<DOCUMENT>
<TYPE>EX-99.1 PRESS RELEAS
<SEQUENCE>3
<FILENAME>exh991toform8kjan212004.txt
<TEXT>
Exhibit 99.1


For additional information, contact:
Loran Cashmore Bond
PhotoWorks, Inc.
pr@photoworks.com
(206) 281-1546

Valerie Chan
Pembroke, Inc.
valerie@pembroke.com
(206) 352-8814


           PhotoWorks Inc. Reports First Quarter Decreased Net Losses
                       and Increased Gross Profit Margins
          Strategic Cost Containment Program Beginning to Show Results

         SEATTLE - January 21, 2004 - Reporting financial results today for its
first quarter ended December 27, 2003, PhotoWorks(R) Inc. (OTCBB: FOTO) said
that its net loss decreased by over 50 percent compared to the first quarter of
fiscal 2003, while gross profit increased to 29.6 percent of net revenues as
compared to 22.4 percent in the first quarter of the prior year. Further,
revenues from digital products and services grew nearly 26 percent compared to
the first quarter of fiscal year 2003.

First Quarter FY 2004 Results
     The company reported a net loss of $467,000, or a loss of $.03 per share,
for the first quarter of fiscal 2004, compared to a net loss of $1,050,000, or
a loss of $.06 per share, for the first quarter of fiscal 2003. PhotoWorks
reported gross profit of 29.6 percent compared to 22.4 percent in the prior
year first quarter. Net revenues for the first quarter of fiscal year 2004 were
$5,755,000, compared to $8,353,000 for the first quarter of fiscal year 2003.
Revenues from digital products and services increased 25.5 percent to $944,000
for the first quarter of fiscal 2004, compared to $752,000 for the first
quarter of fiscal 2003.

Focus on Sustainability
     As part of a broad business strategy announced in November 2003, soon after
Philippe Sanchez was named CEO, PhotoWorks has initiated corporate-wide programs
to reduce expenses, increase cash generated from operations and improve the
balance sheet. Last week, the company announced an organizational realignment,
including a workforce reduction and cost containment program estimated to result
in annual cost savings of $1.9 million.

     "PhotoWorks is making good progress toward achieving sustainability,"
stated President and CEO Philippe Sanchez. "We are working aggressively to
contain costs, defend the core business and establish a core competency in the
digital photo print space. Some of these initiatives have produced results
already while others are expected to generate results over time."


Focus on Digital Photo Print Market
     Sanchez noted that during the first quarter, PhotoWorks focused on
marketing to existing customers to increase sales of prints from digital and
film images.

         "Traditional mail order film revenue continued to decline as expected
but was partially offset by growth in our digital photo print business and
recent product introductions" he said. Revenue from holiday greeting cards
exceeded expectations. Also a new Prepaid Print Credit promotion for digital
photo prints and the innovative Pick Your Prints program - in which film images
are digitized and posted online for viewing so customers need order only the
prints they want from each roll of film - showed better than expected
performance. He noted that plans for the second quarter include web site design
improvements, print product line enhancements and implementation of leading
color correction technology in all of PhotoWorks' digital printing.

         In addition, to further build its digital photo print business and take
advantage of the rapidly growing digital camera market, on January 15 PhotoWorks
announced that it will allocate some of its workforce reduction and cost
containment savings to fund new positions in digital product marketing, as well
as in technology, product and Web site development.

         "PhotoWorks is on track to deliver on the business realignment strategy
announced in November of 2003," Sanchez emphasized. "We will continue our
efforts to stabilize the company through expense control and cost containment,
build the PhotoWorks team and its organizational capacities, stem the decline of
the traditional film business by focusing on retaining our most valuable
customers, establish a scalable digital infrastructure and Web site that
delivers the PhotoWorks brand promise and acquire new digital customers by
leveraging e-marketing tactics."


