Will Photo CD save Kodak’s core business from going the way of the buggy whip?

Several years ago, Kodak realized that it faced a challenge: the company’s core business of selling film, chemistry and photographic paper to serve the amateur photography market was coming under attack from the Japanese consumer electronics companies. Camcorders were getting smaller and less expensive — and sales were beginning to take off. In the longer term, the Japanese were working on new generations of still-video and digital cameras that would allow consumers to take photographs that could be displayed on their television sets and/or fed into computers.

Kodak hit upon an ingenious counter-strategy: combine the advantages of film photography (very high resolution, excellent rendition of colors, the capability to make inexpensive, high-quality prints, and a huge infrastructure of cameras, photo stores and photo finishers) with the attraction of being able to view images on a television screen and the advantages of having images in digital form.

The result is Photo CD.

The key ingredients. There are two key technical foundations for Photo CD. The first is the technology for creating inexpensive write-once (nonerasable) CDs that can be read by a standard CD player.

The second foundation is the data format. This includes a standard “color space” based on analog HDTV standards, a clever data format for storing compressed digital images (see Kodak’s Photo CD Formats, p. 6), and the indexing information required to retrieve stored images.

Almost as important, Kodak has put a lot of effort into the tools necessary to make all of the disparate parts work together, including fast and relatively inexpensive scanners for capturing large volumes of images, hardware and software systems for high-volume recording of CDs, and automatic color correction and color compensation software for “fixing” John Q. Public’s underexposed vacation photographs.

PHOTO CD FOR CONSUMERS

Kodak’s consumer strategy is based upon three assumptions:

1. It can be easy and inexpensive for consumers to convert film images to disc;
2. Kodak will be able to get Photo CD players into consumers’ homes; and
3. Consumers will want to view their photographs on their TV sets.

On the first score, Kodak expects that before the year is out it will have convinced several thousand photo finishers to pony up the $100,000 or so that the disc-making system will cost. Next year, Kodak thinks that installations will skyrocket as every one-hour lab in the country jumps on the bandwagon. This schedule appears to be overly ambitious.

The minimum equipment — Kodak’s model 2400 35mm scanner, a writable CD drive, a Sun workstation and some software — costs less than $100,000 and Kodak will undoubtedly advertise the starting price. But photo finishing is a low-margin, high-volume business, and a minimal system can’t turn out the discs fast enough to make money. A system that can — a second disc-writer drive, a gigabyte or two of buffer storage, 100 MB or more memory for the computer — will easily hit the hundred-grand mark.

Once the disc-makers are ubiquitous, it will indeed be convenient to turn your snapshots into digits. Your Kodak-authorized photo finisher will develop the film, scan it, automatically correct the color and write it out to the disc. The whole process won’t take much longer than it now takes to make 4×5-inch prints. As to cost, Kodak estimates that a 12-shot roll can be developed, written to disc and packed in a jewel case, complete with a “contact sheet” of thumbnails, for $20.

The player. Assumption 2 is based on Kodak’s hope that all CD audio and CD-ROM manufacturers will eventually build Photo CD capabilities into their players. New multimedia CD drives will likely support Photo CD. Philips, for one, announced a year ago that it was building support for Photo CD into its CD-I players.

However, consumer sales of CD-I — or of any other consumer multimedia products — have hardly been strong enough to create the market Kodak needs. And, the manufacturers of CD audio players are not likely to build in the added cost of Photo CD support until they are convinced that consumers really want Photo CD capabilities. So Kodak will try to jump start the market by offering its own audio/Photo CD player (manufactured by Philips).

A basic Photo CD player looks just like an audio disc player, and it will play audio CDs. It hooks to your TV like a VCR and is operated by a VCR-like remote control. With it, you can sequence the pictures from one disc, including dropping certain pictures from the playback. Your sequence cannot be stored with the disc, however, and will be forgotten as soon as you insert the next disc. It initially will cost about $450.

Kodak figures that people will want to do a bit more than just step sequentially through their rolls of film. They will want to build slide shows about specific vacations or birthdays, showing only the best pictures. Thus, it also will offer a deluxe player, which features 2× close-ups and extra memory for storing multi-disc sequences. Later in the year, Kodak will add a five-disc carousel model to the lineup.

