2014 Photo Output UPDATE Photo Output Review (N.A. & W. EU) 12/5/2014Property of f/22 Consulting, Inc. - 20141

2014 Photo Output UPDATE

Photo Output Review (N.A. & W. EU)

12/5/2014 Property of f/22 Consulting, Inc. - 2014 1

CONSUMER PHOTO OUTPUT

Photo Output


Unmet Needs – Consumer Photo Output

12/5/2014

Prop

erty

of f

/22

Cons

ultin

g, In

c. -

2014

3

Too many photos. Don’t know

where they are!

Not Organized to

create the things I’d

love

Too much complexity

No time for projects…I want easy solutions

The Digital Photo Consumer Today

• Takes More Pictures• Increasingly prefers capturing, sharing and creating with

images taken on smartphones.• Is younger and tech-savvy• Edits a significant % of photos• Uploads photos to multiple locations• Is less likely to make photo products (wants versus needs)• Includes cameraphone pictures in the majority of products

made….when products are made.• Is, increasingly, accustomed to “free” content.• Compares price and is less brand loyal.• Is hyper-connected• Wants and needs immediate solutions vs. projects.


Trends – Consumer Photo Output


From To

Must have prints Nice to have personalized products

Create and Output in Retail Store

Create on computer or mobile device and output from centralized production for mail-2-home or ship to retail fulfillment

Desktop and laptop photo experiences

Mobile experiences (especially smartphones)

Projects and crafts (DIY) Automation that does-it-for-me….but makes it look highly personalized (e.g. Animoto, Smilebox).

Still images sharing Still and short video storytelling

Documenting Sharing and Displaying

Dedicated cameras Smartphone cameras

Only pros capture great images

Everyone can capture and/or create great images

Photo as a record Photo as content

Trends – Consumer Photo Output


Personalized Products

Even as consumers have abandoned traditional photo prints, they have

embraced personalized photo output.

Growth

The combination of smarter devices with superior photo capabilities,

easier/always-on access to organized images, improved mobile create/order/pay, product

innovation, and quality/timeliness/value will drive

substantive and sustainable growth.

HISTORICAL AND FORECAST DETAILS

Consumer Photo Output


Note About Product “Blur”

• One of the challenges of defining market size for consumer digital photo output is finding consensus regarding what should or should not be considered “consumer photo output.” Examples:

a. A personalized image rich book created as a business product (annual report, menu, sales brochure, etc.). This is, for example, a large part of Blurb unit sales.

b. A wall décor product that is made with licensed content (including licensed photos) for commercial décor.

Depending upon the commercial interest of the measuring party the decision of what to consider “consumer photo products” can change the overall opportunity size (+/-) by a substantial amount. (e.g. Don Franz, Photo Imaging News, includes all of Vistaprint’s print units and revenue in his roll-up of the photo print market size. To me that is ridiculous and dangerous.


Historical Market Size - Consumer Photo Output

Channels Production Method• Brick & Mortar Retail On-Site• Brick & Mortar Retail Centralized

Back-to-Store• Brick & Mortar Retail Centralized

Mail-to-Home• Online Photo Specialty (e.g.

Shutterfly)• Online Non-Photo Retailers (e.g.

Vistaprint)

– Dye-Sublimation– Inkjet

• Digital Press• Wide & Grand Format

– Toner


Personalized Output

Historical Market SizeConsumer Photo Output

Non-Print• Mugs• Fabrics

– T-shirts– Pillows– Blankets

• Mousepads• Magnets• Ornaments• Jewelry


*Incl. canvas wraps, fine art prints, glass, acrylic, metal and wood, adhesives, etc.

▪ Photo Books▪ Greeting Cards▪ Home and Office Décor

(exclusive of photo print enlargements)*

▪ Calendars

Digital Press & Wide Format

Historical and Trend Market Size EstimatesTotal Consumer Photo Output (U.S. & Canada) – $B


Includes Photo Prints

Recovering Overall Photo Output Revenue


Historical and Trend Market Size EstimatesConsumer Photo Output (U.S. & Canada, W. Europe) – Share by Production Platform (volume)

Historical and Trend Market Size EstimatesConsumer Photo Output (U.S. & Canada, W. Europe) – % $Share by

Production Type


%

The photo output industry has migrated from chemical (silver halide) to ink (digital presses). As a result there are vastly more fulfillment partnership possibilities and vastly more global print capacity.

Historical and Trend Market Size Estimates – Personalized Photo Output – N.A. ($B)


Historical and Trend Market Estimates – Personalized Photo Output ($B) – W. Europe


Historical and Trend Market Estimates – Personalized Photo Output ($B) – N.A./W. Eur.


PHOTOBOOKS



Photobook Trend Drivers

• Factors Driving Slower Growth– Projects vs. solutions– Not yet a mass market product– High-Cost (incl. shipping “gotchas”)– Focus on style/form vs. function/ease of creation

• New Headwinds– Rapid adoption of mobile as preferred shopping

platform– Rich, instant, automated digital storytelling and

sharing


Photobook – Leading Competitors (N. A.)


