Kodak
From Invertopedia, the encyclopedia of how things fail
Kodak was the film and camera company whose engineer, Steven Sasson, built the first digital camera in 1975[2]. Kodak never put it into production[2], and later held back a working digital SLR, reportedly for fear of hurting film sales[8]. It still became the top seller of digital cameras in the US in 2004 and 2005[4], but on January 19, 2012 it filed for Chapter 11 with $5.1 billion in assets and $6.8 billion in debts[1][5].
Contents
The bet
Kodak made money on every step of a photograph: the camera, the film, the processing and the prints[8]. The bet was that this would last long enough to move to digital on Kodak's own schedule. When Sasson showed his camera, executives said they did not see a market for it, and he was not allowed to talk about it or show it outside the company[2].
Kodak said later that its switch had been timed to catch digital imaging when it became a mass-market product[4].
What happened
| Dec 1975 | Sasson's prototype takes its first picture. It weighs 3.6 kilograms, records 100 by 100 pixel black-and-white images, and takes 23 seconds to save each one to a cassette tape.[2] |
|---|---|
| 1978 | Kodak gets a US patent on the camera. It is never put into production.[2] |
| 1980s | Kodak's workforce peaks at 145,000.[3] |
| 1989 | Sasson and Robert Hills build a 1.2-megapixel digital SLR with memory cards. Kodak does not sell it, reportedly afraid it would hurt film.[8] |
| 2003 | Digital cameras start outselling film cameras in the US.[4] |
| 2005 | Kodak is the top US digital camera seller for a second year, with 24.9 percent of the market, and its digital sales pass its film-based sales for the first time.[4] |
| 2003 – 2011 | Kodak cuts 47,000 jobs and closes 13 factories and 130 processing labs.[1] |
| Jan 19, 2012 | Kodak and its US subsidiaries file for Chapter 11 in New York, with a $950 million loan from Citigroup to keep running.[1] |
| Dec 19, 2012 | Kodak agrees to sell its digital imaging patents for $525 million, after hoping they could fetch up to $2 billion.[3][9] |
| Sep 3, 2013 | Kodak leaves bankruptcy as a commercial-printing company. Its old shares are canceled.[6][7] |
The kill shot
Kodak moved slowly to protect film. By the time it led digital camera sales, the film business it had been protecting was the thing going away.
Kodak did not miss digital. It invented it, patented it[2] and later earned over $3 billion licensing its digital capture patents[1]. What it would not do was let digital replace film on purpose. A camera good enough to sell in 1989 stayed in the lab[8].
Being first in digital cameras in 2005[4] was not the same as replacing film. A digital photo needs no film, no processing and no print, which were the steps Kodak got paid for[8]. By Kodak's own account, its digital capture patents had become essential to other companies' phones and consumer devices[1]. When Kodak filed, it was trying to sell 1,100 digital imaging patents to raise cash[5].
Red flags ignored
- An invention with no owner. Executives saw no market for the digital camera, and the engineer who built it could not show it outside Kodak.[2]
- Protecting the cash cow. A sellable digital SLR was shelved in 1989, reportedly to protect film sales.[8]
- Winning the wrong race. Leading US digital camera sales in 2004 and 2005[4] did not replace what film had paid for.
- Shrinking for a decade. From 2003, Kodak cut 47,000 jobs and closed 13 plants and 130 labs before it filed.[1]
The cost
At the Chapter 11 filing Kodak listed $5.1 billion in assets against $6.8 billion in debts and had about 18,000 employees, down from a peak of 145,000[3][5]. Its digital imaging patents, once hoped to fetch up to $2 billion, sold for $525 million[9].
Shareholders lost everything: all of Kodak's old stock was canceled when it left bankruptcy in September 2013[6].
The inversion
Kill your own cash cow before a competitor does it for you. If you invent the thing that replaces your best product, sell it first.
What survived
A much smaller Kodak. It came out of bankruptcy on September 3, 2013, focused on commercial printing and packaging, selling nothing to consumers but still making film for the movie industry[6][7]. Its personalized and document imaging businesses went to Kodak's UK pension plan[6].
The patents went to a group led by Intellectual Ventures and RPX, with licenses for Apple, Google, Microsoft, Samsung, Facebook and others[3][9]. Sasson kept building cameras at Kodak and in 1994 helped make one of the first commercial digital cameras, with Nikon[2].
References
- ^ “Eastman Kodak Company and its U.S. subsidiaries commence voluntary chapter 11 business reorganization (Exhibit 99.1)”. Eastman Kodak 8-K filing with the SEC, January 19, 2012. The Chapter 11 filing in the Southern District of New York, the $950 million Citigroup DIP facility, 47,000 jobs cut and 13 plants and 130 labs closed since 2003, over $3 billion of patent licensing since 2003.
- ^ “The first digital camera was the size of a toaster”. IEEE Spectrum (Joanna Goodrich), April 6, 2022. Sasson's 1975 prototype, its specs, the first picture in December 1975, management seeing no market, the 1978 patent, never produced, the 1994 Nikon camera.
- ^ “Kodak to sell key patents for $525 million”. AFP via IndustryWeek, December 19, 2012. The $525 million patent sale to a group led by Intellectual Ventures and RPX, the named licensees, and the 1980s peak of 145,000 workers.
- ^ “Kodak tops U.S. digital-camera market”. AP via NBC News, February 9, 2006. Kodak first in US digital cameras in 2004 and 2005 with 24.9 percent share in 2005; digital passing film cameras in 2003; digital sales passing film-based sales; Kodak's timing claim.
- ^ “Kodak calls bankruptcy filing 'necessary step'”. NPR (Mark Memmott) via KUNC, January 19, 2012. $5.1 billion in assets and $6.8 billion in debts, about 18,000 employees, the 1,100 patents it could not sell.
- ^ “Kodak emerges from Chapter 11 bankruptcy”. WXXI News, September 3, 2013. The September 3, 2013 exit, old stock canceled, the commercial printing and packaging focus, the spin-off to the UK pension plan.
- ^ “Kodak moments just a memory”. The Columbian, September 3, 2013. Kodak exits as a commercial-printing company that sells nothing to consumers, having dropped cameras, film sales and photo developing; still makes movie film.
- ^ “The invention of digital cameras was almost buried at Kodak - here's why”. BGR (Trevor Mogg), September 1, 2026. Kodak's profits across camera, film, processing and prints; the 1989 1.2-megapixel digital SLR it chose not to sell, reportedly fearing for film sales.
- ^ “Kodak patents sell for $525 million”. WXXI News, December 19, 2012. The $525 million sale, the earlier hope of up to $2 billion, the twelve licensees.