas, the new industry was also born with its foot in its mouth, making sweeping statements about how on-line finishing's radical new business model was the wave of the future and suggesting traditional "bricks-and-mortar" finishers might just as well turn out the lights and go home.
That's not how the story ended, of course. Once the bubble burst and the money aspects of on-line finishing began to settle down, the similarities between the two types of finishers became much easier to see. Some on-line finishers even bought bricks-and-mortar plants, and some of the traditional finishers bought on-line sites. Perhaps the most notable deal was Kodak's purchase of Ofoto in mid-2001. (Since Ofoto had just picked up Zing's members when Zing stopped offering finishing services, a lot of consumers ended up in the Kodak camp.)

"The remaining players in the space have scaled back free print offers and boosted site features that help users more easily buy prints and photo merchandise. As a result, total on-line photofinishing revenue in North America grew 183 percent between 2000 and 2001, while revenue per member increased 110 percent. Several standalone on-line photo services providers are expecting to reach sustainable profitability in 2002. From 2002 to 2007, on-line photofinishing revenue is projected to grow at a compound annual rate of 39 percent in North America, 40 percent worldwide."
InfoTrends' Kristy Holch told PTN that "What's happening is these on-line finishers are adapting, trying to make their revenue from prints now. On-line finishers' volume has been increasing, so economies of scale are coming in. And there is a lot of margin in silver halide prints—but the on-line finishers have to cover lots of start-up costs. On-line finishers also offer features such as on-line albums, etc., and these have supported the [D&P] price."
InfoTrends said that by late last year there were about 100 million Internet users in the U.S., and about 12 million were active customers of on-line photo services. This year the number of on-line finishing customers will probably grow to nearly 19 million, InfoTrends said.

The cost of a 4x6 print, such as the image above, can now cost as little as 19 cents thanks to an online photofinishing price war.

But if things are looking positive for on-line finishing in general, there may well be problems lurking in the wings—like price wars, for instance.
Ever since on-line finishers began charging for prints, many consumers have felt they're charging too much, compared with traditional D&P services—at least for standard 4x6 prints. Now that may be changing. Shortly before PTN went to press, Club Photo announced new pricing, "A price rollback for 4x6 digital prints from 45 cents to 25 cents, the lowest price in the industry. The prints are automatically digitally enhanced to provide 'best looking' photos on high quality Kodak paper."
Speaking about the Club Photo price rollback, InfoTrends analyst Lia Schubert noted, "Today, most consumers perceive that home printing is the most affordable way to print digital photos. With Club Photo's move to 25-cents per print, the cost/benefit of on-line photofinishing will be made clear to end-users. As a result, we anticipate an increase in quantities ordered as well as an industry-wide shift to lower prices overall."
Just a few days later, industry pioneer PhotoWorks (once upon a time Seattle FilmWorks) announced "4x6 prints ONLY 19¢" and "What a great time to get copies of your favorite shots... and send copies to friends and relatives! Buy any number of 4x6 digital prints and pay only 19¢ per print—it's our best price ever."
For the many PhotoWorks customers who use digital cameras, they add, "Have photos on your digital camera? Then send us your memory card or a CD-ROM and you'll get the same great 19¢ price. Just print our order form and mailing label to send us your digital images for free."
Snapfish, which boasts three million members, has also gotten into the action, slashing online print prices by up to 50 percent. At Snapfish, prices now start at 45 cents and go as low as 29 cents per print for a 4x6, depending on order size. In an effort to entice new customers, Snapfish has also lowered shipping and handling prices from $1.49 to .99 cents on orders of 1-3 prints.
"That's a value proposition that can't be beat, either online or off," said Raj Kapoor, Snapfish's president.
Ofoto isn't playing the price game yet, but they offer their customers some extras. Ofoto makes its prints on Kodak's premium, extra-sharp DuraLife paper, and provides ofotoNow 3.0, a free program that many reviewers say is the best software for using on-line finishing.
Only time will tell exactly how the business will develop, but one thing is certain: On-line finishing is a reality. It's here today, it's for real, and it promises to be an integral part of the imaging industry in the 21st century.

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