Company 2015 Est. Unit Volume

(millions)

2015 Est. $ Volume (millions)

Production (Y/N)

Trends

Shutterfly (all brands) 14 $450 Y Little, if any recent unit growth plus declining per unit revenue (discounting)

Apple 4 $150 N Little recent investment and flat to declining volume

Cewecolor (NA only) .5 $10 Y Very positive growth driven by awareness and aggressive advertising in expanding regions

Snapfish (NA + W. Eur) 3.3 $100 N Unit growth declining

Blurb* 1 $50 N Describes focus as self-publishing. Only an arguable % of volume can be considered personalized photo output

Picaboo 1 $40 N Flat unit demand

Mixbook 1 $30 N Early stage excellent growth

Traditional Photo Retail (Walgreens, Walmart, CVS, Costco, Blacks, London Drugs, etc.)**

4 $100 N** Flat to declining demand (reduction of advertising)

Other 2 $80 N

* Mostly self-publishing

**Does not include on-site

30+ million units$1B + revenue

Photobook – Leading Competitors (W. Eu)




Production (Y/N)

Trends

Cewecolor 8 million $300 Y Very positive growth driven by awareness and aggressive advertising in expanding regions

Hema wenskaarten.hema.nl

2 million $50 N ?

Vistaprint /Albumprinters

2.5 million $80 N Unit growth declining

MyPhotoBook www.myphotobook.co.uk/

.5 million $20 N

Photobox 3 million $100 N Substantial growth from aggressive advertising and promotion

Traditional Photo Retail (Boots, Tesco, Jessop,

3.5 million $100 N** Flat to declining demand (reduction of advertising)

Other 3 million $50 N

Photo Specialty 3 million $50 N

** Does not include on-site

25 million $750 million $750 million Revenue25 million units

http://www.myphotobook.co.uk/


The “Photobook” Opportunity Chasm

• 280 million HH (U.S., Can, W. Europe)• 7 million photobooks

• sold to <4 million households• 1.5% of households purchased a photobook in 2014

• Why did 98.5% fail to purchase a photobook?– Lack of Awareness

– Lack of Time (it’s a major project!)– Lack of Confidence (my photos aren’t good enough and don’t

know where they are!)– No urgency (I can do it later!)


Photobook – Crossing the Chasm

Consider this metaphor…..

“Photobooks” serve the needs of the novelists among us (and, occasionally, the committed short story writer). We do not have a

photo output product that serves the needs of the blogger.

So……

Our Facebook page becomes our default photo blog.

Life’s narrative unfolds day-by-day, event-by-event. Only by enabling the immediate, frictionless creation and ordering of products that

document our evolving narrative can we hope to cross this “photobook” chasm.


GREETING CARDS



Greeting Card Trend Drivers




sharing


Greeting Card – Leading Competitors (N. A.)



(millions)


Production (Y/N) Trends


Snapfish (NA + W. Eur) 45 $100 N Unit growth declining

Vistaprint 45 $100 Major growth rates and potential with laser-focus on photo print growth.

Hallmark 50 $100 So far failing to dominate it’s naturally- advantaged turf.

Minted 50 $100 Huge and growing popularity for its crowd-sourced designs for greeting cards, décor products, etc.

Traditional Photo Retail (Walgreens, Walmart, CVS, Costco*, Blacks, London Drugs, etc.)

40 $100 N Continued trends of double digit growth annually.

Other (Peartree, Mixbook, Picaboo, etc.)

1 $50 N

*Costco has developed a huge share of retail photo cards, including the 5x7 folded cards included here.

500+ million units$750 million + revenue

Greeting Card – Leading Competitors (W. Eu)




Production (Y/N)

Trends



10 million $20 N ?


30 million $80 N Unit growth declining


10 million $20 N


Traditional Photo Retail (Boots, Tesco, Jessops, etc.)

25 million $50 N** Flat to declining demand (reduction of advertising)


Photo Specialty 25million $50 N





CALENDARS



Calendar Trend Drivers




sharing


Calendar – Leading Competitors (N. A.)



(millions)


Production (Y/N)

Trends


Vistaprint 7.5 $150 Y Major growth and accelerated investment

Minted 2.5 $50 N Amazing growth and potential

Snapfish (NA + W. Eur) 2.5 $50 N Unit growth declining

Traditional Photo Retail (Walgreens, Walmart, CVS, Costco, Blacks, London Drugs, etc.)**

5 $100 N** Flat to declining demand (reduction of advertising)

Other 2.5 $50 N

$600 million + revenue20+ million units

Calendar – Leading Competitors (W. Eu)




Production (Y/N)

Trends



2 million $50 N ?


2.5 million $80 N Unit growth declining


.5 million $20 N ?


Traditional Photo Retail (Boots, Tesco, Jessop,

3.5 million $100 N** Flat to declining demand (reduction of advertising)


Photo Specialty 3 million $50 N





PRINT DECOR



Historical and Trend Market Size Estimates – Leading Press & Wide Format Products

Decor Trend Drivers– Largely undeveloped market– Billions of walls with expensive, generalized décor vs.

local and relevant décor. (Currently, printed wall décor is a $22B+ U.S. business and nearly $40B in combined focus markets).

– Dramatic increase in access to personal and local content.

– Dramatic reduction of manufacturing costs and increases in capacity.

– Single image products = ease and speed of creation and ordering (the perfect mobile photo product).

– Treasured gift item.


Print Décor - Trend Drivers




sharing


Product Innovation – Mining the Familiar – Canvas Prints ExampleLeading Canvas Print Photo Retailers

