how Capitalism and a lack of innovation Killed Film Photography

You have often heard it said, digital killed film. Allow me to share a more nuanced perspective.

Yes, the digital revolution did indeed play a key role in the demise of film photography, however, this role has been overstated. On the news of Pentax’s renewed interest in developing film cameras, I discussed some of the factors that would influence the range of potential cameras that Pentax would develop, as well as the realistic timelines involved. As I delved deeper, I also started looking at some of my favorite film camera manufacturers, examining the chances for them to also enter the fray.

I went down the rabbit hole.

There, I discovered wild facts and events that left me scratching my head. I published a story on Yashica, and their tragic descent from being one of the most respected brands in film photography to basically a glorified toy camera manufacturer. Then, as I started looking into the history of another one of my favorites, Konica-Minolta, I discovered commonalities that pointed me to an unusual, but unsurprising villain in the case of the demise of film, capitalism and a lack of innovation in the face of stiff competition from digital technology.

To unravel the rationale for the decisions that were being made by the companies in the early 2000s to shut down film camera production, I found a wealth of information explaining the mindset of the key individuals and decision makers behind those historical moves. I went to the source, the financial reports of the said companies. Fortunately, due to laws governing business practice, a lot of these decisions are documented in these financial reports.

But don’t say you haven’t been warned. This article will be filled with lots of numbers, but if you follow the train of thought, the nuggets you will discover will be rewarding.

partying like it was 1999

At the peak of popularity of film photography, many camera manufacturers were competing to release the most advanced and innovative film cameras. There was a wide range of options available to photographers at different price points, and film sales were on the rise, as strong demand for film from both amateur and professional photographers fueled market trends. This demand was driven in part by the strong culture and community surrounding film photography. There were many magazines, workshops, and other resources available for film photographers, and the art form had a dedicated following of enthusiasts.

Camera makers were raking in cash.

In 1999, film cameras were still popular but there were indications that the market fundamentals had started to shift. There was a digital revolution afoot and the companies were starting to diversify their portfolio into digital technologies. Nikon reported in its earnings report that year that “camera equipment posted positive sales results on the back of successful product launches and high levels of consumer spending in the United States”. Sales of single-lens reflex (SLR) cameras increased during the year as a result of the popularity of models such as the new Nikon F100. The Nikon Pronea S, which utilizes Advanced Photo System (APS) technology, enjoyed resounding success, while the Nikon F60 series, a range of easy-to-use models for beginners, also proved highly popular, according to Nikon. They were also projecting to “to benefit from the high popularity of (their) new range of digital cameras and the planned launch of a digital camera model for the professional market (in the) autumn”.

Across the pond at Konica, sales in the Photographic Materials and Photo-Related Industrial Equipment segment were declining, attributed to a dip in demand for color film, color paper, cameras, and other consumer products in Japan and elsewhere in Asia. Sales in this segment had declined modestly by 4.9% in fiscal 1999, to ¥336.6 billion. However, the Company’s popular Konica Revio APS camera continued to sell well, and sales of the Konica Z-up 140LX and the Konica Z-up 110EX were strong in Europe and the United States. However, their investment into the APS film technology, although it had seen some success initially, would ultimately fall victim to the push to digital technology, and by 2003, there was no mention of it in the earnings report. The format had all but died.

a tsunami and paranoia at konica-minolta

In 2003, Minolta had joined forces with Konica, in a new conglomerate, Konica-Minolta. They were still making money, lots of it, with Konica reporting its highest earnings ever. However, paranoia was starting to set in.

The CEO of Konica-Minolta admitted that their “mainstay silver-halide color film and color paper business in the photo imaging field (was) highly impacted by the worldwide expansion of digital cameras”. Sales in Japan, North America, and Europe, had deteriorated, however, sales in Russia, China, India, and surrounding regions, on the other hand, were still growing. Their solution was to look for opportunities to establish new alternative businesses. That would seem counter to what the logical response should have been, investing in those emerging markets in order to boost sale of film and film products.

In 2006, the dreaded news came. Konica-Minolta discontinued production of its line of film and digital cameras, licensing rights to their autofocus lens technology to Sony. It is worth noting that at that time, although film related products sales were trending downwards from a height in 2003, they were still bringing in more money (net sales) than their sensing and medical and graphic imaging divisions combined, and more than their optics division.

That decision to totally abandon both film and digital camera production seemed drastic, but fair, considering that the company had been operating in loss for three consecutive years.

However, another path forward may have been to scale down its film camera production and ramp up digital camera production, as was the strategy that Nikon and Leica employed.

In 2006, as other film camera manufacturers were hitting the exit, Nikon was committing to maintaining production of its scaled-down range of film cameras. This was the right approach. Snippets from Nikon’s 2006 Financial Report.

One clue as to why this drastic decision was made can be found in the Company’s own projections for 2006 made back in their 2003 earnings report. They were projecting that the new merger between the two entities, Konica and Minolta would lead to amazing growth, with operating income projected to rise from 77.3 billion Yen in 2003 to 150 (!) billion Yen in 2006. This painted a rosy picture of a successful merger, even though in their own words, film and film camera sales were starting to decline at that time.

Konica-Minolta had made a seemingly unrealistic projection regarding their projected Net Sales and Operating Income

Guess what? That did not happen. Actual operating income was 83.4 billion Yen, a modest increase from 2003, but apparently still not enough to meet the astronomical growth they had predicted back in 2003 with the merger.

In the world of capitalism, nothing seems more grievous than not meeting an earnings target. You may be making billions, but if you missed the target and did not make enough billions, something had to give.

Heads had to roll, and roll they did.

