The history of Kodak: Pioneer of film and digital photography

Angélica Sofía Castillo

From the invention of film stored in rolls to the creation of the first digital camera, Kodak has been one of the most innovative photography companies for more than a century. But it has struggled to remain competitive in the face of cheaper film produced in Japan and, later, digital cameras from China.

In 1880, a gentleman called George Eastman, of the Eastman Dry Plate Company, was busy inventing single-shot pieces of paper that were covered in a photographic emulsion. A fellow photographic expert, William Walker, joined Eastman’s company in 1883, and in 1885 they invented a holder for a roll of Eastman’s photo plates. Then, in 1887, independently of Eastman, Hannibal Goodwin created a transparent nitrocellulose film base — and in 1888, Emile Reynaud put perforations into nitrocellulose film.

In 1889, Eastman put all of these inventions together and created the first mass-produced rolls of transparent photographic film.

Much is made by those commentating on Kodak’s corporate history of the company’s advertising success as well. The company successfully exhorted those with families to become archivers of those ethereal Kodak moments, which could now be forever captured in a photograph caught on film. Having created the consumer market for film photography, Kodak used its campaigns to inspire people to use its products. Phrases like “Kodak as you go” or “Keep a Kodak Story of the Children”, which were dripping with sentimental language and also featured colorful photographs of people gifting, using or otherwise enjoying their Kodak cameras.ç

In 1962, Kodak employed 75,000 people and earned more than $1 billion in U.S. sales. It had achieved an incredible position over the course of 70 years in an industry that was largely its own creation. The company had gotten to that point by focusing on selling inexpensive cameras to keep consumers buying its film. The way Kodak saw it, there was nothing more important to the company’s success than protecting its interests in film photography.

However, although the rise of digital photography as the sole reason for Kodak’s failures makes a good story, it was not the first major technological disruption in the company’s history. Instant photography had been invented by 1950 and Polaroid was able to develop the cameras needed to capture this segment of the market. Kodak developed its own instant photography products but was sued by Polaroid and ended up having to pay that company $909 million in 1990. Throughout the 1980s, a major shift in the film market was sparked by Japanese photography company Fujifilm, which was able to sell mass-produced film to huge retailers like Walmart for a price less than Kodak’s film, a move which dramatically undercut Kodak’s profits. By the late 1990s, Fujifilm had captured a large portion of Kodak’s share of a market that was quickly being evacuated anyways.

Kodak did not sit still and simply watch its business diminish, although in some cases it may have been better if they did. The company did focus on some digital photography innovations during the 1990s, including the creation of the film-based Photo CD and a computer printing dock for photos. But its focus on film’s profitability and the chemical processes used to create that film led the company to make some inadvisable business decisions. For example, in 1988 Kodak paid $5.1 billion to acquire American pharmaceutical company Sterling Drug. The company hoped to utilize its expertise in chemical engineering to create drugs with high profit margins, but lacked the ability and resources to apply that knowledge in creating patented pharmaceuticals or extremely cheap generic medications. Kodak dismantled the Sterling operations and sold off the readier of their pharmaceutical business for less than $3 billion only six years after acquiring Sterling.

Despite the restructuring efforts, Kodak remained, according to Peter Nulty writing in Fortunemagazine in early 1994, 'one of the most bureaucratic, wasteful, paternalistic, slow-moving, isolated, and beloved companies in America.' The company continued to lose market share in its core film and photographic paper operations; not only was Kodak reluctant to fully embrace the digital future out of fear of undermining its chemical photography business, it also had been slow to recognize huge opportunities in that chemical core, such as the explosive growth of 35-millimeter film sales following the debut of 'point-and-shoot' 35-millimeter cameras. The moves to diversify outside imaging, most notably the move into pharmaceuticals, proved ill-advised and saddled the company with more than $7 billion in debt. With earnings stagnating and no turnaround in sight, the board of directors, under pressure from outside investors, fired Whitmore in late 1993. Replacing him as chairman and CEO was George Fisher, who left the top spot at Motorola, Inc. to join Kodak, thereby becoming the first outsider to head the company. 