• http://www.costcophotocenter.com/Shop/CanvasPrints#/• http://www.cvsphoto.com/Canvas-Prints• http://photo.walgreens.com/walgreens/storepage/storePageId=Wall-Decor• http://photos.walmart.com/walmart/storepage/storePageId=Wall+Art• http://photo.samsclub.com/HomeDecor/• http://www.shutterfly.com/home-decor/canvas-prints• http://www.snapfish.com/snapfish/home-decor/personalized-photo-canvases• http://www.photobox.co.uk/mobile/shop/canvas• https://photoworld.com/wall-art/canvas-prints• http://www.bootsphoto.com/boots/photo-gifts/photo-canvas-prints/campaignN

ame=bp_boots_menu_canvas• http://photolab.londondrugs.com/catalogue/Canvas-Gallery-Wraps• http://www.blacks.ca/products/wall_art/canvas


http://www.costcophotocenter.com/Shop/CanvasPrints#/

http://www.cvsphoto.com/Canvas-Prints

http://photo.walgreens.com/walgreens/storepage/storePageId=Wall-Decor

http://photos.walmart.com/walmart/storepage/storePageId=Wall+Art

http://photo.samsclub.com/HomeDecor/

http://www.shutterfly.com/home-decor/canvas-prints

http://www.snapfish.com/snapfish/home-decor/personalized-photo-canvases

http://www.photobox.co.uk/mobile/shop/canvas

https://photoworld.com/wall-art/canvas-prints

http://www.bootsphoto.com/boots/photo-gifts/photo-canvas-prints/campaignName=bp_boots_menu_canvas

http://www.bootsphoto.com/boots/photo-gifts/photo-canvas-prints/campaignName=bp_boots_menu_canvas

http://photolab.londondrugs.com/catalogue/Canvas-Gallery-Wraps

http://www.blacks.ca/products/wall_art/canvas

Canvas Print Specialty Online• Until recently start-up online photo specialty companies dominated

canvas print sales, helping to drive awareness through aggressive promotional activity (particularly daily deals).

• Leaders in this online photo output specialty business include:– Canvas On Demand

• http://www.canvasondemand.com/– Easy Canvas Prints

• http://www.easycanvasprints.com/– Canvas Pop

• http://www.canvaspop.com/– Fabness

• http://www.fabness.com/– EZPrints (Café Press)

• http://ezprints.com/

! Dozens of others


http://www.canvasondemand.com/

http://www.easycanvasprints.com/

http://www.canvaspop.com/

http://www.fabness.com/

http://ezprints.com/

Print Decor – Leading Competitors (N. A.)



(millions)


Production (Y/N) Trends

Shutterfly (all brands) 1 $100 Y Have done little to find a way to grab their “fair share” of growth.

Snapfish (NA + W. Eur) .5 $50 N Have not identified and treated the opportunity with the attention it deserves.

Canvas On Demand 2.5 $150 N This Café Press company rises heads-above others when it comes to effective promotion

Costco .5 $30 N In a few short years they’ve turned an uninteresting sub-category into their top-producing outsourced product and it is growing 30%+ annually.

CVS .3 $10 N** Same as Costco!

Other Mass Retailers 1 $50 N Still have not caught on to the success that Costco and CVS are realizing…and why. Look out when they do!

Other Online B2C Specialty Retailers

3 $200 Crowded, aggressive space. Many will fall away or get acquired.

8 $600 $600 million +8 million units +

Print Decor – Leading Competitors (W. Eu)



(millions)


Production (Y/N)

Trends

Cewecolor $110 Y Very positive growth driven by awareness and aggressive advertising in expanding regions

Hema $20 N ?

DM $40

Photobox (Moonpig, Sticky9,

$70 Y Substantial growth from aggressive advertising and promotion

Traditional Photo Retail (Boots, Costco. Tesco, Jessop)

$50 N** No “discovery” of the price/merchandising opportunities being driven by Costco and CVS in U.S. to-date. That will change.

Other B2C Specialty Sites

$60 N Crowded, aggressive space. Most will not be able to compete and survive as prices continue to fall.

Photo Specialty $50 N


7 $400 $400 Million +7 million units +

GROWTH DRIVERS



Growth Opportunity Drivers – Consumer Photo Output


Output Growth Drivers

Mobile

Image Access

DistributionProduct Innovation

Enabling Technologies

Growth Drivers – Mobile….Smartphones will replace digital cameras as the mass market photo capture

device


Devices

•Cameraphone optical and software developments not only equals or surpasses camera capture quality but qualitatively redefine “photo”

•Always connected, always synced, always backed-up, always hyper-rich in metadata.•Focus on photo file size gives way to quality of experience throughout the utility set of images (viewing, saving, sharing, personalized output). Files that are smaller but contain more critical information.

Networks

•Reliability everywhere•Costs for data transmission (image files) decline•Photos become strategically important to carriers. People don’t leave their images behind. Photo will become the foremost glue in an increasingly sticky relationship.

Software

•Automated Product Creation (from fresh images)•Mobile Click-2-Pay adoption reduces spontaneous purchase friction•Location-based, content-rich product creation. This is not only me and my family but, look, we are at Time Square in Manhattan on November 10, 2014”

•Search Optimization

Mobile Photo = Smartphones • With the rapid penetration

of smartphones….worldwide….people now can capture quality images any where at any time. In this study 94% indicated that they had used their smartphone for taking pictures.

12/5/2014 Property of f/22 Consulting, Inc. - 2014 41Source: Suite 48A – Photo Output Product Survey Among Mobile Photographers

Smartphones are becoming ubiquitous

• The most capable photo capture and sharing device in history is rapidly reaching full mass market penetration.


Smartphone Users Capture Photos more Frequently

• “The best camera you have is the one that’s with you.”

• Not only do smartphone users use their camera more frequently but the number of photos taken will soon overtake those taken on digital cameras.


Smartphone Users Take Many Pictures

• Smartphone users report that they currently snap more than 35 pictures per month (out of the 126 total digital photos taken monthly)

• The smartphone captures already exceeds the average number of photos taken by film cameras during the peak of analog photography by more than 2x!12/5/2014 Property of f/22 Consulting, Inc. - 2014 44Source: Suite 48A – Photo Output Product

Survey Among Mobile Photographers

Smartphone Users Share More Frequently

43% of our respondents who share photos by emailing or texting from their smartphone do this at least once a week. Only 21% do this as frequently from their computer. (6Sight Social Imaging Survey – 2012)


Smartphone Users Share More Frequently….but Sharing is Selective

• The average number of digital photos shared monthly, by any device, is 34, which is substantially less than the 126 photos reported taken per month (77 on digital cameras, 34 on smartphones and 15 on tablets).– 61% of the respondents share fewer than 25 photos.– 7% don’t share at all.– 8% share all their photos.