Photo CD players went on sale in the U.S. in August. As expected, initial sales have been spotty.

Chicken and egg. Photo CD images displayed on a good TV set look stunning. The crucial question, however, is how many consumers are going to pay the additional $250 over the cost of a standard audio CD player, or around $450, for the privilege of viewing photographs on their televisions.

If enough of them do, consumer electronics companies will be convinced to build Photo CD capabilities into all of their players and the photo labs and photo finishers will be convinced to buy the necessary equipment. Otherwise, all bets are off.

Snapshots, and then what? Beyond players, Kodak does not have a good consumer solution for the photographic pleasure of creating photo albums. It does have software for picture editing: sharpening, cropping and color-correcting pictures, adding music, titles and commentary. However, the software runs only on robust Macintoshes or Windows PCs equipped with an expensive write-once CD drive. This is sophisticated equipment, and it is doubtful whether more than a few gadgeteers will buy the necessary hardware and figure out how to use the software.

Most consumers who want Photo CD albums will have to take their existing photo discs, audio clips and music on cassette, and script notes to their local photo finisher to assemble their albums. Kodak’s literature makes it sound like the photo finisher can set up do-it-yourself kiosks where people will assemble their own albums. But editing sound cuts and image transitions takes quite a bit of practice, and the people who are interested in doing it themselves tend to invest in the tools. Everyone else either lets a pro do the work or skips the whole thing. It is unlikely that the photo finishers will also become multimedia producers, although this could eventually become a profitable side business if there is enough interest.

COMMERCIAL APPLICATIONS

If you add everything up — the cost of the players, the investment in equipment and training required by the photo finisher, the caution of the Japanese CD audio manufacturers (many of whom also have a stake in the camcorder and still-video business), and the limitations of a plain “vanilla” Photo CD slide show — it is not likely that Photo CD will be an instant raging success in the consumer market. Fortunately for Kodak, it looks as if Photo CD is going to be a rapid success in commercial markets. Indeed, commercial applications are going to be crucial to the ultimate success of Photo CD. These applications can provide the initial bread-and-butter volume for Kodak, and the professional photographer can validate Photo CD as a legitimate extension of photography in the mind of the amateur.

Because the Photo CD format is based on the CD-ROM/XA data format, most of these drives will read (or, with some additional software, can be made to read) at least single-session Photo CD discs. Within a very short time, virtually all new XA drives will be fully Photo CD compatible, including support for multi-session discs.

Commercial applications are going to be crucial to the ultimate success of Photo CD. These applications can provide the initial bread-and-butter volume for Kodak, and the professional photographer can validate Photo CD as a legitimate extension of photography in the mind of the amateur.

Kodak offers Photo CD Access software to allow Mac and Windows users to read Photo CD discs. It also licenses a Photo CD Access developer’s tool kit to software developers who want to build support for Photo CD images into their programs. Apple has already announced that it will support Photo CD in its next system software upgrade and Microsoft is expected to do so shortly.

Currently, anyone who wishes to access Photo CD images must use Kodak’s software which, among other things, color corrects the image for television display thus muting or losing some color. There are applications for which this is inappropriate. Kodak has refused, however, to publish the Photo CD data formats and allow unobstructed access to the images.

On August 25, Kodak announced a slew of products intended to make Photo CD more useful to a broader range of commercial applications. These include:

• Four new Photo CD formats aimed at particular markets (see sidebar, p. 6).
• A high-resolution “professional” Photo CD scanner that will scan film sizes up to 4×5 inches at resolutions of up to 4,000×6,000 pixels. (The standard scanner accepts only 35mm film and has a maximum resolution of 2,000×3,000 pixels.)
• Faster workstations for mastering Photo CD discs.
• New end-user software for image retrieval and manipulation.
• A Kodak Picture Exchange worldwide Photo CD image transmission service.