Fisher almost immediately moved to refocus the company on its imaging core. Fisher and a newly installed top financial team went ahead with the spinoff to shareholders of Eastman Chemical at year-end 1993; this divestment had already been in the works under Whitmore. The following year, Kodak sold Sterling Winthrop to SmithKline Beecham plc for $4.6 billion, its diagnostics products division to Johnson & Johnson for $1 billion, and several other nonimaging units for about another $2.4 billion. These businesses had together accounted for $7.4 billion in revenues in 1993 but only $46 million in pretax profit. The asset sales reduced the debt load to a manageable $1.5 billion and returned the company to its roots.

Next, Fisher moved to transform Kodak into a digital company for the 21st century. Rather than viewing the digital future as a threat to the chemical photography past, Fisher saw digital photography as a great opportunity to revitalize Kodak's core, as he related to Forbes in early 1997: 'I think there was a fear of what digital was all about, whereas I was coming here because I believed digital imaging and the core photography business had a symbiotic relationship, which was, in fact, exciting.' During 1994 Fisher created a new division called Digital and Applied Imaging, and hired Carl Gustin, a marketing executive who had previously worked at Digital Equipment Corporation and Apple Computer, Inc., as its head. Among the early developments of the new division was the 1995 relaunch of the Kodak Photo CD with a new design aimed at desktop personal computer users and the introduction that year of a full-featured digital camera priced at less than $1,000. 

Back on the chemical photography front, Kodak under Fisher's leadership took a more aggressive approach to trade disputes with its archrival Fuji Photo Film. In 1995 Kodak accused the Japanese government and Fuji of illegally restricting access to the Japanese market for film and photographic paper. The U.S. government took the case to the newly formed World Trade Organization (WTO) in 1996, with the European Union soon joining the Kodak side. Fuji contended that Kodak's policies in pricing and marketing its products in Japan were to blame for the company's low market share, and that Kodak faced an environment in Japan similar to what Fuji faced in the United States. In fact, both companies held about 70 percent of their respective home markets, while Kodak held about 12 percent of the Japanese market and Fuji still only ten percent of the U.S. market. In 1997 the WTO rejected Kodak's claims, ruling in Fuji's favor.

Kodak began to struggle financially in the late 1990s as a result of the decline in sales of photographic film and its slowness in transitioning to digital photography. As part of a turnaround strategy, Kodak focused on digital photography and digital pritting and attempted to generate revenues through aggressive patent ligation. In January 2012, Kodak filed Chapter 11 bankruptcy protection in the United States District Court for the Southern District of New York. In February 2012, Kodak announced that it would cease making digital cameras, pocket video cameras and digital picture frames and focus on the corporate digital imaging market. In August 2012, Kodak announced the intention to sell its photographic film (excluding motion picture film), commercial scanners and kiosk operations as a measure to emerge from bankruptcy.

In January 2013, the Court approved financing for Kodak to emerge from bankruptcy by mid-2013. Kodak sold many of its patents for approximately $525,000,000 to a group of companies (including Apple, Google, Facebook, Amazon, Microsoft, Samsung, Adobe Systems and HTC) under the name Intellectual Ventures and RPX Corporation. On September 3, 2013, the company emerged from bankruptcy having shed its large legacy liabilities and exited several businesses. Personalized Imaging and Document Imaging are now part of Kodak Alaris, a separate company owned by the U.K.-based Kodak Pension Plan. On March 12, 2014, it announced that the Board of Directors had elected Jeffrey J. Clarke as Chief Executive Officer and a member of its Board of Directors.

resources:
http://www.forbes.com/sites/petercohan/2011/10/01/how-success-killed-eastman-kodak/#754a26cf4d86
http://www.nytimes.com/2015/03/22/business/at-kodak-clinging-to-a-future-beyond-film.html?_r=0