By Barbara Pellow Digital press manufacturers like Hewlett-Packard and Kodak NexPress are working with users on the evolution of new products and services that use captured images to build postcards, greeting cards, calendars and photo books. November 29, 2004 -- Printers and photographers are teaming up when it comes to assessing new ways to generate additional revenue and differentiate their businesses from competitors. Photography is clearly experiencing a major revolution with the widespread availability of high-performance, low-cost digital cameras, coupled with the meteoric growth of the Internet. Users are finding more and more innovative ways of taking, printing and sharing pictures that go far beyond the old family album. The InfoTrends Research Group projects that worldwide revenue from low-end (sub-$1,000) digital camera sales will reach $11.8 billion by 2007. Worldwide unit shipments of low-end digital cameras reached 24 million units in 2002, capturing 28% of total worldwide camera sales (not including one-time use cameras). Unit volume is forecast to grow at a compound annual growth rate of 16% to reach 51 million units in 2007. These digital camera owners will use digital photo-finishing labs to print the pictures they choose to consign to paper. In addition, analog images can be automatically scanned and archived on image servers for viewing and ordering over the Internet. This means that the nature of industrial photo finishing labs will have to change. Digital press manufacturers like Hewlett-Packard and Kodak NexPress are hoping to capture the synergy between digital photography and digital color printing. They are working with users on the evolution of new products and services that use captured images to build postcards, greeting cards, calendars and photo books. Some of the key trends driving the expansion of these new digital photographic products include the following: According to InfoTrends, specialty photo merchandise is estimated to represent 40% of the on-line photo revenue by 2008, up from 20% in 2002. Photo books appear to be an important driver of this growth. The Photo Marketing Association (PMA) indicated that 5.4 billion prints will be made from digital still cameras in 2004, growing to 7.7 billion in 2005 IDC said that there would be more than a billion camera-enabled mobile phones in use over the next three years. In addition 343 million photos were processed online in 2003, up from 114 million in 2002 and growing to 2 billion by 2007. Today's Technology…Making New Products and New Revenue Streams for Shutterfly Shutterfly, a leading online photo service, is leveraging today's production digital color printing technology to expand its market opportunity. The company was formed in 1999. Jim Clark, Netscape's co-founder and CEO, and Shutterfly's Chairman, recognized that digital cameras were taking off and seized the opportunity to provide an easy way to get digital camera output into hardcopy photos. Shutterfly is very focused on continually engaging its customer base as the company defines new digital color products and services designed to repurpose photographic images multiple times. Initially, Shutterfly's offering was designed so that the user would come to the Web site, upload images and place an order. The order would get submitted to an order database; the credit card would be authorized; and the order would be passed to the lab for printing. Shutterfly has uniquely developed software that color-corrects and enhances images prior to printing, unless the user opts not to use it. Once the image is rendered, it is scheduled for printing. As Shutterfly's management team looked at the market, they realized that there was an opportunity to affordably offer a new array of products and services leveraging digital color print technologies. More than 65% of Shutterfly's users are female and they were continually looking for new ways to stay in touch with friends and family. When Shutterfly assessed the needs of its customer base, the company found that customers wanted personalized greeting cards, note cards and calendars at an attractive price. In September of 2001, Shutterfly installed its first production digital color press to blend the captured image with high quality printed specialty products. Today, users can create a custom calendar that showcases their favorite pictures month after month. It gives them the opportunity to remember a great vacation with a calendar of travel pictures. They can also create a baby calendar with pictures from baby's first year as a gift for Grandma. The easy-to-use software lets the consumer choose the pictures they would like to use for the calendar and a picture for the calendar cover. It can be either a 12- or 18-month wall calendar and start on any month. It opens to a full 11" x 17" so each image and month is printed on an 8.5" x 11" page, creating room to jot down appointments, notes and reminders of important dates. Since the calendar is printed on durable card stock, it will hold up to everyday use and the acid-free paper ensures that pictures will look great for an extended period of time. Shutterfly has given users this application at prices comparable to store-bought calendars. A 12 month personalized calendar (quantity one) is available for $19.99 and an 18-month calendar is priced at $24.99. Customers also wanted the ability to spread holiday cheer with personalized photo greeting cards or 4x8 photo cards. Greeting cards are priced to be competitive with your local Hallmark store with 51-100 cards priced at $1.59 per card. Note cards using a picture the customer chooses for the front proved to be a great option for personalized thank you cards or a terrific gift. A box of 12 is priced at $9.99. Not only are these products offered on the Shutterfly Web site, but the company has also established alliances with Adobe, Best Buy, Dell, and Verizon for expanded distribution of its digital color print products. Elegante Wedding Photography Elegante Wedding Photography has established an excellent reputation for producing high-quality leather-bound wedding albums and additional photographic prints in frames. They are focused on generating additional high-margin revenue and differentiating their business from competitors as well as capitalizing on the inevitable transition of photography to digital image capture. They teamed up with NexPress and UK printer Butler &Tanner to re-engineer the process. The result was the development of the Elegante Story Book, a digitally printed wedding album that supplements Elegante's photographic products. While the overall digital color printing market has not yet made the connection between digital cameras and production digital color printing, there is clearly opportunity for a number of fun and affordable products as consumers capture more and more images. The Elegante Storybook workflow places photos into a password protected online viewing application. The bride and groom review and select images on screen, specifying special effects such as watercolor, charcoal, or soft-transition borders, and indicate retouching challenges, such as removing champagne spots from the bride's dress. The bride and groom can also provide text, such as poems, vows, or toasts for integration with the images. The production team applies the desired effects and places the images and text into professionally designed album templates. The final album is made into a PDF file that the client can review and approve. It is then sent to the printer for digital color printing and finishing. According to Gary Brown, Business Development Manager, Elegante Wedding Photography, "Our clients love all the artistic effects we can offer and our production staff loves the flexibility of the digital workflow. And we can offer print runs of one to satisfy individual customers and still make a good business of it." The Market Connection…Digital Cameras…Digital Color While the overall digital color printing market has not yet made the connection between digital cameras and production digital color printing, there is clearly opportunity for a number of fun and affordable products as consumers capture more and more images. The opportunities range from consumer applications to professional portrait social products to commercial applications. Consumers are looking for the ability to take photos of special intimate family moments and share them through greeting cards, personalized calendars and photo books. Professional photographers see digital print as an opportunity to generate additional revenue streams as a supplement to traditional photography. The opportunities include photo directories like school yearbooks, sports cards, wedding books and thank you cards. And finally there may be specific commercial applications including portfolio books or limited edition art books. Photos are personal, and the ability to package a customized greeting or message with a "photo oriented product" makes tremendous market sense. As digital color printers search for application expansion, helping customers capture and share memories may be the answer.