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

Kodak was the first company to create a digital camera, but its failure to recognize the product's potential caused it to fall behind.

In January 2012, the iconic American camera manufacturer Eastman Kodak filed for bankruptcy protection in a New York court. They stated that they had been granted a $950 million credit line to maintain operations for 18 months.

Kodak's move was not surprising. They had already served as a cautionary tale for anyone considering entering the industry. Every year, MBA students at top universities around the world meticulously study the strategic mistakes that led to Kodak's downfall in the digital camera era.

Unlike contemporaries like IBM and Xerox, who found new revenue streams when their original businesses declined, Kodak was criticized for abandoning new projects too quickly, investing too broadly in digital technology, and for complacency that prevented them from seeing the technological advancements taking place.

"The seeds of the problem were sown decades ago. Kodak was too focused on the city where it was founded, and didn't really have a presence in the developing technological hubs of 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, developing roll film and later the Brownie camera. Priced at $1, this camera was aimed at everyone. With the slogan "Just press the shutter button, we'll do the rest," Kodak sold approximately 25 million Brownie cameras 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 of their lives. The phrase "Kodak moment" was even coined to refer to those unforgettable moments.

In 1981, Kodak's revenue reached $10 billion. At its peak, the company held a position 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 the digital camera, about the size of a sandwich toaster.

However, Kodak failed to recognize the mass-production potential of this product. They remained focused on the high-end camera segment for niche markets. Furthermore, executives were concerned that digital cameras would erode the profits of their film business.

"When George Eastman passed away, he had such an impact on the entire company that Kodak's image became synonymous with nostalgia. Nostalgia is valuable, but it doesn't help people move forward," Nancy West, a professor at the University of Missouri, told Reuters.

In the Telegraph , Olivier Laurent, a writer for the British Journal of Photography, commented: "Kodak was the first company to create a digital camera. But at that time, most of their profits came from selling chemicals used in film production. They were hesitant to invest, thinking it would erode their traditional business."

When Kodak realized the potential of digital cameras, the market had already surpassed film cameras. Kodak's competitors had launched highly advanced products. "Kodak never returned to its golden age," Laurent said.

In 1981, Sony launched its first digital camera. This "stirred up fears at Kodak," according to research by Harvard University 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 its first device for the digital photography era. But it wasn't a camera; it was a CD for storing photos.

In 1996, they launched their first pocket digital camera, the DC20. Kodak's biggest effort in this area was the introduction of the Easyshare camera brand in 2001. However, by then, the market was already crowded with products from Canon and many other Asian brands.

Kodak also sought to diversify its business. In 1988, they acquired the pharmaceutical company Sterling Drug for $5.1 billion. However, this deal plunged Kodak into deep debt, reaching $9.3 billion in 1993.

In 1994, Kodak spun off its Eastman Chemical division in hopes of reducing debt. But that same year, they still had to sell Sterling. "Kodak's problem remains 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 lead the scanner market, with a 27% market share in 1999. However, this figure gradually declined, to 15% in 2003 and 7% in 2010, due to having to share market share with Canon, Nikon, and many other brands.

In 2001, Kodak lost $60 for every digital camera sold. Internal conflicts also arose within Kodak between employees in the film and digital divisions, according to research from Harvard University.

By 2007, Kodak realized they needed to increase resources for their camera business. Therefore, they sold their medical equipment division – the manufacturer of X-ray machines for hospitals and dentists. This segment was still highly 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 preparing to retire, and the demand for X-rays was increasing. But Kodak's logic at the time was: They didn't want to spend money to make the healthcare sector completely digital .

"We call it the 'Backward Bird.' Because looking back is always more comfortable than looking forward," says Dan Alef, author of a biography about George Eastman. "George Eastman never looked back. He always wanted to make something better, even if he was already making the best product on the market at the time."

Kodak's revenue from 2005 to 2022 (in million USD). Chart: Statista
*The 2013 data is divided into two periods: before and after exiting bankruptcy.

In 2004, Kodak's stock was removed from the Dow Jones Industrial Average after more than 70 years. Between 2004 and 2007, Kodak attempted restructuring by closing 13 film factories, 130 photo labs, and laying off 50,000 employees. By the end of 2010, market research firm IDC reported that Kodak's market share in the digital camera segment was only 7%, ranking 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 keep operating.

In 2012, Antonio Perez, then CEO of Kodak, stated that bankruptcy was a necessary step. "Now, we must complete the transformation by restructuring our cost structure and generating revenue from non-core intellectual property assets," he said. Prior to this, he had even called digital cameras an "unattractive business."

Analysts argue that Kodak could have become a social media giant if it had convinced consumers to use its own online service to store, edit, and share photos. Instead, it focused too much on its equipment and lost the online battle against social networks like Facebook.

In August 2013, Kodak received approval from a New York court for its bankruptcy exit plan. Under the plan, the company committed to completely divesting its camera, film roll, and consumer photography services businesses to focus on printing technology for business customers.

In 2020, Kodak also received a $765 million loan from the US government to accelerate domestic drug production, aiming to reduce its dependence on foreign sources.

In recent years, Kodak's revenue has stabilized around $1 billion, only 10% of its peak. Last year, the company earned $1.2 billion, with a profit of $26 million. Both figures represent a slight increase compared to 2021.

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