Five years ago, Rick OConnors two SuperColor 1-Hour Photo shops were among at least 17 such outlets operated by independent photo finishers here. OConnor offered only a few digital services then, such as scanning images and burning them onto floppy disks.


Today, about 50 percent of the sales of OConnors company, which now does business as SuperColor Photo & Digital and has only one outlet, are from digital services, he says. Meanwhile, seven of those other independent Spokane-area photo labs have closed.


To make up for plunging film-processing orders, SuperColor recently invested $200,000 in a machine that makes prints from either negatives or digital images, and the company also has diversified its other services. OConnor says he changed his companys operations to avoid drowning in the flood of digital camera sales.


Youre either going to adapt to the changes or go away, says OConnor, who owns the business with his wife, Wendy. Im sitting back with a fat-cat smile on my face waiting for others to go away.


Since 1998, single outlets operated by Paramount Photo Inc., Ricks 1-Hour Photo (not OConnors), and Olympic Photo Lab have shut their doors, and four of Washington Photo & Digitals five outlets have been shuttered.


Calvin Lea, who owns Spokane-based Chromastat Inc. with Randy Forbes, says many labs have closed across the U.S. in the last five years as the volume of photographs taken with film has plunged by 25 percent nationally.


The part thats hard to distinguish is, how much of thats related to digital technology, and how much is related to the economy? Lea says.


Sales of digital cameras are booming here and elsewhere, says Henry Hill, vice president of Spokane-based Huppins Hi-Fi Photo & Video Inc.s retail division.


Its not only changed the business, but its made it bigger, Hill says. He says the digital-camera revolution has drawn to photography people who view digital cameras as easier to manipulate. Also, the falling price of the memory cards, which store photographs has made digital photography more accessible.


All of a sudden, people can have a couple of 512-megabyte cards in their bag and have all the memory they need for a two-week vacation, Hill says. He adds that Huppins sells such cards for about $160, but they would have cost three times that a couple of years ago.


Today, about two-thirds of the cameras Huppins sells are digital, and the store has added a plethora of digital-photography accessories, such as printers, memory cards, and photo paper. The owners of several of the smaller photo-processing labs here, however, say it wouldnt pay for them to carry do-it-yourself photo-finishing merchandise, such as special paper and ink cartridges.


Most of the independent photo processors here say their sales have dropped as digital photography has surged.


Randy Henderson, who owns Spokane-based Foto Factory Inc. with Nate Narrance and Dennis Spier, says Foto Factorys revenues in 2002 were 20 percent lower than in 2001, and in the last year, the company has reduced the number of people it employs, besides its owners, to four from 15.


At 51-year-old Wirsche Custom Photo Lab, of Spokane, sales are down 50 percent from three years ago, says Douglass Wirsche, who owns the company with his son, Michael.


Were not going digital and I dont know if thats a mistake or not, Wirsche says. I look at those machines, and theyre very expensive.


Wirsche now employs just two people besides himself and his son, down from eight to 10 people two years ago, he says. Since film-processing orders have dropped, the companys focus has been on photo restoration.


The future of our business, its kind of scary sometimes, Wirsche says. Im 79, and I dont want to start over.


Year-to-date sales at SuperColor, on the other hand, had grown 5 percent in early October over the same period last year, even though its processing fewer film orders, OConnor says.


Digital has not replaced film dollar-wise, but its replaced a good share of the loss, he says. Other services weve added have not only replaced the balance of that but have provided a sales gain. Those other services include artistic photo restoration and event photography.


Consumers, of course, can print digital images on their computer printers at home, but the quality can be poor, the price per print can be high, and the process can be time consuming, Henderson contends. He says that because of those drawbacks, the photo-processing industry has projected that consumers increasingly will ask photo finishers to make prints of digital images for them, and some industry leaders, such as Fuji Photo Film Co., have launched advertising campaigns encouraging people to come to labs.


Henderson says, They think theres going to be a big explosion of it. The whole thing is really tough for us because the mass merchants are undercutting everybodys prices so low that its tough to compete.


Now, consumers also can drive to a Costco Wholesale Corp. store or other big retailers here. Costco recently installed in its Spokane stores a machine similar to SuperColors. Most of the independent photo-processing companies here concede that its hard to match Costcos prices.


Walgreen Co. and Tidymans LLC also have installed do-it-yourself countertop devices that read digital memory cards, diskettes, and compact discs. As with the devices at Costco and SuperColor, customers push a few buttons to send their digital images to larger machines that print the photos.


All of Wal-Mart Stores Inc.s outlets here have similar systems, a manager in one of the giant retailers Spokane-area photo labs says, but the printing process takes about an hour rather than a few minutes. Wal-Mart also has full-service customer-operated kiosks that print photos within a minute, but charges more for that service than for the one-hour queue.


Meanwhile, the ubiquity of digital camerasfrom inexpensive amateur models to professional-grade machineshas brought drastic changes in what consumers do with the images they shoot, photo finishers here say. The urgency to put pictures onto paper has dwindled, and many people are content to view and store digital pictures on home computers and e-mail them to people.


Like SuperColor Photo & Digital, Foto Factory has improved its results by offering digital photo-processing services, which it started doing four years ago, and such services now bring in about 10 percent of its revenues, Henderson says.


SuperColors $200,000 digital-and-film photo-printing machine, which is in use now at the companys store at 2918 S. Regal, works quickly. The machine either downloads image files from a digital memory card or diskettes or scans negatives and converts them into digital files. In either case, it then prints the images onto photo-quality paper.


Using a do-it-yourself device on the stores countertop thats connected to the machine, customers can send images they have brought in on digital memory cards, diskettes, or compact discs to the larger machine, which prints the images in about eight minutes. OConnor says thats much faster than the hour or full day or more it takes to get prints from diskettes at other labs or to have film processed and get prints made.


Making a large investment in equipment is risky, however, especially when a photo finisher operates at more than one location, Henderson says. Foto Factory has four outlets, and it expects to be down to three by the end of next year, he says. He believes that fast digital-photo processing is going to be more of a destination thing. You cant have it in all the satellite branches, so people will just have to drive further to get the services.


Lea, of Chromastat, says that making expensive equipment purchases can be dangerous because digital photo-processing technology is changing rapidly.


Just about every lab that has made a huge investment in digital equipment has gone out of business, he says. You have to recoup your expenses in 12 months or else youre dead, because the equipment you buy today will be obsolete in 12 months. He adds that in the past, equipment could be used for five or six years before it became outdated.


Also, the hefty amounts that photo finishers plunk down for new machines dont cover the cost of training employees to use the machines, which have so many capabilities that the day or two of training vendors offer usually isnt sufficient, Lea says. Theres a huge learning curve.


Although about 25 percent of Chromastats client base uses digital cameras now, Lea believes there will be a small backlash against that technology.


People already are coming back to film because digital isnt as easy as the industry led them to believe, he says, adding, though, that digitals share of the market will continue to grow.


Its a scary time. If those customers dont come back and their needs arent addressed, youll see all those one-hour labs close.