Kodak - the former king of cameras failed because of the digital age

Kodak was the first company to create a digital camera, but failing 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, investing too broadly in digital, and for complacency that kept it from seeing ongoing technological advances.

"The seeds of the problem have been there for decades. Kodak was too focused on the city where they were born, not really present in the places where new technology was 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 aimed at everyone. With the slogan "You just press the button, we'll do the rest", Kodak sold about 25 million Brownies by the 1940s, BBC said.

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 unforgettable moments.

In 1981, Kodak's revenue reached $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 this product. They still focused on the high-end segment of cameras for niche markets. In addition, executives were concerned that digital cameras would erode the profits of their own film division.

"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, because they thought 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 panic 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 to store photos.

In 1996, they launched a pocket digital camera, called the DC20. Kodak's biggest effort 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 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 Eastman Chemical, 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 become the leader in the scanner market, with a 27% market share in 1999. However, this number gradually decreased, to 15% in 2003 and 7% in 2010, due to sharing 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, when 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 technology .

"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 figures are 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 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, the total debt the company had to bear was up to $6.75 billion. They also had to find ways to sell some of their 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 generating revenue from non-core intellectual property,” 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. Under the plan, the company pledged to completely abandon 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, aiming to reduce foreign dependence.

Kodak’s revenue has been steady 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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