• In other words: people share only a subset of their photos, providing important behavior markers that indicate favorites and photos most likely to be used in photo output.

• By gender and age: no significant differences.12/5/2014 Property of f/22 Consulting, Inc. - 2014 46Source: Suite 48A – Photo Output Product

Survey Among Mobile Photographers

Smartphone Users Sharing Their Life with Family & Friends (see more smartphone adoption and usage slides

in Addendum)


73% believe the reason they share photos is to share the experience behind thephotos with friends or family:A few things stand out:• No matter how easy social networks

and photo sites have made it to share photos with the general public, most respondents still share photos primarily to friends or family.

For most respondents photos are still a means through which you can share experiences, they “tell a story.” • For just 13%, showcasing the photo

itself is the major reason to share them.

Source: Suite 48A – Photo Output Product Survey Among Mobile Photographers

Growth Drivers –Image Access and Discovery


Intelligent Organization

Synchronized (across all selected devices & services)

Search Optimization

Intelligent Organization

• Without vastly superior image organization there is, absolutely, a major ongoing barriers to the creation and ordering of photo output.

• With vastly superior image organization the elements of our entire personal life story can be revealed, with ease, any time and anywhere we choose to give physical substance to moments or chapters in that life.

• What that Intelligent Organization can and should look like is the content of Focus Area 2 – Cloud Storage, Sync, and Share.– Successful address of some or all of the recommended

opportunities will have a dramatic impact on future growth of photo output.


Synchronized• In our world of multiple capture devices and multiple destinations for our images

the need to automatically synchronize photos and securely and intelligently organize them in the cloud is vitally important.

• Examples if current efforts to aggregate and synchronize photos from all device platforms as well as popular services include:– Shutterfly / This Life – Sugarsync– Picturelife– Smile– Woven– Eye-Fi Mobi

• Syncing is covered extensively in the project’s Focus Area 2 – Cloud Storage / Syncing / Sharing.

• By successfully addressing the opportunities to both sych and intelligently organize photos in the cloud major new growth of photo output is inevitable.

• See Focus Area 2 for extensive detail.


Search Optimization

• Rapid advances in artificial intelligence are advancing face and scene recognition rapidly. These advances are largely driven by investments by Google, Facebook, Apple, Amazon, Dropbox, Shutterfly and dozens of start-ups. In almost every case the investment driver is ad revenue. The exceptions, of note, are Shutterfly and Dropbox.

• See Focus Area 3 for greater detail.


Growth Drivers – Product Innovation Meets Consumer Purchase Motivation

• Note carefully: Most personalized photo products are classified and referenced as “Gifts,” when, in fact, the vast majority are purchased for personal use, display or for keepsakes. Don’t fall into that hole!


Consumer Purpose

Memorialize

Share*

Preserve

Celebrate

Collaborate

Display

*Personalized photo products , far more than virtual shares, make high-value, emotional, keepsake gifts for friends and family

Growth Drivers – Product Innovation


Quality• Appearance• Texture• Experience

Timeliness

• Fast & Easy Create and Order

• When expected or before (1)

Value

•Product Cost•Delivery Cost•Perceived Value (brand)

(1) Delivery expectation varies with purchase driver and product

Quality“Quality” is the most oft-misunderstood and misinterpreted requirement for

consumer delight.1. “Quality” includes everything from the exploration and

ordering experience (no matter where it occurs) to the on-time delivery, to the security and attractiveness of the package received, to the real and perceived tangible and intangible quality of the product itself (did it meet of exceed my expectations.

2. “Quality” means different things to different people at different times and it is almost always subjective!

3. While “Quality” often is indicated as the #1 reason why someone chooses to purchase a product it is seldom the actual motivator when it comes to the mass market and photo output (thus the increase prevalence of deep discounts and daily deals).

4. The end result of perceived quality (#1) is a delighted shopper who now is predisposed to evangelize and return.


Timeliness

We live in a world of instantaneous gratification.

We live in a world in which Amazon, Staples, Zappos, and other top-tier online retailers deliver

your purchases in 1-2 days.

Those who cannot or choose not to satisfy and increased expectation for fast delivery do so a

grave peril.


Value

Perception of value is the primary driver of purchase activity for mass market consumers.

For photo output it has always been true and nothing has changed.

Value is often more than lowest cost. Other value factors are:

– Brand– Convenience (saves me time and effort)– Presentation


Product Innovation – Business Model Creativity


Product Innovation – Keeping it Fresh


Product Innovation – Value!


Growth Driver Examples – Product Innovation


Gap Examples

Memorialize • Target products for funeral industry• Target products for anniversaries• Target products for class reunions

Share / Gift • Auto-create greeting card with every gift (click-2-add)• Personalize gift with “salutation and signature” (e.g. on back cover, back of

décor, etc.• Feed additional / alternative products automatically (during create and order

process)Preserve • Synchronize , Organize & Secure images for generations

• Network archives across friends and families (e.g. genealogy)

Celebrate • Attack Immediacy• Access to adjacent content (e.g. location driven content to add to “story”)

Collaborate • Invite others to collaborate or build their own

Display • Software to facilitate easy creation of multi-print galleries (see www.fabness.com)

http://www.fabness.com/

Growth Drivers – Enabling Technology


Pervasive Create and

Order Applications on Devices

Mobile Payment Adoption

Voice to Access,

Create and Order

Continued Printing

Innovation

Pervasive Create and Order Applications on Devices

• “you have to disguise the things you need as the things you want!” So it may be with the next generations of camera apps on smart devices (e.g. less about proving the things that you can do that digital cameras can’t and more about delivering really meaningful, really sticky, really delightful experiences from capture to organize to discovering click-to-add products.

