Konica Minolta ended its film business to survive the digital age

By November 2005 the numbers were unambiguous. Konica Minolta, the world's third-largest camera-film maker after Eastman Kodak and Fuji Photo Film, forecast a ¥47 billion ($407.9 million) group net loss for the year to March 2006, booked against a ¥90 billion charge to rationalize production, write down assets and cut jobs in its camera and film division. The market it depended on was shrinking more than 20% a year as digital cameras spread.

On January 19, 2006 the company went past downsizing and announced a full withdrawal from the camera and color film businesses: compact camera production would cease by March 2006, photographic film and color paper by March 2007, and a portion of its digital SLR camera assets would be sold to Sony, with which it had agreed in July 2005 to jointly develop digital SLRs. President Fumio Iwai, who told reporters 'I wanted to put a clear end to the matter,' was replaced by Vice President Yoshikatsu Ota on April 1.

The exit closed the circle on a company only two years old: Konica Minolta had been created in August 2003 through the merger of two photography pioneers — the maker of Japan's first photographic paper (1903) and the country's first color film (1940). JP Morgan's analyst called the shutdown a 'positive surprise' and 'a bold move rare among Japanese firms,' predicting the stock would rise now that 'the traditional camera and film businesses were seen as a barrier to earnings growth... and now it will be completely gone.'

Culled a film market shrinking more than 20% a year and the ¥47bn net loss it drove, removing what analysts called a barrier to earnings growth.

Film's decline was structural, not cyclical: a market shrinking more than 20% a year could not be managed back to health by cost cuts alone.

November 2005's partial retreat — downsizing camera and film but keeping them — showed management had accepted the diagnosis; January's full exit simply cut the bleeding sooner.

Selling the digital SLR assets to Sony turned a dying product line into cash and a relationship, after the two companies had spent 2005 jointly developing digital SLRs.

The same-day leadership change gave the decision a clean owner: Iwai ended the matter, and Ota arrived to build what came after.

Merging two dying businesses buys time, not survival: barely two years after Konica and Minolta combined, the group ended the very business that created both — going out cleanly beat bleeding slowly.

Compact camera production ended in March 2006 and photographic film and color paper by March 2007, with the SLR assets transferred to Sony. Fuji Photo responded with a statement that it would keep making film, while analysts said the exit would put pressure on Fuji to shrink its own film business. Ota took over as president on April 1, 2006, inheriting a group whose loss-making heritage businesses had been excised and whose remaining operations — free of what JP Morgan called a barrier to earnings growth — no longer carried the film albatross.