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It’s time we give Eastman Kodak some credit

Another business/tech writer is trying to make their bones with a continuation of the tired story of how Eastman Kodak Co. flubbed the analog-to-digital transition. This time, Tracy Moran, deputy editor of Ozy.com posted “Kodak Got The Digital Picture Too Little, Too Late.” The tagline for Ozy.com is “Fresh Stories and Bold Ideas,” but ironically, this blog post is neither fresh nor bold. It maintains the tired old canard that somehow the dolts cluelessly shuffling about the 19th floor at 343 State Street never saw digital coming.

“[By] the mid-to-late 1990s, digital quality was improving enough to rival film,” writes Moran. “So much so that even photographers like [London-based news photographer Ken Mears] who initially scoffed at digital realized ‘[it] was the way forward, as it made image-making a lot easier on the technical front.’ Yet Kodak wasn’t budging. While Kodak launched a digital science wing in 1995, a year later the company bet big on its Advanced Photo System known as Advantix, a self-loaded film that let users choose the format for their printed photos — high-definition, classic (4×6) and panoramic. From a film camera standpoint, says [Chunka Mui, a futurist and innovation adviser at the Vermont-based Devil’s Advocate Group], ‘Advantix solved a bunch of issues that customers had in terms of how they loaded film and printed film.’ But it also meant that Kodak was ‘doubling down on film at a time when digital was on the rise,’ he adds.”

You’d think a “London-based news photographer” would remember Kodak actually offered the first digital cameras designed for photojournalism, including the Kodak Professional Digital Camera System in 1991.

As typical of these blogs, the truth is there but framed within a context of poor sourcing and context. Did EK spend billions on Advanced Photo System? They sure did, but so did Fujifilm, Nikon, Canon and Minolta. APS was a unique time in the photographic industry when highly competitive consumer brands came together to jointly design, build and launch a product category. Was this a mistake? Maybe, but it’s not like Fujifilm, Nikon, Canon and Minolta weren’t heavily investing in digital cameras as well.

This is similar to the Cheddar video making the round earlier this year – “Why Kodak Willingly Ignored the Future of Photography – Cheddar Examines” – posted below, which dredged up a story of heroic scientist Steve Sasson came up with the first digital camera in the 1976 but was thwarted in his attempts to change the world by those crusty old film guys.

*Sigh* This is a very lightweight analysis of the situation with Eastman Kodak. Fujifilm in Tokyo faced the same situation but pivoted successfully. The problem wasn’t that Kodak didn’t see the potential in digital cameras; the problem was there wasn’t – and still isn’t – high margins in the part of consumer market Kodak had access to. Film and paper have enormous high margins, and shareholders were demanding a return on this investment.

Kodak led the way – and was probably too early – in some areas. For one thing, they co-developed the OLED screen, and even tried to become an OEM supplier of screens. Kodak once put an OLED screen on a digital camera, long before one appeared on a smartphone. In fact, one of Kodak’s former scientists, Dr. Ching Tang, was recently awarded the Kyoto Prize for his contributions in “Pioneering Contributions to the Birth of High-Efficiency Organic Light-Emitting Diodes (OLEDs) and Their Applications.” The Kyoto Prize is  Japan’s highest private award for global achievement. In early 2002, EK saw the potential of OLED displays, naming a top executive Bernard Masson to head this business; I interviewed Masson back then, and he talked about creating large-screen TVs so thin, you could hand them on a wall like a picture frame. Fast-forward to today, where this is readily available from Best Buy or Walmart.

It’s the chemicals, stupid

At its core, Kodak was a chemicals company with world-class expertise in coating materials at high speed, in total darkness, with near-perfect quality. They ran out of things to coat. Meanwhile, Fujifilm has pivoted to pharmaceuticals and cosmetics, while keeping its photography business alive and well.

Eastman Kodak is still around, a graphic arts company with a market cap of $133 million. There is also Kodak Alaris, which is a separate company spun off from EK, marketing Kodak professional film and software, kiosks, Kodak Moments app, etc. Printing pictures is still a multi-billion-dollar business, too.