• Once again….the opportunity to explode what George Eastman promised and Edwin Land followed on with….. “you take the pictures…we do the rest!”


Mobile Payment Adoption• Few things are more annoying and unnecessary than

having to enter credit card numbers, bill to and ship to addresses, etc. when making a mobile payment. Because of that the mass market will quickly adopt mobile payment methods over the next few years.

• When the mass market has adopted click to order simplicity of their smartphones one of the major barriers to spontaneous ordering of 1-2-several click, low-cost, personalized photo products is swept away.


Voice to Access, Create and Order• Just as we ask Google for directions today, and increasingly for

text-based information the day when we can ask for “photos from my weekend in San Francisco” will instantly populate my screen with a selection of those best images, ask me if I’d like to see more of my photos from that trip, ask me if I’d like to see other images from the areas that I visited, show we a selection of 1-2-several products that I can click to order, ask me if I’d like to share my creation with my family and/or friends, etc.

• It will be that easy, quickly adopted, and it will be soon.


Continued Printing Innovation

• During the last few years advances in digital printing, from large digital presses for simplex and duplex printing, as well as wide and grand format printers for wall décor, along with advances in automated assembly and packaging, and adoption of lean manufacturing, have all resulted in substantive reductions of cost to manufacture virtually all of totals popular personalized photo products and enable and encourage continuing investment in innovative new products (some of which are vitally important to meet the emerging wants and needs of the smartphone shopper).


Growth Drivers - Distribution


Prod

uct Ship to Home

Pick-Up at Partner Retail Location

Fulfill at Local Retail Location

Distribution – Brick & Mortar Retail• Brick & Mortar retailers (particularly traditional photo retail

destinations such as Walmart, Walgreens, Costco, CVS, Boots-the-Chemist, Blacks, London Drugs, etc.) continue to enjoy a large share of photo output fulfillment in N. America and W. Europe.

• Revenues have shrunk by more than 50% since the peak of film printing, forcing many retailers to abandon the category and those remaining to reduce capital and labor costs and to adjust ad budgets to reflect current revenues.

• Photo specialty retailers have been particularly hard hit, with numbers shrinking by 70+%.

• Result is that there are fewer retailer destinations and even fewer staffed with informed personnel where consumers can discover new products and services….vitally important for an industry whose growth depends upon successfully innovating, testing, and distributing streams of new products.


UNMET CUSTOMER NEEDS



Distribution – Brick & Mortar Retail

What retail can and may do to facilitate the growth of mass market engagement with photo output:

1. Refocus on smartphones as the new camera and on frictionless output as a benefit of owning a smartphone. This requires realigning photo output as a destination service at Walmart and Target to an integrated part of the Mobile/Communications centers in mass discount locations.

2. Engage new retail channels– Wireless Carriers– Consumer Electronics

Align Growth Photo Output Products with new channel partners:3. Photobooks at Craft4. Wall décor at Furniture, Mass Discount Home Décor Departments5. Photo Gifts at Mass Discount and Department Store Registries6. Personalized business products at OSS

3. Reignite investment (including manufacturer and industry) in photo output advertising.


COMPETITIVE REVIEW



Photo Output Retail Competitive Overview

• Shutterfly• Cewecolor• Snapfish• Apple • Vistaprint• Photobox• Canvas-On-Demand• Mass Retail (e.g. Tesco, Walmart, Costco,

Walgreens/Boots, CVS, Staples)


Personalized Photo Products Share – by Units (N. America)


On Shutterfly and Share

• From the prior slide you’ll note that, in spite of articles claiming much higher share of consumer photo output, Shutterfly does not have more than 50% of overall unit sales for any of the major personalized products. In fact, Shutterfly, has been slow to capitalize on the dramatic growth of demand for photo décor products.


Competitive Overview - Shutterfly


Strengths Weaknesses Opportunities Threats

Brands Legacy “dead” image storage costs

Continue to build on This Life platform lifecycle relationship/paid service model

A more open and compelling user experience redefines digital imaging overall value proposition.

Customer Base Retail product prices and shipping costs too high.

Rapidly invest in and lead mobile growth.

FB decides to broaden their role in the digital life by adopting a robust photo management and output model.

Creative team “Hi-Low” retailer practices trains shoppers to wait for deals.

Pursue global brand and markets.

Others successfully intercept images captured on mobile devices and direct them to alternative photo management/output platforms.

Manufacturing Controls

Manufacturing Costs Reduce dependency on manufacturing.

Hubris

Best of class mobile create and order

Late to lead in mobile (business model conflicts)

Focus on décor products for growth.

This Life https://www.thislife.com/

Diversity of assets makes it hard to focus awareness on the strengths of each.

Leverage Tiny Prints to continue to expand greeting card business beyond Q4.

Leverage My Publisher Albums for pro market https://www.mypublisher.com/albums/sizesandprices

Fear of driving ASP lower = reluctance to innovate easier, lower-touch, more affordable products.

Free up and fund important brands to segment marketing opportunities, drive awareness and growth.

https://www.thislife.com/

https://www.thislife.com/

https://www.mypublisher.com/albums/sizesandprices



Competitive Overview - Cewecolor



Manufacturing Experience and Excellence (5 decades)

Dependence on retailers Expand into N. America via large retail partner such as Costco.

