It's been a roller-coaster year for the Eastman Kodak Company. As one of the most recongnizable brands in the world, last year's news of its bankruptcy filing and the intended sale of its personal imaging business spurred speculation in the industry — with many wondering what would happen to Kodak's fleet of photo kiosks and the value of its iconic name.
But the ambiguity began to clear in recent months. Kodak announced in December that it sold its patent portfolio for $527 million, and earlier this week a judge approved a financing deal worth $843.7 million to pay off its existing bankruptcy loan — both key steps toward bringing the photography pioneer out of its financial woes.
At the recent Consumer Electronics Show in Las Vegas, Larry Trevarthen, Kodak's VP of marketing and retail system solutions, spoke with Gary Pageau, principal at InfoCircle and blogger for Kiosk Marketplace. Read the interview below for an in-depth discussion about Kodak's current state of business and its plans for the future:
Q: Where is the sale going?
A: Kodak corporate is getting ready to emerge from bankruptcy. We're well on track through the patent sale and the kiosk. With the sale of patents a few weeks ago, and the sale of these businesses, it sets Kodak up for emergence from bankruptcy.
For the photography business, we've been meeting with potential buyers, and there's been a handful who have come forward that are very interested in the business. Through this month, we're going to get ready to go through a process called a stalking horse. One of the buyers is put forth as a base bid, and we announce that. That will be in February. In March, there will be an auction, where any other bidders who want to compete will have an opportunity to bid. And that will be completed sometime in the March timeframe. By June of 2013, the personalized imaging component of Kodak would be separate from Kodak as an ongoing organization with new owners.
Q: Does this include using the Kodak name?
A: We've been meeting with a lot of resellers, and we've said it doesn't make sense without the Kodak name. The Kodak brand is a separate asset available to the purchasers of the personalized imaging component — either to buy or to license. Everybody in the management organization, or even the buyers, can't see that [Kodak] won't go with it, because that's what you're buying, the Kodak photography business.
Q: How many kiosk units?
A: We're quoting 106,000 units installed.
Q: Who are some of your retail partners?
A: CVS and Target are the primary large U.S. accounts. We have a lot of other ones: Bartell’s in the state of Washington, Hy-Vee, Sam's Club, Loblaw, WalMart in Canada, Boots, Tesco in the U.K., Carrefour, Real, DM and Office Works. Those are the flagships in the Western world.
Q: Who produces the media?
Story continues below...
A: Part of the sale includes the manufacturing of the media and the Colorado manufacturing facilities. That's part of the sale.
It's all good news. Next you'll see the announcement of the stalking horse, and then it will go quiet again, until March. Once we actually sell in June, there will be lots of public discussions with press and customers to explain what it means.
Really, what the retailers are looking for is continuity of business. The interesting thing about this business is that we have long term contracts with retailers and with our suppliers. We're just changing the name on the masthead.
Q: What about integration with what used to be Kodak Gallery? What's your online strategy? You can't use Kodak Gallery anymore because it's gone away.
A: That gets us into the second part of the conversation, which is: What do we do with the portfolio and what do we do with the products? Where is the kiosk business going? I'm going to focus much more on the kiosks than the paper and film business. Fundamentally, the way we look at our strategy is, it's not so much that we are a photo company — we're a memory company.
One of the things we're finding, as we serve our retail partners, is that we've got to be relevant in the store. We've got make sure we've got a great experience. And, as consumers move more and more toward mobile this year, a lot of retailers are rolling out our new WiFi device.
With a kiosk, it's near-term WiFi, and you can download your pictures. Interestingly enough, the experience is actually better than if it's tethered. If it's tethered, it stars pulling down all the images; if it's WiFi, it pulls the thumbnails and does everything in the background. The WiFi engagement with the kiosk is very strong.
Q: When Bluetooth was the rage, it was very difficult in-store. Is WiFi any easier?
A: We're using near-field WiFi. You just need a phone. It works with iPhone and Android. From a retailer's standpoint — going to your online question — they have to be relevant in-store and out-of-store as well. That's why we have focused on mobile devices. As consumers take pictures on the device, through net-to-retail to the kiosk, they can do simple photo books and pick those up.
Even more to the point, as I take this picture, it's not so much a 4x6 I am interested in anymore, I am interested in Instagram and enhancing it in some way. So one of the things we've been talking to retailers about is opening up our API and our program so it's not just photos that can be printed — it's any content. Leave it up to the imagination of the developers.
That's where the strategy becomes complete. Embracing mobile, in-store and out-of-store, and that it's not just for photos, but for content.
Q: Where can you pull images from?
A: You can pull images from Facebook and Picasa; we're going to be integrating with DropBox.
Q: What about the APEX platform? Will that continue?
A: It will absolutely continue. As the images come in from net-to-retail, they will come into the APEX and be managed and routed in the store as well. What we're really excited about is transforming the category from the in-store photo to the "wherever you are" content.
If you look at Kodak's heritage, you can say it's a photo company, but it's really a memories company. As memories go beyond photos to content, we're really embracing that. As memories go to the smartphone, we're really embracing that as well.
Q: What do you mean other content?
A: I'll give you three examples. We signed an agreement last fall with the company named On-Demand Books, maker of the Espresso book machine. It can produce a book that looks like it came from Barnes & Noble in four minutes. They are producing a volume of not only trade books, but also self-published books like recipe books or genealogy books.
One thing I haven't mentioned is, when a customer comes in, that's a really valued customer interaction point. What we've done is integrate the On-Demand books and the kiosks in several ways. You can go to the kiosk and search for a book you may want printed, and have it printed out. Or you could do a photo book on this device; it's very high-quality color, it's perfect-bound, and it can be trimmed on three sizes. We've talked to our retail partners about doing pilots, and changing the way books are sold.
Another thing it can do very well is greeting cards. At Greeting Card Universe, you can order cards. We have an agreement with Solabyte to authenticate DVDs as part of the UltraViolet initiative. One of the things they have is the ability to physically mark the DVD, so it's electronically marked for authentication, as opposed to hand-stamped, which is how Walmart does it today. It's more secure. We're going to that as part of the kiosk.
Yes, you can do that at home, but in two or three years, the laptop you have at home won't have a DVD in it. I asked the UltraViolet people how long we will have DVDs, and they said eight years. People don't migrate as fast as you think.
Kodak is changing from the walled garden approach; this is intentional. There's no way any company can predict and win wherever this content stuff is going to go. If we did a walled garden, and tried to do it all ourselves, we would get there late and underpowered. So if you open it up to the best of everybody and bring that to the consumer, the market will decide who wins. Not to mention the fact that this is a category that needs excitement, that needs reinvention.
Q: A lot of people are writing it off at this point. There are fewer players, less innovation, too much overhead, etc.
A: The only way you can win a game that's against you is to change the rules. That's effectively what we are doing. We're saying this is not a photo category. We're opening it up to new content to new players. The walled garden worked when you were in a controlled market in one category. It doesn't work in a mobile ecosystem anymore.
That's why the mobile and tablet experience is important. We have to embrace creation where creation makes sense and output where output makes sense. Output may not necessarily be retail. It may be ship-to-home or some other mechanism. But if I embrace those two things, there's a lot of possibility in the middle.
Read more about photo kiosks.