Surprises at the Eleventh Hour
Whatever the reason, the joint venture was forecast by management to generate sales of somewhere between $500 million and $1 billion by 2005. As much as half of the income was expected to come from ink and paper consumables. It was unlikely that this target could have been met considering the later-than-expected start and relatively low kickoff sales.
Fred Heigold, CEO and a 29-year Kodak veteran, was the driving spirit behind the Phogenix team. He had built a crew of very passionate workers who were devoted to breaking new ground with an inkjet minilab. Starting from the February 2000 announcement of the joint venture without a name, office or a box of paper clips, the company planned and built an inkjet minilab from scratch. There were no previous designs that could be copied. Though some deadlines were missed along the way, Fred's team, in the course of three years, brought production units to the point of shipment to a market that was waiting. No mean feat.
Fred said he first heard of the possibility of the close-down following HP's statement. "We were very surprised," he said. An executive assistant said that the reaction was "shock and quiet." She said "We did our best." Another referred to the announcement "like a death in the family."
I don't think there is a person involved in the entire matter, right up to Kodak's top ranks, that wouldn't honestly characterize the HP pullout as a surprise.
Mike Stanicek, senior marketing director and HP alumni, said, "We were on the cusp of fundamentally changing the market." He added, "I have never worked with a more passionate group or one more committed to success. We created something from nothing."
The shutdown caught competitors unaware, as well. Bill Diminno, Fuji senior executive, was surprised at the suddenness of the announcement if not that it was made. Bill likened the inkjet minilab to APS: "They were trying to solve a problem that didn't exist." He felt that silver halide was "the perfect system" and that there were still unanswered questions as to inkjet longevity.
Joe Leach, Noritsu executive vp, was also surprised at the unexpected announcement. He could be a major beneficiary of the shutdown. My guess is that the concept of an inkjet minilab as first proposed by the joint venture, spurred an arrangement for Noritsu to pal with Epson and announce last year the dDP-411 inkjet lab. By default, Noritsu will now have this field to itself. Fuji has not made known any plans to enter the market with an inkjet minilab.
The Noritsu dDP-411 was prepared to begin shipments in June, according to Joe. At $45,000 the unit will print 310, 4x6/hr. and enlargements up to 12x18-inches, Joe does not see this as a stand-alone minilab. Rather, he expects it to be used in commercial locations, government and military offices, police facilities and the like where digital cameras are being used extensively and there is no need for film developing. Also, in minilab locations primarily for enlargements from digital media and other digital specialty services.
Joe hopes that his Kodak buddies will pass along all of their DFX leads so his people can pitch the dDP-411.
The retailers that had units for trade trial seemed to be unanimous in praise for the DFX. Joel Paymer, owner of Camera Land, Manhattan, has been using one since January. He said he placed a firm order for an early production unit and expected that within a year he would have ordered a second. He said he has been averaging about 14,000 4x6 prints a month (at 49¢ each) from digital files, plus enlargements.
With two deliveries a day from the Qualex lab in Fairlawn, NJ, Joel does no on-site processing but does have a Picture Maker. His reaction to the Phogenix shutdown: "It was very short-sighted on HP's part."
ColorTek, with six Kodak KICS labs in Manhattan, also had a DFX on trade trial. James Park, president, said, "It's a shame to see it go away. I hope someone picks it up. The technology is unbelievable."
James has had the unit in one of his two stores that is equipped with Noritsu labs. He said he was doing about 10-15 orders a day and averaging between 40-50 prints per order at 79¢ apiece. When he first received the unit he said he had a paper jamming problem but that it had been corrected. Jamming had been an early DFX concern but I was told it had been corrected in the production units.
Kodak has a rocky history when it comes to selling minilabs in the U.S. In the late 1980's, when the minilab business was in its major growth spurt, Kodak decided to enter the fray and compete with the likes of Noritsu, Fuji, Agfa, Gretag, Konica and Copal. Models were supplied under the Kodak label by Noritsu, Model 25 and Copal, Model 40, and Kodak even designed and sold its own system, Model 20. The effort lasted only a few years and was finally canned. Kodak's thin sales staff couldn't compete with established relationships already developed between minilab owners and their suppliers.