Retailers abandon photo as a discipline

Network of 1000’s of retail customers

No N. America or Asian presence Strengthen brand (become the European “Kodak” for the digital imaging generations).

800# tech/platform gorilla becomes intercept point from mobile devices and safe and secure harbor and solutions provider for all images.

Fulfilment ecosystem with all components (online, mobile, retail self-serve, centralized and retail product fulfillment)

Challenged to overcome output-dependence as only source of revenue

Acquisitions strengthen experience and cloud management services.

Hubris

Solid and experienced management team with focus on only one thing - output

Culturally predisposed to view their solutions as the final and only solutions - hubris

Successful engagement with wireless carriers makes them the output traffic manager connected to tens of thousands of retail outlets.

Financial strength Vulnerable to consumer behavior shifts away from retail fulfillment.

Challenged to become a primary brand destination for photo management

Competitive Overview - Snapfish



Established brand & member base

Starved by HP and lacking internal margins to innovate

Successful acquisition by capable and committed enterprise.

Stays at HP and is starved to death.

Access to HP resources Innovative founder team gone and preplaced by HP mid-level managers

Expand relationships with leading mass retailers and adopt a state-of-art transaction based business that drives incremental growth to partners and fair share of revenues to Snapfish.

Acquired and killed (Shutterfly)

Contracts with Walgreens and Walmart

Demanding B2B partners divert most development resources from B2C efforts

HP makes another about-face and lavished Snapfish with financial and technical support. (perhaps driven by new 3D product opportunities.

Dropped by Walgreens and or Walmart.

Competitive Overview - Apple



The loyalist customers in the world

Focus on viewing and sharing throughout the Apple ecosystem vs. printing (i.e. print is out of scope)

Applying their brand to a suite of unique output options might further strengthen the brand and it’s bond with loyal customers.

Hubris

More cash than they can spend

Leveraging their muscle with CGX to develop and distribute meaningful new output products globally.

Closed community finally unacceptable even to long-time loyal Apple users

Most powerful product brand in the world.

Leaders in ecosystem design and execution.

Competitive Overview - Photoboxhttp://group.photobox.com/



Experience – Founded 1999 Unknown Seemingly boundless Unknown

Powerful and distinctive multi-brand strategy

Cewe

#2 volume (after Cewe) Intercepted by a major cloud provider

Taking traditional retailers head on with what is being hailed as ‘the ultimate customizable product platform’, PaperShaker’s focus is on allowing customers to create truly unique stationery in particular for birth announcements, wedding or party invitations.

Sticky9 is a global, online print brand that transforms Instagrams into highly covetable, custom products with irresistible tactile appeal.

Moonpig has well over 10,000 card designs for all occasions, from the cute and quirky to the weird and wonderful. Well known for brilliant humor, spoofs, photo upload and for working with top brands such as Disney and Nickelodeon, Moonpig designs are all exclusive

http://group.photobox.com/

Competitive Overview - Vistaprinthttp://www.vistaprint.com/?mk=vistaprint&ad=e&crtv=51600414139&psite=mkwid%7cKCdbXkuc&device=c&couponAutoload=1&expiredCouponCode=33OFF&GP=11%2f20%2f2014+6%3a40%3a31+AM&GPS=3342284526&GNF=1



Affiliate and Pro Advantage programs (e.g. Staples)

Hard to become destination for consumer products.

Continue to leverage partner platforms and fill the void being left by retailers wanting to exit photo retail operations.

None apparent

25 localized websites serving various global markets; world-class manufacturing facilities around the globe, including North America, Western Europe, Australia and India; and thousands of employees in 13 offices worldwide.

Make it vs, source it bias results in often late to market or inferior initial product offerings (e.g. canvas prints)

Invest in extending brand and portfolio to become a destination for consumer photo output products.

Small business growth WW.

Develop deeper photo print core competence and focus

http://www.vistaprint.com/?mk=vistaprint&ad=e&crtv=51600414139&psite=mkwid%7CKCdbXkuc&device=c&couponAutoload=1&expiredCouponCode=33OFF&GP=11/20/2014+6:40:31+AM&GPS=3342284526&GNF=1

http://www.vistaprint.com/?mk=vistaprint&ad=e&crtv=51600414139&psite=mkwid%7CKCdbXkuc&device=c&couponAutoload=1&expiredCouponCode=33OFF&GP=11/20/2014+6:40:31+AM&GPS=3342284526&GNF=1

Competitive Overview - Canvas On Demand



Increasing economies of scale = lower per unit cost

Owned by Café Press Diversify (hard with that name!) Circle Graphics

Focus on one thing Vulnerable to new lower-cost manufacturing (Circle Graphics) and more aggressive price position by mass retail (commoditization)

Strengthen affiliate programs Commoditization

Proven business model Mass Retail

Sweet spot of photo output growth

Owned by Café Press

Competitive Overview - Mass Retailers



Where boomers and Gen X shopped for prints.

Many/most have exited photo printing and likely to be predisposed to avoid it.

Low-touch, no-cap programs that leverage existing infrastructure, create a no-inventory path to creating frequent shopping trips.

Managing down the film printing business was horribly difficult. Few want to hear “print” again.

Most convenient place to fulfill photo output for many.

Reduced, disgruntled, poorly compensated labor force with huge turn-over rates (generally)

All retained margin…no direct overhead.

Gen Y will never consider mass retail as a destination for personal photo product fulfillment.

Staff to support discovery and purchase activity

Consolidation has crushed innovation.

Very positive emotional products and services create much-needed loyalty.

Ability to display product for discovery

Hard to do business with (mostly)

Virtually every trip to a retail store results in unintended purchases.