Three thousand seven hundred employees were laid off with that decision.

The market rewarded that decision with a boost in their stock value. The period following that decision was marked by the biggest growth in Konica-Minolta stocks.

the mess at kyocera

Speaking of unfortunate consequences for film photography, Kyocera did its fair share to contribute.

The story of Yashica is as tragic as they come, however, there is a clear and consistent line of greed and cynicism that led to Kyocera (the company that acquired Yashica) to terminate camera production in 2005. Ironically, for the year-ending financial statement in 2004, gross profit had increased by ¥7 billion ($68 million), or 2.6%, in fiscal 2004 to ¥280.6 billion ($2,698 million) from ¥273.5 billion in fiscal 2003. Yet, it felt the need to terminate not just its film camera operations, but also all of its digital camera production.

A statement in the 2005 Financial report says it all:

“To enhance cost competitiveness in the camera business, we mass produce digital still cameras through our joint venture, Dongguan Shilong Kyocera Optics Co., Ltd. However, we could not improve profitability in the camera business due mainly to a rapid demand shift from conventional still cameras to digital still cameras and a continuous market price hike in digital still cameras. As a result, we made a decision to downsize our camera business and focus on the optical module business.”

Keywords, “improve profitability”.

The question worth asking, why does profitability always have to improve? Is staying profitable not good enough?

So basically, they were downsizing their camera business because they couldn’t increase profits in that sector. That in my opinion is capitalism at its worse. Also, notice the reference to the Dongguan Shilong Kyocera Optics Co., Ltd.? More on that shortly.

During this period, digital was on the rise and presented opportunities to capitalize on the gains in the digital photography market, in order to supplement the reduction (not loss) in the film camera business. The earnings report for that year reveals a whopping profit of 101 billion Yen! They were not suffering, and worst of all, they were projecting stable growth in the market for digital cameras for 2006.

The fundamental problem is that Kyocera had gone on a seemingly random company acquisition spree, ranging from multimedia and gaming, mobile technology, solar energy, engine development and others not associated with film camera production. They had made a tragic decision to lump all these diverse products under their Equipment Group. They were developing DSC modules for mobile phone and film camera sales were starting to decrease.

According to the 2004 financial report:

“In optical instruments, poor sales of still film cameras combined with development costs for the “R-TUNE” engine and higher promotional costs for DSCs resulted in an operating loss.”

Imagine that. They were blaming the operating loss in that department (filled with totally unrelated businesses) partially on film, while lumping their development and promotional cost for other totally unrelated products to their film camera division’s profitability. So in effect, film sales did not offset these other development projects and promotional projects.

Also, this statement in the 2004 Financial report:

“In addition, we continue to expand production of digital cameras at our Dongguan Shilong plant in China, to reduce costs and raise margins.”

Surprise! They had moved production to China to reduce costs, and improve profit margins, which ultimately hurt the Yashica brand name and value. They had stopped manufacturing Yashica’s high-end SLRs, instead moving production to the Chinese factory, and rebranding Yashica as a cheap and affordable brand, by focusing on cheap point and shoot cameras.

Thus, in their quest to make more money, they ended up making less money, then overreacted and shut the whole thing down.

winners and losers

The period that saw the rapid decline of film has often thus been attributed to the rapid uptake of digital. I argue here that it was mostly due to a lack of innovation and thinking outside the box from the film camera manufacturers.

Now, I know this is a controversial take, but hear me out.

If digital killed film and digital is even stronger now than ever before, why is film resurging. It does not compute for me that 2 megapixel digital cameras were able to take out the best film cameras, but yet people are now going back to film in hoards, even though 50 megapixel cameras and high quality smartphones lenses are so ubiquitous. Also, why did digital not kill Instax? Kodak and Polaroid did what the majority of the film companies did, bail out of the instant film market. However, Fuji stuck it out with Instax and innovated. In return, they were greatly rewarded, even in the heights of the digital revolution. According to Wikipedia, in 2014, the Instax Mini 8 was outselling flagship models like the Fujifilm X-T1 and the Sony α7R, and in 2016, sales of Instax cameras had risen to 5 million units the previous fiscal year, up from 100,000 units in 2004. Eventually, the Impossible Project bought out the Polaroid brand and with its own innovation managed to resurrect the brand and create a market niche for itself.

Innovation should have been film’s answer to the rapid rise of digital, but unfortunately, for reasons discussed earlier, that would have required more investments and potential short-term losses that the companies were not willing to make.

FEEDING THE MONSTER, and a cautionary tale

I conclude that film photography fell victim to a capitalist mindset and a lack of innovation. Profits margins could not decrease for too long, or investors panic and CEO heads roll. This put the heads (pun intended) of these companies in a very tight spot. There was no room for film to naturally decline and find its level that could be sustained through time. There was no patience for that natural process, nor the foresight to entertain the possibility of a resurgence. There was not much invested into making film better, researching less toxic ways of developing film for example. Imagine the great benefit this could have been to the companies when a resurgence finally came through if they had maintained their film equipment operating, even if at base profitability. They could have had the option to quickly ramp up production once a resurgence like the one we are currently experiencing came back around.

In these stories lie a cautionary tale.

With Pentax indicating their desire to re-enter the film photography business, my hope would be that they do not allow themselves to be driven only by the capitalist metrics. If they instead focus on building the film community and culture from the ground up, sponsoring meet-ups, contests and the likes, maybe even at a loss at the start, they may be credited with single-handedly growing a market from base levels, and salvaging an industry. The rewards of that effort will be worth it, in due time I believe.

Film photography is dead, long Live film photography!