Interview with Tom Berarducci, Consumer Imaging Systems Group at Kodak

For almost 120 years, Kodak has been one of the names most closely associated with photography. Now, as consumers move from traditional to digital photos, Kodak is making the transition, too. As part of that, they’re bringing out a line of wireless digital picture frames in March.

Tom Berarducci, the director of technology partnerships and programs in the Consumer Imaging Systems Group at the Eastman Kodak Company, was nice enough to take some time to chat with us about the outlook for digital picture frames at Kodak.

How long has Kodak been selling digital frames?

Kodak came out with a frame product late last year and followed up this year with our new digital picture frames. Prior to that, we had been involved in the market off and on for several years.

As the transition from traditional photo to digital took hold, did heading to this space just seem natural or was that a departure?

It was really natural because Kodak’s all about trying to figure out ways to help people enjoy their pictures better. As people got in front of computers and electronic displays, it just seemed natural for Kodak to be able to put Kodak image science and Kodak pictures on those displays.

You’ve just introduced some wireless frames that are coming out in March. Tell us about them.

We really tried to bring a lot of cool Kodak technology to an area about which a lot of people are getting excited: digital picture frames. The interesting thing about these frames is that we’ve tried to put in some new things that we think people are going to really want. First of all, Kodak is absolutely providing the best image quality, in terms of display, with these frames. We’re putting Kodak image quality into these displays such that they’re going to bring out the kind of pictures that people want to see.

Number two we think we’re providing an ease-of-use experience that’s better than anything else out there. The way that people can get pictures onto the frames, especially the wireless versions, is excellent. The fact that these things come with a really cool remote control that will make it really easy for people to enjoy the frames – not only getting the pictures on, but sharing them with their friends and families – is kind of neat.

And the third thing is that this is one of the first set of products in the market that I have seen that are moving to a full HD aspect ratio, the 16:9 aspect ratio display, which is basically the wave of the future.

What is it that you’re doing to make the picture quality better?

We have a lot of knowledge about how images are captured on, not just Kodak cameras, but pretty much all digital cameras out there, so we’re really good at understanding what they call the capture space: how pictures get transferred from reality to the bits that end up in the memory card.

The displays are made to Kodak’s standards. We understand them. So, if you understand how the display is characterized and how the pictures are captured, you can do a really good mapping between the two.

In between that piece, we process the image to make sure that it renders the colors the way people are going to want them.

It’s the combination of those three things that makes the pictures the way people expect them to be when they think about that scene that they took.

A minute ago you were talking about making the frame easy to set up. Is that a response to Kodak seeing too much difficulty for the average user in some of the other digital frame products?

Absolutely. A lot of frames – and this goes for consumer electronic products in general – the least expensive ones aren’t necessarily the easiest ones to use. It takes some work to make something simple. You can put in an interface that allows you to plug a memory card into something and select pictures, but if you have to go through 50 menus and different layers, the consumer gets bored, or frustrated, and in either case it might cause them to take the product back.

You need them to be able to rapidly insert a memory card or wirelessly access your PC and display the pictures. One thing that our new frames do is get you to a slide show really fast. You don’t have to think too much or mess around with “gee, what do I have to do to get those pictures displayed?? That’s what people really want. They want to rapidly get to enjoying the pictures.

As far as using the wireless feature of the new frames to share photos, of course the products use Kodak’s online photo sharing service. But do they allow RSS feeds or Flickr?

Right now they don’t. Right now they connect either to the pictures on your PC or to your gallery account, but we’re looking at those things for the future.

Is Kodak selling most of its frames in physical retail or online?

It’s my understanding that in March we’re going to have them available in retail [at retailers including Best Buy and Target] and we will sell them online. Typically the way these things go is that you have early adopters who generate the buzz. That typically comes through a direct sales channel online, which then allows for consumer demand to give the retailers the confidence they need to put [the products] on their shelves. Because we’re Kodak we’ve gotten some people to work with us to put our products on their store shelves. It’s a demand-driven thing. It’s when the consumers see the value and they go and demand it that retailers are going to put in on their shelves.

What are retailers telling you they want to see to help give frames more shelf space?

ASPs (Average Selling Prices) need be to low. They want the things to be as cheap as possible to generate demand. From what I have heard, we had a tremendous response at CES from retailers with respect to the feature set, quality, and the way the products presented themselves. We got a very positive response to what we’re putting out there.