Advertising voice Chance, for some, to connect stream of margin rich products with low-margin electronics hardware and service agreements.

MAJOR CHALLENGES AND BARRIERS



Headwinds for Consumer Photo Output


Digital Solutions Displace Output

Solutions

No Significant Mass Market Products

Little or No Retail Merchandising

Limited Awareness of New Products

Poor quality products and experiences

disillusion shoppers

VERTICAL OPPORTUNITIES (A VERY PARTIAL LIST)



Large Vertical Opportunities


Smartphone AdoptionThe closer you get to the capture moment the larger the output opportunity. Engage leading carriers.

New Moms (and Dads and Grandparents)

The rate of picture taking and output making explodes when children and grandchildren arrive.

Pet Lovers Solutions

Pet owners lavish attention and investment on their pets in unprecedented fashion. Engage a market-leading pet retailer.



Travel Solutions

My images plus location-based images equals unprecedented opportunities to preserve and celebrate travel.

Event SolutionsMy and our images from any event (“I was/we were here!”). Engage event management industries to offer rich, time, location and event-specific memorabilia. www.geteversnap.com

Genealogy Solutions

The family tree in pictures will emerge as a major revenue opportunity on the back of recognition advances and LDS genealogy investments.

http://www.geteversnap.com/



Billions of Walls!

Dramatic manufacturing cost reductions + Unprecedented Access to Content = $$B Global Opportunity. Personalize my home and my workplace.

Retail collaboration…with a well-profiled, committed, market-influencing retail partner.

It’s where I’ll be and who I trust.

CONCLUSIONS AND RECOMMENDATIONS



The Future of Print

• Given the headwinds that marked the transition from “must have” bags of prints to “nice to have” personalized photo products it is easy to lose sight of the fact that demand for personalized photo products has grown dramatically every year and the convergence of a number of factors should drive an acceleration of growth. It is likely that the WW revenue from photo output will exceed the historical high marks during the analog era….and that higher value products will carry higher margins for manufacturers and sellers. See the next slide for the converging factors…..


Tailwinds for Personalized Photo Output - Convergence of Positive Forces


Easier Access to Content

More & Better

Content Available

Printing Advances

(Faster, better,

cheaper)

Product & Software

Innovation

The Future of Consumer Personalized Photo Output

Our current belief is that mass market consumers will not only continue to purchase personalized photo products but will do so at increasing levels. Among the main reasons:1. Dramatic growth of demand for personalized photo products, in spite of many barriers

from 2000-2015.2. Mass market consumers, at all age levels, indicate a strong intent to purchase prints (70%+).3. Smartphone adoption and advanced photo capabilities create unprecedented contributions

to our personal life narrative, some of which will be expressed in physical output.4. Printing advances enable better, faster, more personal products.5. Product innovation will focus on storytelling products that can be selected instantly and

created, ordered and fulfilled without friction. 6. Ever-easier access to one’s most important photos (smart curation)7. Households will continue to form (weddings), add children, go on vacations, celebrate

birthdays , holidays , and gatherings, and strive to record and preserve their narrative.8. Walls everywhere, at home and at work, will demand local, relevant and personal decor.9. Wealth is spreading globally, and as people are lifted out of poverty investments in

personalized photo products will rise.


Current State Estimates for Consumer Personalized Photo Output (US$ - B)


Desired State Estimates for Consumer Personalized Photo Output (US$ - B)


Desired State Lift = $7B

Consumer Photo Output N.A./EU Revenue Estimates (B$)Current State vs. Desired State


Consumer Photo Output Revenue Estimates (B$)Share Point Value N.A./EU


If Memories gained 10% share of consumer photo output by 2025 revenues from that business would be $1.8B

Professional Photo Output

Pro Photo Output❖ Historical Market Size

❖ Potential Growth Opportunities❖ Competitive Overview❖ Barriers & Challenges❖ Possible Verticals

Professional Photo Printing

For the sake of this report professional photographer is defined as anyone who

captures photos and offers them for sale. The can be classified as full-time professionals,

part-time professionals or hobbyists.


SUPPLY

Pro Photography


Professional Market OpportunitiesSupply Side

• US Market Uniquely Supports A Network of Professional Photo Labs– H&H Color Lab– Millers Professional Imaging– Nations Photo Lab– Bay Photo Lab– White House Custom Color



• Digital transition (now print only) enabled new services competitors– Large brick and mortar retailers…specifically Costco – Consumer upload and print web portals e.g. Shutterfly– Prosumer upload and print web sites (differentiated quality, service, etc. from

straight consumer sites))• MPIX (Actually Miller’s amateur site)• Adorama• SmugMug

– Specially designed, turn key professional photo portals for lower volume photographers• Pictage• Collages.net (now part of H&H Color Labs)• Zenfolio• SmugMug



– Professional Portals offer a complete “B to C” service portfolio to professional photographers• End User Password Protected Accounts• Save Access to “proof” images• Allow orders for a large range of prints and products• Integrated E-commerce • Automatic Product fulfillment

– Proprietary Studio to Cloud Upload Portals• Customer information• Accounting functions• Usage statistics• Customer Order tracking


DEMAND

Pro Photography


Professional Market OpportunitiesDemand Side

The High End “People Photography” Market is Under Assault

– Millennial parents and brides have an informal DIY attitude– Virtually All Pro Sectors are Shrinking with the exception of

• Sports Photography• School Photography



Growing Competition from “Mamarazzi” and Weekend Warriors

– Weekend Warriors are part time professionals • shoot events and weddings as a second job

• No Studio Capitalization• Often sell fixed price packages that consist of digital files only• Serviced by current Pro Lab channels (web and fulfillment)



