Kodak was the first company to create a digital camera, but their failure to realize the potential of this product left them behind.
In January 2012, the iconic American camera maker Eastman Kodak filed for bankruptcy protection in a New York court. They said they had been granted a $950 million line of credit to sustain operations for 18 months.
Kodak’s move was not surprising. It had long been a cautionary tale for anyone looking to enter the industry. MBA students at the world’s top universities study in detail every year the strategic mistakes that led to Kodak’s slide into the digital age.
Unlike its contemporaries IBM and Xerox, which found new revenue streams when their original businesses were in decline, Kodak has been criticized for abandoning new projects too quickly, over-investing in digital, and complacency that kept it from seeing ongoing technological advances.
"The seeds of the problem were laid decades ago. Kodak was too focused on the city where they were born, and not really present in the places where new technologies were developing in the world. It was like they were living in a museum," said Rosabeth Kanter, a professor at Harvard Business School.
In 1888, George Eastman invented a camera that could store images on large glass plates. Not satisfied with this breakthrough, he continued his research, creating roll film and then the Brownie camera. Priced at $1, this camera was intended for everyone. With the slogan "You just press the button, we'll do the rest", Kodak sold about 25 million Brownies by the 1940s, according to the BBC .
George Eastman (left) and Thomas Edison. Photo: George Eastman Museum
In 1935, they introduced Kodachrome color film. Kodak quickly became a household name, helping Americans capture the most important moments in their lives. The phrase "Kodak moment" was even coined to refer to these unforgettable moments.
In 1981, Kodak's revenue hit $10 billion. At its peak, the company was comparable to Google or Apple today, with 145,000 employees worldwide.
In the 1960s, Kodak began researching the potential of computers and made a major breakthrough in 1975. At that time, one of their engineers - Steve Sasson - invented a digital camera, the size of a sandwich toaster.
However, Kodak failed to realize the mass-production potential of the product, focusing on high-end cameras for niche markets. In addition, executives feared that digital cameras would cannibalize their film profits.
"When George Eastman died, he had such an impact on the entire company that Kodak's image is always associated with nostalgia. Nostalgia is a very valuable thing, but it does not help people move forward," Nancy West, a professor at the University of Missouri, commented on Reuters.
On the Telegraph , Olivier Laurent - a writer at the British Journal of Photography magazine commented: "Kodak was the first company to create a digital camera. But at that time, most of their profits came from selling chemicals used for film production. They were afraid to invest, thinking that this would erode their traditional business."
When Kodak realized the potential of digital cameras, the segment far surpassed film cameras. Kodak's competitors launched highly advanced products. "Kodak never returned to its glory days," Laurent said.
In 1981, Sony introduced its first digital camera, which “sparked fear at Kodak,” according to research by Harvard professors Giovanni Gavetti and Rebecca Henderson.
Kodak's Brownie Special Six-20 (left) and Pocket Instamatic 20 cameras. Photo: Reuters
However, it wasn't until 1991 that Kodak produced the first device for the digital imaging era. But it wasn't a camera, it was a CD for storing photos.
It wasn’t until 1996 that they launched a pocket-sized digital camera, the DC20. Kodak’s biggest attempt in this area was the launch of the Easyshare camera brand in 2001. But by then, the market was already crowded with products from Canon and many other Asian brands.
Kodak also sought to diversify. In 1988, it bought the pharmaceutical company Sterling Drug for $5.1 billion. However, the deal left Kodak deeply in debt, with $9.3 billion in debt by 1993.
In 1994, Kodak spun off its Eastman Chemical division, hoping to reduce its debt. But that same year, it sold Sterling. "The problem with Kodak is that they don't want to change," West said.
By 1993, Kodak had spent $5 billion on digital imaging research, spread across 23 different scanner projects. This investment helped Kodak take the lead in the scanner market, with a 27% market share in 1999. However, that number gradually decreased, to 15% in 2003 and 7% in 2010, due to having to share with Canon, Nikon and many other names.
In 2001, Kodak lost $60 for every digital camera it sold. There was also a war within Kodak between film and digital employees, according to a Harvard University study.
By 2007, Kodak realized it needed to increase its resources in the camera business. So it sold its medical equipment business, which made X-ray machines for hospitals and dentists. This business was still very profitable at the time.
Kodak pocketed $2.35 billion from this deal. However, analysts pointed out that this was a mistake, as the baby boomer generation (born between 1946 and 1964) in the US was about to retire, and the demand for X-rays increased. But for Kodak, their logic at that time was: They did not want to spend money to make the medical sector become completely digital.
"We call it 'The Bird That Flys Backward.' Because it's always more comfortable to look back than to look forward," said Dan Alef, author of George Eastman's autobiography. "George Eastman never looked back. He always wanted to make something better, even though he was making the best product on the market at the time."
Kodak's revenue from 2005 to 2022 (unit: million USD). Chart: Statista
*2013 data is divided into two periods before and after bankruptcy.
In 2004, Kodak stock was removed from the Dow Jones Industrial Average after more than 70 years. During the period 2004-2007, Kodak attempted to restructure by closing 13 film factories, 130 photo labs and laying off 50,000 workers. By the end of 2010, market research firm IDC said that Kodak's market share in the digital camera segment was only 7%, behind Canon, Sony, Nikon and many others.
At the end of September 2011, Kodak had assets worth $5.1 billion. However, its total debt had reached $6.75 billion. They also had to find ways to sell off patents to have money to maintain operations.
In 2012, Kodak’s then-CEO Antonio Perez said bankruptcy was a necessary step. “We now have to complete the transformation, by restructuring our cost structure and monetizing non-core intellectual property assets,” he said. He had previously called digital cameras “an unattractive business.”
Analysts say Kodak could have become a social media giant if it had convinced consumers to use its own online services to store, edit and share photos. Instead, it focused too much on devices and lost the online battle with social networks like Facebook.
In August 2013, Kodak received approval from a New York court to exit bankruptcy, pledging to completely divest its consumer camera, film, and photo services businesses and focus on printing technology for business customers.
In 2020, Kodak was also granted a $765 million loan by the US government to accelerate domestic drug production, in order to reduce dependence on foreign countries.
Kodak’s revenue has stabilized around $1 billion in recent years, just 10% of its peak. Last year, it brought in $1.2 billion and made $26 million in profit. Both figures were up slightly from 2021.
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