What are the factors that are influencing pricing right now?

The major components of cost for digital picture frames haven’t changed in the past 10 years: The panel is the major component of cost. Secondly, because we have wireless technology, the wireless interface still demands a price premium. Other components are a little more down the cost curve and more toward commodity levels.

What is the price point that will tip this market from being an early adopter market to being a real consumer market?

$99.

How soon might we get down there for quality products?

It’s hard to predict because sometimes price is not completely indicative of cost and there are very strange relationship sometimes between channel margin and manufacturing margin. It’s just hard to predict.

I will say, though, that in order for a business like this to be sustainable, at every point in the value chain, the participants have to feel like they’re making some money. I’d like to see a robust business come out of this where people are not just cutting costs and undercutting each other and losing money such that the business gets trashed. It might take a little longer for that to be mature. You might see a $99 frame tomorrow, but that doesn’t mean that anyone’s making money. For the business to be mature and robust and sustainable, which is something we all would like to see, it may take a little bit longer than you would expect.

Do you see any danger in somebody coming to market with a low-cost frame too quickly, that’s maybe not as good a product, and damaging the credibility of this emerging space?

There’s always a danger of that in any consumer electronics field. We’ve seen that happen a lot, but consumers are pretty resilient. The early adopters are the ones that get the arrows in their backs and – God love ?em – I’m one of them. We go out there and get these things and we rapidly figure out what’s good and what’s not. Nowadays with the Internet and the blogosphere, if you’re a little bit aware, you can avoid some of those pitfalls. But sure, there’s always that danger. But I don’t really believe that it will represent long-term damage because if you come out with an inferior product that you lose money on, you typically can’t last.

Do you envision video applications for these frames as well?

What’s so good about these displays is they can display anything, any kind of bitmapped information. So why limit it to just still photos? Since we have a dynamic wireless interface with these new devices, I think in the future we’ll see all types of information being displayed on them. So, in the future you might see a lot of different things being displayed on panels throughout the home.

Do you think that photo sharing is gong to be the killer app that spurs adoption or is there something else that’s going to drive it?

I think there’s going to be a component of photo sharing. That’s really a remote-type application, where I’m sharing my baby pictures with my mother who doesn’t live in the house with me. That’s one of them.

But just the ease of access to information, wherever I happen to be – if I’m down in the den and there’s a digital picture frame that’s got my family pictures on it, and maybe it’s got the baby monitor too, or the weather report for tomorrow, or the headlines for the news, or even the news feed itself. That type of convergence is in the future. I’m not quite sure how far off it is; technologically it’s not undoable in the near term.

Will we need to see an application spurring that convergence, or will there be lots of niche players working with different manufacturers driving different kinds of adoption?
I think you’ll see niche players, you’ll see people come out with targeted uses, you’ll see the big players supporting it. I don’t believe there’s going to be any one standard that will support this, although that would be great. Whenever you talk about convergence, there are issues around multiple standards. The most seamless solution will take the longest to appear in the market.

Given that wireless frames are Internet-connected devices, do you worry about security or hackers or spam?

For our near-term products, I can’t see there being an issue because we have sort of a direct connect between the Kodak frame and Kodak software or Microsoft infrastructure, which is pretty well protected. For the longer-term it’s always going to be an issue. It’s always going to be a balance between making things open and accessible and configurable and being subject things like spam and attackers. We don’t see it being a near-term issue.

The issue is always going to be: Can we control access without limiting flexibility? I haven’t really seen a model in consumer products today that has hit the ultimate balance in that area.

What does Kodak see as the single biggest obstacle to wide adoption of digital picture frames?

First and foremost it’s cost. Regardless of the technology, people don’t care whether LCD panels cost $100 or $500. They only have so much disposable money that they’re willing to put down for a product like this.

The second one is how well the product functions. I believe that customers have to be able to get it within a matter of minutes, either in the store or seeing a 30-second commercial or being exposed to it at a friend’s house. It doesn’t matter if it works really well after an engineer has spent an hour setting it up. That’s not going to be good enough. You need to be able to get it and understand it just like a remote control for a CD player. If it’s not that simple, most people just don’t have the time and the patience to mess around with it.

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