Digital-Photo Printing Is a Developing Industry

By Leslie Walker
Thursday, June 2, 2005

One of the Internet's livelier battles this year is over your digital photos.

Snapfish, the Web photo service recently bought by Hewlett-Packard Co., lowered its price last week for printing a 4-by-6-inch photo to 12 cents from 19 cents. This week, Wal-Mart matched the offer, dropping the cost of standard prints ordered through its Web site to 12 cents from 17 cents. It was the second price drop this year for Walmart.com, which had been charging 24 cents per print just a few months ago.

The steep price cuts followed a flurry of recent takeovers in the Web photo industry and escalated a price war that has raged for five years over printing digital photos. Yet they won't likely resolve the major question swirling around digital photography: Namely, who's going to make money off all those pictures people are snapping with their shiny new digital cameras and camera phones?

Will people print digital images as often as they did film? So far they are not; industry analysts say fewer than one in five digital photos gets printed, compared with the vast majority of those taken on film.

It is easy to imagine the giant photo-printing industry shrinking to a shadow of its former self as generations raised to see the world through computer screens view more of their personal photos electronically. Even if people do print their growing digital collections, it is unclear where they will do so -- at home, in retail stores or through online services.

"Big companies need to be playing in all these areas," said Jill Aldort, analyst with InfoTrends/CapVentures, whose firm projects camera owners will continue using all three printing methods. While retail's share of digital printing has been growing, it has not caught up with home printing, Aldort said.

Well over half of the 8 billion digital images printed in the United States last year rolled off home printers, InfoTrends reports, even though home printing is considerably more expensive than ordering prints online or in stores. After factoring in ink and paper costs, InfoTrends estimated the average cost of a 4-by-6 photo printed at home was 36 cents, though larger prints can be more economical.

That is several times what you'd pay for standard prints at Walmart.com, which will let you pick them up for free in two days at a store or will ship them to you for an additional fee. Shipping adds about 6 to 8 cents per print at Snapfish and a few pennies more at Walmart.com.

Eastman Kodak Co.'s EasyShare Gallery, one of the most popular online photo sites, charges 25 cents for a standard print. Shutterfly asks 29 cents. Sony's ImageStation has them on sale for 17 cents, which is also what Costco's Web site charges for ordering online and picking up an hour later at a store. Snapfish recently started running Costco's online photo site, and its one-hour pickup option costs 2 cents less than the same service from Wal-Mart.

When Snapfish launched five years ago, it charged 59 cents for a 4-by-6 print, close to the industry average at that time. But Snapfish President Ben Nelson insisted that Snapfish is still making a profit today charging only 12 cents.

"Every year, we have had triple-digit growth," he said, "and as you grow to scale, you can cover fixed costs and get better operational efficiencies."

Hewlett-Packard is hardly the only big company trying to buy into the online photo business. So far this year, Yahoo bought an online photo service called Flickr; media company CNET Networks Inc. bought a rival called HeyPix; and Internet service provider United Online bought PhotoSite. Last year, Google picked up Picasa.

On the surface, these sites look similar, offering virtual albums for storing, displaying, editing and printing digital photos. But some make money selling paper prints and custom photo gifts, while others are focused on helping people view, share and manipulate their images -- and showing ads around them.

Online print orders today account for less than 10 percent of all digital printing, according to most industry estimates. Partly that is because many digital camera users are unfamiliar with Internet photo services, and others have dial-up Internet connections at home that make transmitting large files difficult.

It seems ironic that Hewlett-Packard, which makes a ton of money selling ink and has pushed home printing for years, could become the company that triggers big growth in online photo services by buying Snapfish and lowering its printing prices.

Nelson said the Snapfish price cut had been planned since December, before Hewlett-Packard began negotiating to buy the company. The printer maker could have blocked the move, Nelson noted, but decided it might help the digital-photography industry by encouraging people to print more.

"Growing the online industry and making sure everyone prints more is critical for Hewlett-Packard,'' he said. "And I can tell you flat out that just in the last week, we have seen both the average number of prints per image and prints per order go up at Snapfish.''

The final picture is far from developed, of course, but it's refreshing to see a traditional offline printing company taking the lead in promoting the still-young Internet photo industry.

Leslie Walker's e-mail address iswalkerl@washpost.com. She will be online at noon today for a Web chat with John Hagel III, co-author of the "The Only Sustainable Edge," a new book about the impact of globalization on business. To participate, go tohttp://www.washingtonpost.com.


© 2005 The Washington Post Company