Conference Call


         An investor conference call has been scheduled for today, Wednesday,
January 21, 2004, at 11:00 a.m. Pacific Time to discuss the first quarter
results. The conference call will be broadcast live over the Internet. To listen
to the call over the Internet, go to PhotoWorks' Web site at www.photoworks.com.
If you cannot listen to the conference call live, a replay will be available on
PhotoWorks' Web site for 90 days. If you do not have Internet access, a replay
of the call will be available from January 21, 2004, at 1:00 p.m. Pacific Time
to January 28, 2004 at 1:00 p.m. Pacific Time by dialing 1-800-633-8284 and
entering access code 21179235.

                                     -more-


<PAGE>


About PhotoWorks Inc.
Formerly Seattle FilmWorks, PhotoWorks(R) has been delivering high quality
photographs to more than 6 million satisfied customers for 25 years. The company
is dedicated to providing innovative and inspiring ways for people to create,
share and preserve their photographic memories. Every day, digital and film
photographers come to www.photoworks.com to upload, enhance and print their best
photographic memories, simply and conveniently. The company offers a 100%
satisfaction guarantee. Based in Seattle, PhotoWorks is publicly traded (OTCBB:
FOTO). More information about PhotoWorks is available at www.photoworks.com or
by e-mailing customercare@photoworks.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements in this news release concerning estimated annual cost savings;
ability to reduce expenses, increase cash generated from operations, improve
balance sheet and establish sustainable profitability; opportunities in the
high-growth digital photo processing sector; leadership in photo services and
any other statement which may be construed as a prediction of future
capabilities, performance or events are forward-looking statements, the
occurrence of which are subject to a number of known and unknown risks and
uncertainties which might cause actual performance to differ materially from
those expressed or implied by such statements. These risks and uncertainties
include the ability to generate cash to fund operations or establish sustainable
profitability; launch of future products and services; system performance
problems due to technical difficulties, pricing and other activities by
competitors; economic and industry factors, and other risks including those
described in the company's Annual Report on Form 10-K and those described from
time to time in the company's other filings with the Securities and Exchange
Commission, press releases and other communications.


PhotoWorks(R) is a registered trademark of PhotoWorks, Inc.


                            -Financial Tables Follow-


<PAGE>


                                PHOTOWORKS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share and share data)
<TABLE>
<CAPTION>


                                                                      For the First Quarter Ended
                                                               December 27, 2003   December 28, 2002
<s>                                                            <c>                        <c>
Net revenues                                                     $  5,755                    $8,353
Cost of goods and services                                          4,053                     6,478
                                                                 --------                   -------
   Gross profit                                                     1,702                     1,875

Operating Expenses:
   Marketing                                                          577                       919
   Research and development                                           465                       536
   General and administrative                                       1,093                     1,435
                                                                 --------                   -------
      Total operating expenses                                      2,135                     2,890
                                                                 --------                   -------

Loss from operations                                                 (433)                   (1,015)

Other expense, net                                               (34)                       (35)
                         -------------------------------------------     ----------------------

Loss before income taxes                                             (467)                   (1,050)
Income tax provision                                                    -                         -
                                                                 --------                   -------
Net loss                                                         $   (467)                  $(1,050)
                                                                 ========                   =======

Net loss per share                                                 $(.03)                  $(.06)
                                                                   =====                   =====

Weighted average number of
shares outstanding                                   16,667,000                 16,655,000
                                                     ==========                 ==========
</TABLE>

<TABLE>
<CAPTION>

                                PHOTOWORKS, INC.
                    SELECTED CONSOLIDATED BALANCE SHEET DATA
<s>                                                  <c>                                <c>
                                                       December 27, 2003                 September 27, 2003
                                                       -----------------                 ------------------
         Cash and investments                              $  3,751,000                       $  4,756,000
         Accounts receivable                                     58,000                             28,000
         Inventories                                            751,000                            652,000
         Prepaid expenses                                       290,000                            354,000
         Current Assets                                       4,850,000                          5,790,000
         Total Assets                                        $6,682,000                         $7,662,000
                                                             ==========                         ==========

         Current Liabilities                               $  3,402,000                       $  3,956,000
         Total Liabilities                                    6,554,000                          7,098,000
         Total Shareholders' Equity                             128,000                            564,000
         Total Liabilities and Shareholders' Equity          $6,682,000                         $7,662,000
                                                             ==========                         ==========
</TABLE>


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