Kodak Falls Victim To Own Creation: Digital Photography
Unable To Adapt, Kodak Calls It Quits (For Now)
Eastman Kodak Co., one of the most recognizable name brands of the 20th century, filed for Chapter 11 bankruptcy last Thursday after months of speculation about the company’s ability to stay afloat amid falling sales in an increasingly digital world. A vanguard brand in the world of photography, Kodak became a household name with products such as Instamatic cameras and Kodachrome photographic film (forever immortalized in the song by Paul Simon). But this former trailblazer has lost its glory now that film cameras and printed photos are on their way to becoming relics of the past. Digital photography, which actually originated decades ago at Kodak, has now made the film maker nearly obsolete. Although Kodak did try to compete in the digital camera business, it never had as strong a presence as camera hardware specialist such as Nikon and Canon, or consumer electronics giants such as Sony. Interestingly, the advent of digital photography has now cannibalized the digital camera business as well, because smartphone cameras have become so good and so ubiquitous that many casual users have ditched their point-and-shoot digital cameras.
Based out of Rochester, New York, Kodak has been exposed to heavy foreign competition in its primary business of film sales and processing, and has had a dwindling customer base over the last 15 years or so. New York Governor Andrew Cuomo said that the news was “difficult and disappointing,” and that the city of Rochester owed much to the 132-year-old company. With the help of an 18-month, $950-million credit facility from Citigroup, Kodak continue operating through the restructuring. Kodak’s CEO Antonio M. Perez said that filing for bankruptcy was “a necessary step and the right thing to do for the future of Kodak.” In the last nine years, Kodak has closed13 manufacturing plants and 130 processing labs, laying off 47,000 workers in the process.
Widespread film digitization, which of course has contributed to Kodak’s woes, may eventually be the key to future profitability. Last year, the company’s digital and printing technologies accounted for 75% of its revenue. Many analysts believe that film digitization wasn’t Kodak’s main problem. Instead, the trouble lay in the fact that Kodak didn’t listen its own innovators – the ones who invented digital photography – when they predicted that digitization would one day make the film business obsolete. Back then, the film industry was Kodak’s main moneymaker, and the company wasn’t prepared for widespread sea change. Just ten years ago, Kodak stock was trading at $20 or more. Last Thursday, it was down 35% from the day before – at 36 cents per share.
