By Ben Dobbin
The Associated Press

ROCHESTER, N.Y. - As digital cameras rise swiftly in popularity, Eastman Kodak Co. is halting production of Advanced Photo System cameras, a much-ballyhooed format launched in 1996.

Citing declining demand and poor financial returns, Kodak said Tuesday it will stop manufacturing reloadable APS cameras by the end of 2004 but will continue to make and upgrade APS film and one-time-use cameras.

Co-developed by Kodak, Canon, Fuji, Minolta and Nikon, APS cameras produce pictures in a variety of sizes on the same roll of 24mm film. They feature a drop-in cartridge to eliminate loading errors and a magnetic stripe on the film for ordering extra copies.

The system, launched In February 1996, quickly fell far short of expectations.

Worldwide sales of APS cameras have been stuck at about 2.5 million units a year, Kodak spokesman Charles Smith said.

The world's biggest photography company also will stop making 35mm reloadable cameras in North America and Western Europe by year-end, but plans to expand in Asia, Latin America and Eastern Europe, where 35mm is still growing at a double-digit clip.

Digital cameras, which record snapshots on computer chips, have begun outselling film cameras for the first time in the United States. Last year, 12.5 million digital cameras were sold versus 12.1 million film cameras, the Photo Marketing Association said.

In the conventional photography business, which still provides the bulk of its profits, Kodak is shifting its investment into film and photo finishing. It plans to launch new high-performance APS and 35mm films next month.