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Posted by on Jan 20, 2012 in At TMV, Business | 11 comments

Elegy for Kodak: an American Icon Goes Bankrupt

It was bound to happen sooner or later. After years of declining revenues and tumbling stock prices, Eastman Kodak has finally filed for Chapter 11 bankruptcy. The venerable company that introduced the world to the snapshot has reached the end of the roll.

Bankruptcy doesn’t always mean certain death, of course. Paramount Studios, Pepsi, Macy’s, MGM and plenty of other American institutions have filed in the past and are still with us today in one form or another. But unless it can be rescued and resurrected by a benevolent corporate behemoth, Kodak will soon join the growing roster of vanished American brands: PanAm and TWA, Look Magazine, Pontiac and Oldsmobile (not to mention Studebaker, Edsel, DeSoto, Plymouth and Pierce-Arrow), Rheingold beer, Ipana toothpaste, Postum, Uneeda Biscuits and hundreds of other once-familiar names — now alive only in the memories of aging consumers like me (and possibly you).

If you’re over forty, you probably remember stepping into a tourist shop while on vacation, pointing to the shelves of little yellow-orange boxes behind the counter, and grabbing three or four overpriced rolls of Kodachrome or Kodacolor film for your SLR camera. (It was Kodachrome for slides, Kodacolor for prints.) Professional photographers used to stake their reputations on Kodachrome, especially the low-speed Kodachrome 25, which was revered for the depth and richness of its colors.

Kodak entered the American soul like only a select handful of beloved brands. The “Kodak moment” is part of our vocabulary. One of the company’s nostalgic commercials from the early 1960s still lingers in the memories of those of us old enough to have seen it. Viewed today, this tender masterpiece still guarantees at least few furtive sniffles.

Film was the essence of Kodak’s business and its biggest profit center, but of course the company also made the cameras to go with the film. Kodak founder George Eastman invented both film-on-a-roll (1885) and the portable camera (1888); in fact, his ingeniously simple Brownie camera, introduced in 1900, finally brought photography out of the studio and into the homes of millions. In his unassuming way, the man who chose the name Kodak (because he thought the letter K “seems a strong, incisive sort of letter”) had started a revolution.

I still honor the memory of my first camera, a Kodak Instamatic given to me by my parents when I turned sixteen. That little black-and-silvery gizmo accompanied me to New York, the Grand Canyon, California, Mexico City, college and beyond, culminating in a grand two-month post-collegiate European adventure. My Kodak Instamatic looked upon Stonehenge, the Eiffel Tower, the Matterhorn and the ruins of Pompeii. It took perfectly square pictures of dubious resolution, but it was cute and handy and always ready to tag along. I still have it, tucked away in a box somewhere in my vast and disorderly personal archives, current whereabouts unknown. Wherever it is, it won’t leave my possession until I’m lowered into the ground. Maybe they should bury it with me.

The Instamatic was a model of brilliant simplicity: you popped a plastic film cartridge into the back (no unwieldy spools or sprockets), shut the compartment, pointed and clicked. If you were taking pictures indoors or at night, you mounted a little disposable flash cube atop the camera; it rotated as you snapped away and was good for four shots.

Kodak had come up with an unbeatable business model: inexpensive, well-marketed, user-friendly devices — coupled with the need to refill those devices regularly with the company’s own products. (In marketing parlance, this is the razor blade model: sell a good razor, and your customers will keep buying your blades.) Kodak was sitting pretty, and its future seemed as solid as a Mack Truck.

So how could a giant like Kodak go belly-up? How could a company that held a 90 percent share of the American film market in the 1970s find itself at the door of doom today? Was it a simple matter of film losing out to the digital juggernaut, or were there other issues involved?

Yes, Kodak grew complacent as a result of its near-monopoly on camera film. Even before the digital revolution, the company started losing market share to foreign upstarts like Fuji and Agfa. Kodak assumed that its customers would never desert the sacred brand.

And get ready for a shock: the digital camera was actually invented by a Kodak employee, Steven Sasson, back in 1975. That’s right: a company that made its living from film created the very technology that would render most of its product line obsolete. You have to shake your head in disbelief at such a revelation… and at the same time, you have to love a company that would place innovation above its own fortunes in the great hierarchy of priorities.

But there’s more to the story of Kodak’s collapse. The company enjoyed a brief resurgence as a maker of popular digital cameras that could be docked to a portable instant printer. Just seven years ago, in fact, Kodak ranked number one in camera sales. But there were two emerging problems that didn’t bode well for the company’s future: low profit margins, and a burgeoning smartphone industry that was devouring camera sales. Kodak’s response proved fatal.

Like too many chieftains of faltering companies, Kodak CEO Antonio Perez took the easy route of slashing costs instead of boosting revenues. He shut down the remaining film factories, cut 27,000 jobs and outsourced most of the manufacturing to Asia. Reduced to a shell of its former self, Kodak had lost its soul. It could no longer compete with either the cell phone makers or the robust Japanese camera companies. Checkmate.

Kodak mysteriously kept Perez in the driver’s seat for ten years, right up to the bitter end. Maybe the board believed in his slasher ethic. Or maybe the crippled company had simply lost the will to live. Now Kodak will try to sell its 1100 patents so it can raise enough cash to pay employee pensions. The company created by visionary George Eastman over 120 years ago is pretty much a closed photo album.

Companies are like species, subject to the same ruthless Darwinian laws: compete, find a niche, dominate it, keep adapting and never rest on your laurels. Kodak dominated its niche for over a century — a pretty grand run for any company — but ultimately failed to adapt and was trodden under with the weak and infirm.

Could a better-managed Kodak have survived the transition from film to digital? Maybe, but the challenges of that transition would have taxed and tormented even the most brilliant managers. Film, the very heart of Kodak’s business, had been wiped out by an invasion of pixels — an invasion launched from within the company’s own walls. You can adapt to a gradual change in climate, but Kodak was essentially hit by an asteroid.

So now we’re left with the memories in our photo albums — if any of us still look at photo albums. Under normal conditions, memories are little more than fleeting flashes of light from the past. For over a century, Kodak helped millions of us capture those memories for perpetual viewing and enjoyment. That’s quite a legacy. I like companies that change our lives for the better. More of them should be like Kodak.

Rick Bayan is founder-editor of The New Moderate.