I’ve been covering photo industry for 30 years, and have met Sasson and other Kodak engineers. I have about 10 Kodak digital cameras on my shelf, including two dual-lens VR series. That doesn’t change the fact Kodak was never going to make as much money on digital camera sensors and hardware as they made off consumables like paper and chemistry. Part of their push into digital cameras was to use the hardware to drive digital printing, just as they did with film cameras (razors and razor blades model).

Kodak did push hard into digital. They were literally “all-in” on digital photography more than any other company (other than Fujifilm), offering the first online photo services (Kodak Picture Network in the 1990s and AOL’s “You’ve Got Pictures”), online photo printing (Kodak Gallery), retail printing (Kodak kiosks), mobile printing (Kodak apps), home printing (Kodak inkjet printers and printer/dock thermal printers), Kodak home inkjet media, Kodak photo frames, Kodak consumer and professional cameras, and Kodak professional digital printing media, software, and printers. There wasn’t an aspect of the industry Kodak didn’t touch at some point, from either basic patents to directly offering products to end users.

The problem came when digital photography investments and profits weren’t enough to offset the dramatic declines in the traditional business. Without a fallback source of revenues, the company’s finances collapsed.

A better analogy would be Fujifilm, who understood they were in the chemicals business and have branched out into medicine, cosmetics and graphics arts. As such, imaging is a much smaller part of their business, but they are still successful overall. (Ironically, in the 1990s, Kodak was already on that path, when they bought Sterling Drug to diversify its chemical holdings, but later divested in it to concentrate on photography).

Sure, you can say Kodak missed the chance to dominate digital photography. But it wasn’t for lack of trying. Were management missteps and costly mistakes that contributed to Kodak’s 2012 bankruptcy? Absolutely. Was Kodak addicted to the constant profit stream from film, chemicals, and paper at the expense of all else? Certainly, and find a public company who wouldn’t do the same for its shareholders.

You may think of Kodak as some sort of relic or dinosaur. I’d prefer to think of Kodak as the company filled with good people who had the vision to see a digital world described in the “Kodak Gallery” tour campaign below. (Hat tip to Marianne Samenko and team for hanging all those actual film prints.) This Joe Pytka-director short film captures the value of imaging in our daily lives. Eastman Kodak the company may not be fulfilling it today, but the concepts and ideas live on today. Let’s give them the credit for that.

 

 

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3 thoughts on “It’s time we give Eastman Kodak some credit

  1. Fred Shippey

    Gary, Right on!

  2. Bob Banasik

    Gary, those are great insights and, of course, highly accurate. The most dominant companies in any industry become so through fortifying their positions by building assets and processes that are unique and hard to replicate. They build an impenetrable defense that is supported by revenue volumes at scales that challengers cannot achieve. That attracts additional stockholders to the company and that circle repeats—it keeps on rolling just like a wheel.
    The singular and ultimate potential threat to such companies remains only in their market, a nebulous collection of value propositions, customer needs, and demand. If the market shifts, if the wheel is punctured by lower demand trends that cannot be reversed, the cycle ends and the wheel stops rolling. The assets and processes that fortified the dominant market position become less desirable and their glittering attractiveness turn into liabilities of incumbency. As such, those liabilities will no longer be supported by the required revenue volumes needed to re–inflate the tire. As it turns out, Kodak had only one viable marketing strategy at its disposal—it needed to reset the balance of liabilities to relate in a positive way to the lower revenue potentials of newer value propositions that could be available in the shifted market. It needed to quickly divest those assets, which had ultimately become unsupported liabilities; but since those assets had lost much of their value, only one workable strategy remained.
    We are seeing many companies with dominant market positions who are forced to pursue bankruptcy as a strategy to reset their balance sheets. When the wheel stops turning, when the vehicle that propelled revenues dies, companies eventually see the need to have a funeral and bury the unwanted liabilities and related value propositions. Even market dominant companies are vulnerable to the ultimate arbiter of revenues and profits—the customer.

  3. Mike Berke

    Hi Gary,

    I’d like to add a couple of thoughts to your excellent piece.

    Kodak make backs for both Nikon and Canon bodies. Both companies advertised them. Kodak spent next to nothing on advertising. I believe that was part of the problem.
    But I do agree, the margins in electronics would never approach those in chemistry.

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