– Mamarazzi are 25 to 40 year-old female photo enthusiasts • Fastest growing sector in professional photography• Provide services at well below current market price• Happy (surprised?) with any income…business is part hobby,

part avocation• Generally lack technical photo and business skills• Services and service model are ideally suited to the Millennial

market• No studios and minimal capital invested…created the

professional candid…i.e. ”LifeStyle Photography”



• Generally sell digital files with few or no prints…”shoot and burn” from CD delivery vehicle• Prints or products, if any, are supplied using

consumer or semi-pro channels e.g. Costco, Shutterfly, etc.• Individual volumes too low for Professional Labs• Professional portals are too expensive to meet their

needs• Associations and Web Portals are focusing on Mamarazzis

• Click-N-Moms• Women’s Photography Clubs• Pinterest


RISE OF THE MAMARAZZI

Pro Output


The Changing Composition of “Pro Photographers”

Rise of the “Mamarazzi”• The transition from analog to digital has had a profound impact on professional

photography.• In most lines of professional photography (studio, sports, portraiture,

yearbook, wedding, etc.) the revenue and profit model had been based, almost entirely on output vs. professional services. The diminished demand for and willingness to pay for physical products vs. digital files has forced many true professional photographers to seek other careers or to pursue niche photo opportunities where payment for services exist.

• People still want high-quality image capture for key moments in life (weddings, child portraits, family portraits, pet portraits, etc.). Into the void hundreds of thousands of mostly part-time photographers (younger and predominantly female) have rushed.

• The target for professional services (cloud storage, syncing, sharing), as well as photo output is now a vast and growing wave of “mamarazzi.”


The Changing Composition of Pro Photographers (see detailed slides in Addendum)


MARKET SIZE AND PROJECTIONS

Pro Photographers


Historical Market SizeProfessional Photo Printing

Production Professionals• Professional labs (e.g.

Millers, Bay Photo)– National and

International Labs– Local Pro Labs

• Captive Labs (e.g. Lifetouch)

• Retailers – Costco– Local Photo Specialty

• Full-Time Professionals• Part-Time Professionals• Hobbyists (earning some

money from photography)


In Scope (Outsourced Printing vs. Home Printing)

Output Fulfillment is Fragmented


Pro Photography Specialties


Youth Sports

Portrait/Studio

Wedding

CommercialFine Art

Church Directory

Journalism

Pro Photographers and Personalized Photo Output – N. A.


Pro Photographers and Personalized Photo Output – W. Eur.


Pro Photo Output Revenue Est. N.A. & W. EU. ($B)


Historical Market SizeProfessional Photo Printing Products

Non-Print

• Media (CD, DVD, etc.)• Mugs• Fabrics

– T-shirts– Pillows– Blankets

• Mousepads• Magnets• Ornaments• Jewelry

12/5/2014 Property of f/22 Consulting, Inc. - 2014 118*Incl. canvas wraps, fine art prints, glass, acrylic, metal and wood

• Greeting Cards• Photo Books• Calendars• Home and Office Décor

(exclusive of photo print enlargements)*

• Wall clings (e.g. wallpaper, Fathead, repositionable)

Digital Press & Wide Format

Historical and Trend Market Size EstimatesPro Photo Printing (U.S. & Canada, W. Europe) – % Share by Product

Type ($)


Pro Photo Output by Supplier – N. A.


GROWTH OPPORTUNITIES

Pro Photographers


Potential Growth Opportunities – Pro Photo Output


Print Growth Drivers

Mobile and Wireless

Image and Output

Distribution

Product Innovation

Enabling Technologies

Growth Opportunities - Mobile

• The target for photo output is unequivocally the “mamarazzi” and “weekend warrior” vs. the shrinking ranks of pros and the captive labs (e.g. Nations and Lifetouch).

• The fastest and easiest way to serve these primarily part-time pros is through connected devices and apps.

• Mobile….automatic transfer of captured photos, instant viewing and sharing, instant product preview and order, etc. will drive clients to purchase of photo output.


Growth Opportunities –Image Access

• The ability to quickly and easily locate photos from recent or past projects drives rich opportunities for promoting output sales…especially if those photos can be instantly visualized as product options.


Growth Opportunities – Product Innovation

• Photos from professional photo sessions are among the “highest value” photos one will ever have.

• If product options are of obvious high-quality, and are on-trend and even fashion-forward, the post-capture opportunities to market and sell photo output are exceptionally high.

• If innovative personal products are presented instantly using session or event photos the likelihood of purchase is at its peak.


Growth Opportunities – Enabling Technology


Easy Solutions!

Instant & Auto Photo

Transfer (connected

devices)

Instant Product Option

Preview and Order

Instant Storage,

Organization, Curation

Mobile Editing

Growth Opportunities - Distribution

• Auto-feed of “best” photos to client for social sharing.

• Click to Order links in all shares.• Easy ordering and fast fulfillment of

products.


TRENDS

Pro Photographers


Trends – Pro Photo Output

• Pro photographers are younger, with predominantly new female ranks.

• Today’s pros are more likely to offer personalized photo products.

• Today’s pros often remove price barriers to engagement, driving up total addressable market size.

• Today’s pros are more experience-focused than technology focused.

• Today’s pros are more flexible and responsive to the personalized wants and needs of clients.


UNMET NEEDS

Pro Photographers


Unmet Needs – Pro Photo Output

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Business Support

Website Design and

Support

TrainingCollaboration

Product Support

(Revenue!)

Documents

2014 Photo Output UPDATE Photo Output Review (N.A. & W. EU) 12/5/2014Property of f/22 Consulting, Inc. - 20141