Kodak's marketing strategy for super-8

[sarmoti]

Matthew: the problem is that no one (myself included) knows exactly how much the manufacturing and loading of S8 carts costs Kodak. You say it's enough so that the nearly 3x increased revenue from the same amount of emulsion is still not enough to turn an increased profit; I say it can't be. Neither of us has any real evidence. I doubt Kodak will come out with numbers.

Profit vs manufacturing/distribution costs is based on the amount of product sold and the selling effort, there's the supply & demand principle behind it as well,

as I explained elsewhere, just the print film sold for a single major motion picture release in the U.S. is enough to fill 4.5 million carts of film. It takes kodak much more effort to manufacture and sell that many S8 carts than it does for them to fufill one order for Deluxe labs.

Think about it, though. 16mm film in 100' loads isn't just sold on a cheap plastic core. It comes on metal spools in plastic boxes. In materials at least, the packaging/peripheral costs are probably close to super 8...

Ok, for argument sake let's assume that the raw materials to produce both are the same. As with any factory operation, producing 1 million of one product is cheaper per unit than producing 10,000 of the other. Add to that that you need to keep people employed and machinery in order for both products individually, you end up realizing that you need to sell the less popular product at a higher cost to maintain operations with minimum profit, while you can lower the cost of the other and still profit dramatically due to the mass of the sales. One product is also easier to sell in huge quantities per order while the other sells at a few per order so essentially your lesser selling product requires much more operational expenses (man hours) just to manage it's orders.

[Evan Kubota]

I understand basic economic principles, thanks.

The gist of my previous post is that this is *all* speculation. Depending on exactly how *much* cost it entails for Kodak to slit the film and load it into S8 carts, it could be profitable, or not.

I'm speaking of profit per unit, FWIW. Sales volume has nothing to do with it. If each individual S8 unit that's sold is profitable (taking into account equipment and manufacturing costs), then S8 sales as a whole will generate profit. It doesn't take any 'effort' per se for Kodak to sell S8 - it basically sells itself to people who want it. I certainly haven't seen any ads on TV or in print for S8 film. Most people don't even know it's still around.

[ccortez]

It doesn't take any 'effort' per se for Kodak to sell S8 - it basically sells itself to people who want it. I certainly haven't seen any ads on TV or in print for S8 film. Most people don't even know it's still around.

OK, so there's no marketing cost. But there's opportunity cost. One company can't do everything. Little plastic boxes aren't profitable, business units are. What Matthew is saying is that Kodak's margins suck on Super-8, not that it's completely "unprofitable". You could expend lots of corporate energy on a product where your margins suck, or you could focus your corporate energy where your margins are great(er).

[sarmoti]

The gist of my previous post is that this is *all* speculation. Depending on exactly how *much* cost it entails for Kodak to slit the film and load it into S8 carts, it could be profitable, or not.

Ok, so let's get unrealistic and guess they're making a whopping $6 per cart and they sold an astonishing 1 million a year, that's $6 million! That's just half of what they make on one large theatrical 35mm release film sale (2500 150 minute prints). So they had to have all their people fufill orders and answer the phone for 1 million S8 carts and on the other hand they fufilled one order of 35mm print film for deluxe labs and made double the amount of money.

I'm speaking of profit per unit, FWIW. Sales volume has nothing to do with it. If each individual S8 unit that's sold is profitable (taking into account equipment and manufacturing costs), then S8 sales as a whole will generate profit.

But in the real world, in order to make a profit per unit you need to cover the operational expenses first, not just the material cost. Pro8mm has done it for years and they haven't shown huge profits even with a telecine suite and lab operation generating additional income, and they're a small business without all the operational complexities.

It doesn't take any 'effort' per se for Kodak to sell S8 - it basically sells itself to people who want it. I certainly haven't seen any ads on TV or in print for S8 film. Most people don't even know it's still around.

So no effort goes into fufilling thousands of insignificantly small orders? I'm sure that the person on the phone who just made a million dollar sale looks forward to one of us calling and asking them for $100 of super-8. They are after all paid a salary and in a corporate sense their work hours are more profitable with larger sales.

I think the lack of advertising presence answers the question of "is S8 profitable" all on it's own. Why would kodak spend advertising $$ promoting a $10 product that sells in miniscule quantities (overall and per order) when they can promote a $200 product that sells in massive quantities (overall and per order).

[audadvnc]

You could expend lots of corporate energy on a product where your margins suck, or you could focus your corporate energy where your margins are great(er).

Reminds me of the situation at Control Data Corporation in the 80's. Although they had profitable lines, upper mgmt apparently attended a few too many business seminars, because the vice presidents started shutting down profitable lines that weren't pulling a high enough margin. Simultaneously these same VP's were proposing ridiculous products and promising the moon in their inside sales pitches. One quarter, CDC lost $450 million, the same quarter a bunch of the main players cashed out to the tune of - $450 mil! They even gave each other "great performer" cash awards for gutting the company and screwing the stockholders. Love that Merkin' Bizness Ethic!

[ccortez]

Clearly I'm not recommending anything along those lines for Kodak. ;)

[T-Scan]

There was an article in S8 Today with Kodak that mentioned putting out some print adds for super 8 in the near future. God only knows how many people would jump on it if they knew it still existed.

[sarmoti]

Kodak is in no position to throw money down the drain marketing a low profit margin niche product. The do spend that kind of money marketing digital still cameras were profit margins are very small but the market is huge.

Of course Kodak knows that there's no consumer appeal for S8 other than some die hard fans and the pro appeal is a limited niche market on it's own.

Even if they spent billions on marketing S8 there's no way consumers are going to drop their video cameras and go back to expensive film and processing nightmares. And pros alike, they're not going to drop their broadcast cameras and 35mm cameras to settle for S8. Where's the reality???

[T-Scan]

Well, when I figure how many people drop their linen when they see me using S8 in public... I would imagine a simple magazine add for super 8 would knock people out of their chairs, more so than the same old digital camera adds that people are used to paging past in almost every major magazine. I they ran one add in Time Magazine that stated the format was still here, provided the web page address with all the current info... It would pay for itself 100 times over just from old timers pulling out their cameras just one more time out of curiosity... not to mentioned those that would get hooked the same way almost everyone on this board did. It may not start a full scale revolution, but I hardley see it as a risk.

[Evan Kubota]

"Ok, so let's get unrealistic and guess they're making a whopping $6 per cart and they sold an astonishing 1 million a year, that's $6 million! That's just half of what they make on one large theatrical 35mm release film sale (2500 150 minute prints). So they had to have all their people fufill orders and answer the phone for 1 million S8 carts and on the other hand they fufilled one order of 35mm print film for deluxe labs and made double the amount of money."

I never said they make a huge amount of money from S8, or that it was anything more than a drop in the bucket compared to their main film business. However, when people say that Kodak "isn't making any profit" on S8 it's probably not factually true. If it was losing money, they wouldn't still produce the cartridges. The market is certainly not going to expand dramatically in the next few years (like they seem to think digital will - it won't - but that's another issue... but what the hell)

IMO Kodak is kicking themselves in the ass by pushing into the low margin, incredibly oversaturated digital market with what are frequently just rebranded products. While I read that Kodak digicams were the #1 brand in terms of volume sold (largely due to availability at mass market retailers like Wal-Mart), they are still losing money from digital imaging overall.

It would make a lot more sense to focus on products in areas where there is the potential for higher margins, due to less competition. Nikon is apparently focusing more on digital SLRs rather than low-margin point and shoots now. A smart move.