The moment it all went wrong for Kodak

The world's biggest film company filed for bankruptcy yesterday, beaten by the digital revolution. The only problem is, the enemy started within

David Usborne
Friday 20 January 2012 01:00 GMT

When companies go bust, we, the customers, rarely pay much heed. It's all about judges, restructuring and then, if they are lucky, their re-emerging in some shrunken form to carry on as if nothing had happened. Not so in the case of Kodak, which is now taking the walk of ignominy to the bankruptcy courts.

Click 'view gallery' above to launch 'Timeline: 128 years of Kodak'

For this is a company we care about – at least if we were born before 1986 or so, when Kodak was at the peak of its commercial powers. A hundred years earlier George Eastman, the company's founder, had invented roll film, which replaced photographic plates and allowed photography to become a hobby of the masses. Kodak did not quite own the 20th century, but it did become the curator of our memories.

"One of the interesting parts of this bankruptcy story is everyone's saddened by it," notes Robert Burley, professor of photography at Ryerson University in Toronto. "There's a kind of emotional connection to Kodak for many people. You could find that name inside every American household and, in the last five years, it's disappeared."

But 1986 was arguably also the year when Kodak, a company that for so long was the emblem of American industrial innovation, began to be eaten by others, notably from Japan, who learnt to innovate too – and more quickly.

Kodak was the great inventor. In 1900, it unveiled the Box Brownie camera. "You push the button, we do the rest," ran the advertising campaign. Kodachrome film, the standard for movie-makers as well as generations of still photographers because of its incredible definition and archival longevity, was introduced in 1936 and only went out of production 2009. Nor should we forget the Instamatic, the camera with the little cartridges of film that spared us the fumbling of trying to get film to spool properly. Between 1963 and 1970 the company sold 50 million of those.

The trouble began 20 years ago, with the decline of film photography. In the 1990s, Kodak poured billions into developing technology for taking pictures using mobile phones and other digital devices. But it held back from developing digital cameras for the mass market for fear of killing its all-important film business. Others, such as the Japanese firm Canon, rushed in.

So who invented the digital camera? Ironically, Kodak did – or, rather, a company engineer called Steve Sasson, who put together a toaster-sized contraption that could save images using electronic circuits. The images were transferred onto a tape cassette and were viewable by attaching the camera to a TV screen, a process that took 23 seconds.

It was an astonishing achievement. And it happened in 1975, long before the digital age. Mr Sasson and his colleagues were met with blank faces when they unveiled their device to Kodak's bosses. Even he didn't full see its potential. "It is funny now to look back on this project and realise that we were not really thinking of this as the world's first digital camera," Mr Sasson was later to write on a company blog.

"We were looking at it as a distant possibility. Maybe a line from the technical report written at the time sums it up best: 'The camera described in this report represents a first attempt demonstrating a photographic system which may, with improvements in technology, substantially impact the way pictures will be taken in the future.' But in reality, we had no idea."

For Kodak's leaders, going digital meant killing film, smashing the company's golden egg to make way for the new. Mr Sasson saw in hindsight that he had not exactly won them over when he unveiled his toy: "In what has got to be one of the most insensitive choices of demonstration titles ever, we called it 'Film-less Photography'. Talk about warming up your audience!"

Even before film began to fade, other manufacturers, notably Fuji, were nibbling at the company's dominance: at the 1984 Olympics it was Fuji that supplied the official film, after Kodak declined the opportunity. In recent years the company has been weighed down by its pension responsibilities, born of a paternalistic culture introduced by Mr Eastman himself. And its efforts in the last 10 years to shift its focus to consumer and industrial printers have faltered: the company has posted losses in six of the last seven years.

In 1976, Kodak sold 90 per cent of the photographic film in the US and 85 per cent of the cameras; 10 years later it still employed 145,000 people worldwide compared with a global payroll today of 18,000. Historians may one day conclude that most of the company's slow unravelling can be traced to the failure of its leaders to recognise the huge potential of Mr Sasson's invention.

Don Strickland, a former vice-president, who left the company in 1993 because even then he couldn't persuade it to manufacture and market a digital camera, put it this way: "We developed the world's first consumer digital camera but we could not get approval to launch or sell it because of fear of the effects on the film market."

Financial future of 15,500 UK staff at risk

Kodak's decision to file for bankruptcy protection in the US puts the financial futures of 15,500 UK staff at risk.

The firm has a significant manufacturing plant in Harrow, north London, which at its peak employed 6,000 staff and still has over 1,000 today. Kodak last year agreed to inject $800m into the UK pension fund over the next decade to fill a massive shortfall. But now the company's ability to meet that promise is in doubt after lawyers warned that the Chapter 11 protection means it will be able to shut unprofitable operations and cut back on its pension obligations.

The UK Pension Regulator has been given aggressive legal powers to put pensioners at the top of the list of creditors of collapsed foreign companies. But in practice it has never succeeded in doing so in the US.

Helena Berman, a litigation lawyer at Maurice Turnor Gardner, said: "The pensions regulator has been given the teeth to go after pension schemes in other jurisdictions such as the US, but every time it's tried to so, it has been challenged. For the Kodak pensions, it's a case of wait and see." The Kodak UK pension trustees may attempt to claim priority over other creditors' claims in the US.

Lucy Tobin

Exposed: Firms that took eye off the ball

Barbie Mattel, whose Barbie dolls have been adored by girls for 53 years, saw sales handbagged by the arrival of the sassy rival Bratz. Sales of Barbie, according to The Wall Street Journal, have been flat or negative for most of the 2000s.

Psion The PalmPilot gadget had what seemed an amazing power of organising your diary and phone book electronically. Sadly, Psion failed to spot early enough that mobile phones would soon incorporate all that – and more.

Western Union It was to Western Union that Alexander Graham Bell and his co-inventors took their patent for the telephone first. But its chairman balked at the $100,000 they asked him for, describing the contraption as "nothing but a toy".

Nokia As the brick phones of the 1980s became smaller and smaller, Nokia quickly became synonymous with small, practical mobiles. Sadly for the Finnish company, it failed to see the growing importance of internet-enabled smartphones.

Timeline: 128 years of Kodak

1884 American inventor George Eastman, who later becomes founder of the Eastman Kodak Company, patents photographic film stored in a roll.

1888 The Kodak name is trademarked. The first Eastman Kodak camera is released and costs around $25 (about £400 in today's money).

1891 The company opens its first international manufacturing site in the London suburb of Harrow, taking advantage of Europe's booming photography market.

1900 Kodak launches the Brownie camera, priced at $1, which is credited with bringing photography to the masses.

1922 Kodak produces 147,000 miles of motion picture film a year, using one-twelfth of the silver mined annually in the US.

1925 George Eastman, now 71, hands over presidency of the company to William Stuber.

1969 The film used on the Apollo 11 Moon landing is manufactured by Kodak.

1975 Kodak becomes the first company to make a digital camera. It took 23 seconds to expose each image.

1976 More than 90 per cent of photographic film and more than 85 per cent of cameras sold in the US are made by Kodak.

1994 One of the first consumer digital cameras, the QuickTake, is launched by Apple. It is made by Kodak.

2004 As the popularity of digital cameras grows, Kodak finally abandons the film camera.

2005 Kodak is the largest digital camera retailer in the US, raking in up to $5.7bn in sales.

2007 Kodak falls to fourth biggest digital camera retailer. By 2010, it is the seventh biggest.

2009 After 74 years of production, Kodak stops selling 35mm colour film.

2011 Kodak shares fall by more than 80 per cent, partly because the company struggles to meet pension costs for its employees.

2012 Kodak files for chapter 11 bankruptcy.

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