A big push. Photo CD is crucial to Kodak’s long-term future. Kodak knows as well as anyone that an all-digital future bodes ill for the silver-based film business that is Kodak’s heart and soul. Kodak’s true interest lies in heading off any tendency for the market to standardize on still-video cameras, camcorders and any other all-electronic medium that would cut into its film sales, and lock it out of the future of digital photography.

But first Kodak is going to have to learn the lesson that every vendor in the computer industry has been forced to learn: standards must be open. In the consumer market, it is fine for Kodak to control technology to insure that customers get Kodak quality from a Kodak process. In the commercial market, Kodak is going to have to be prepared to publish all its data formats and let other companies build hardware and software products that make use of these formats.

Like all hybrids of old and new technology, Photo CD is only an interim solution. Ultimately, silver film will go the way of the buggy whip, both because all-digital is intrinsically simpler and because silver causes nasty disposal problems at every step of the process. Thus, Kodak’s ultimate goal in pursuing Photo CD cannot be to stave off the demise of film (though that is surely its interim goal). Rather, its strategy is to move from being a marginal player in electronic imaging to being a central, controlling player.

To do this, it must first become the player that defines the de facto standards, then it must force the pace of innovation without losing the loyalty of its existing customers. Photo CD is admirably positioned to let Kodak do both.

Peter Dyson, Jonathan Seybold

KODAK’S PHOTO CD FORMATS

Photo CD Master. This is the original Photo CD format, the “digital negative” for the consumer market. It provides for up to 100 images per disc, each one stored in all five resolutions:

• 1/16 of standard TV quality, suitable for thumbnails and contact sheets;
• 1/4 of standard TV quality;
• Base resolution, designed to be viewed on current TV sets;
• 4×, equivalent to the proposed HDTV quality;
• 16×, which captures digitally just about all of the information that is in a 35mm snapshot (2,000×3,000 pixels).

The data is stored on the disc in a very clever manner. The first three resolutions are stored without data compression. To view an image at Level 4 (4×) additional information is added to the Level 3 (TV) resolution to produce the higher-quality image. Level 5 (16×) adds still more data to get up to the full resolution of the original scan. All of this additional data is compressed. Therefore, the disc does not have to hold five complete copies of each image. It only stores three low-resolution images and the necessary data to “fill in” the missing detail.

On August 25, Kodak announced four additional formats.

Pro Photo CD. This is designed for professional photographers. It allows higher resolution to capture the greater detail available from larger film sizes (up to 4×5-inches), and thus must be made on a Professional model scanner that not every photofinisher will have. Of particular interest to professionals, the file format allows embedding copyright notices within the picture data, and also permits encrypting the data as well as “watermarking” images, at least until payment for the image has been received. Thus, the high-resolution versions of each image won’t be compatible with the Master format. However, the thumbnail and base-resolution images will be compatible.

Photo CD Portfolio. This disc format is designed for entertainment viewing of slide shows, or digital photo albums. Unlike the previous two formats, which have all possible resolutions stored on the disc, the Portfolio need only hold the display-resolution pictures. Dispensing with the top-quality versions frees up disc space, enough to allow 800 pictures or an hour of CD-audio sound or any intermediate combination.

Portfolio discs cannot be made directly from 35mm film. Their content can only be transferred from a Master or Pro CD, or from another Portfolio.

Photo CD Catalog. This format is designed as an index to 6,000 images. Thus, it only has the low-resolution image format. But it also has Kodak’s Browser application software, which allows keyword searching of an image database. Versions for dos, Windows and Macintosh will be able to coexist on the same disc. Catalog’s primary applications will be as a sales tool for firms that sell images: stock photo houses, freelance photographers and so on. However, it will also be used by catalog retailers like L.L. Bean, which can display photographs of its entire inventory, with prices, colors and ordering information, on a single disk.

Photo CD Medical. This format, for specialized imaging requirements, allows highly nonstandard data encoding. It will be useful to radiologists, who can trade a lower color definition for greater gray-scale resolution, and to geological researchers and others who use false-color mapping to enhance the detail in computer-generated images such as sonograms, seismograms and satellite scans. This is the only format that allows other forms of digital data to be encoded on the disc, like CAT scans, MRI data, or digital satellite telemetry.

Peter Dyson