Kodak: The long downfall of an industry pioneer

By Andrej Sokolow Jan 19, 2012, 14:48 GMT

New York/Berlin - Kodak is not just a tradition-filled company going bankrupt. It's an industry pioneer which changed the history of man like few other companies before it.

Kodak invented the roll of film, as well as the interchangeable film cartridge. When the one-dollar Brownie camera was introduced in 1900, it brought photography to the masses.

Kodak's invention of the film also laid the foundation for motion pictures. It's not out of the question to say that, without Kodak, people would not have been able to capture many of their memories in pictures.

The company made a lot of money over the decades - loads and loads of it. Company founder George Eastman came up with a brilliant business model - providing people with cheap cameras and making the money with the film and all of the services revolving around it. Kodak absolutely dominated the American photography market in the 1970s, with a fantastic share of more than 80 percent.

So how can you lose everything after being in such a fabulous position?

The downfall of Kodak is a lesson for how market leaders can be overrun by technical developments.

The tragic irony of the story is that Kodak had the future in its hand. In 1975 - long before any of its rivals - Kodak developed the first digital camera. But management stored it away on the shelves to avoid endangering the film business it dominated.

With that decision, and its focus on day-to-day profits, Kodak missed the unique chance of leading an innovation. Kodak also wasted billions in the 1980s with a foray into the pharmaceuticals industry.

But it had faced off threats before. When Polaroid introduced instant picture photography in the 1940s, alarm bells went off and Kodak responded with its own instant camera, leading to a long legal fight between the two.

Nonetheless, managers eventually realized that their lucrative film model would no longer fit in the digital era, making Kodak a victim of its own success. In the 1990s, the company attempted to use its strong market position and revive its digital aspirations.

Since the 1990s, Kodak has been considered one of the leading manufacturers of digital cameras. But it sold the cameras at a loss, just like it had done with analog cameras. And, this time, there was no money from film sales.

It didn't help that rivals like Fujifilm made inroads into Kodak's territory with cheap film, grabbing more and more of Kodak's share, forcing the US company to lay off tens of thousands of employees in the 1990s.

Photography today remains a billion-dollar market, but companies other than Kodak are profiting from it - camera manufacturers, printing service providers and software developers among them. Making it even worse are smartphone cameras, which have become so good that manufacturers of digital cameras are worrying about their own future.

Kodak tried to establish a business saving photos on CDs. But the technology which Kodak was offering was still too expensive, and before too long everyone had a DVD drive on their computers. Current boss Antonio Perez even tried recently to convert Kodak to a printing service provider. But the transition went too slowly and the losses would not slow down.

Even though Kodak could avoid death in the bankruptcy proceedings, the old greatness is only a faint memory.

Perez may have pointed that 75 percent of the revenues are now in the digital business, but the turnover is only about 7 billion dollars, compared to more than 15 billion from in the 1990s.

And the number of employees has dropped from 150,000 back then to just 17,000.

Then again, former rival Polaroid might provide some hope.

It succumbed to the pressure of the digital competition and went bankrupt in 2001. Now, new investors are trying to build back up the traditional brand as they are selling a digital camera with built-in printer, bringing back the spirit of the classic Polaroid model. Perhaps there are Kodak enthusiasts crafting similar plans should Kodak ultimately fail to struggle back from bankruptcy.