BY PETE PACHAL
Kodak has finally formalized what had been expected for years — it’s gone bankrupt. In the past 15 years, digital technology changed photography dramatically, and Kodak, a former heavyweight in the analog film business, got left behind.
That’s the story of Kodak in the broadest of strokes, though it doesn’t capture the full (if you’ll forgive me) picture. In fact, Kodak missed the boat on digital not once, but at least three times. Besides never capitalizing on the digital-camera tech it helped create, Kodak also gravely misunderstood the new ways consumers wanted to interact with their photos, the technologies involved, and the market forces surrounding them.
“It’s sad because they still have good people there,” says Jeffrey Hayzlett, who was Kodak’s Chief Marketing Officer from 2006 until 2010. “Overall the company has made a bunch of bets on technologies and business models that needed a longer runway than they had.”
The recent economic downturn was a factor in Kodak’s demise, though other companies managed to weather it without going bankrupt. The truth is that by the time Kodak had both feet fully in the digital game, it had been outclassed by more nimble competitors with better products. And whenever Kodak took a shot at standing out, it was a swing and a miss. Now that it’s completely struck out, it bears reflecting on how deeply Kodak misunderstood consumer photography today, and the digital and social forces transforming it:
Miss 1: Digital Cameras
It’s no exaggeration to say Kodak invented digital photography. In 1975 Kodak engineer Steve Sasson created the first digital camera, which took photos with 10,000 pixels, or 0.01 megapixels — about a hundredth of the resolution that low-end cameraphones have today. Kodak didn’t stop there; it worked extensively on digital, patenting numerous technologies, many of which are built into the digital cameras of today. (Kodak’s primary asset is its intellectual property, which some estimates value at $2 billion.)
“If you want to point back to the most pivotal moment that caused this,” says Hayzlett, “it was back in 1975 when they discovered the digital camera and put it back into a closet. Some of the same people are still there. I actually had an executive from Kodak come up to me last week and say, ‘I think film’s coming back.'”
In 1995 the company brought its first digital camera to market, the DC40. This was years before many others would get into the digital game, but Kodak never took advantage of its early start. Philisophically, the company was steeped in the film business, and to embrace digital meant cannibalizing its own business. Others quickly filled the niche, and Kodak didn’t fully rev up its digital business until 2001, when it launched the EasyShare line of point-and-shoot cameras.
“It’s a classic business strategy problem,” says Miriam Leuchter, editor of Popular Photography. “Their whole business was tied up in film and in printing. So while they’re developing this business technology, there’s not a big incentive to push it very far.”
While Kodak was slow to get into the digital game, it wasn’t the only one. Perennial rival Fujifilm tiptoed as well, not coming out with the FinePix line of point-and-shoots until 2001, so Kodak still had a chance. However, despite having created the category, Kodak digital cameras weren’t anything special. They didn’t have any standout specs or features, and their designs weren’t as eye-catching other manufacturers’ models.
“They just weren’t as good,” says Leuchter. “And the cameras themselves weren’t that appealing. Consumers like products that look cool, and [many] Kodak products just do not look cool. They’re bulky, they’re hunky, they’re dorky looking. They had a couple of good EasyShare cameras a couple of years ago, but they weren’t as good as a lot of the point-and-shoots from other companies.”
Those rivals — including Fujifilm, Nikon, Sony, Canon and others — kept innovating over the years with features like face detection, smile detection, and in-camera red-eye fixes, and Kodak, while it put out competent products, was always following feature trends, never leading them.
“The fact that Kodak invented the digital camera makes what is happening now particularly tragic,” says photographer Steve Simon, author of The Passionate Photographer. “For the last few years I would see Kodak at photo trade shows and on the big billboard at Times Square and I would wonder to myself, who exactly are they now and what exactly are they doing? If a photographer has to ask that, you know they have a problem.”
Miss 2: Photo Sharing
Kodak actually had one shot at creating a truly novel and useful feature for digital cameras: The company launched the world’s first Wi-Fi enabled camera in 2005, the EasyShare-One (seen below). The camera came equipped with a special card (separate from the SD card) that, when engaged, could connect to a nearby Wi-Fi network. The user could then email photos to friends straight from the camera.
I reviewed the camera for Sound+Vision magazine, and, while it was bulky and had a cumbersome way of using the Wi-Fi, it worked as promised. Emailing photos was a relatively simple task (aside from the initial inputting of addresses), and since few people were securing their Wi-Fi networks with passwords in 2005, finding an open hotspot was surprisingly easy in urban environments.
Nonetheless, the camera failed to sell well, and Kodak killed the line. However, if the company had the foresight to realize sharing was going to become the way people interacted with their photos, it might have thought twice. The year the EasyShare-One came out was the same year a group of engineers founded Eye-Fi, which has gone on to create a successful business around Wi-Fi-enabled SD cards for cameras — virtually the exact same concept Kodak abandoned.
“Photo sharing is the killer app today,” says Hayzlett. “There’s nothing that beats it. The issue is they built a Wi-Fi camera well before its time, and really the application needs to be on a phone.”
Sharing via the Web is by far the biggest way people use their photos, though, and Kodak seemingly got into the game reasonably early with its purchase of the Ofoto service in 2001 (Snapfish, now owned by HP, was founded in 2000). It took Kodak four years to relaunch the service as Kodak EasyShare Gallery, though, a huge amount of time that saw the emergence of Flickr, Picasa, Photobucket and others. Although EasyShare got good reviews for a while, the buzz surrounding its competitors was too loud for it to make any noise.
And let’s not forget cellphones, which not only helped murder Kodak’s digital camera business (along with everyone else’s — right, Flip?), but also made photos social. While it would be expecting too much of Kodak to have created novel apps like Instagram or PicPlz, it was a virtual non-presence in mobile apps (no, SmileMaker doesn’t count), which cemented the company’s irrelevance in the way people experience photos today. There are no Kodak moments in mobile.
Miss 3: Photo Viewing
Kodak bet big on digital photo frames and photo printers, though it didn’t anticipate the market forces at work in each field. When Kodak began pushing hard into frames — with differentiating features like Wi-Fi and batteries (most frames only work when plugged in) — prices were in free-fall, and digital frames were rapidly becoming a commodity market, with thin margins.
“That’s a very tough business to make money in, if you can make it at all,” says Hayzlett. “Everybody wants the best quality for free, basically.”
At the same time, Kodak frames were still hampered by the necessity to tie into the company’s photo services, and the setup was much more technically cumbersome than the average person was willing to endure (if you’ve ever set up a Wi-Fi frame, you’ve probably wished Apple would enter the market so it would “just work”). Competing against value brands and other heavy hitters such as HP and Sony, Kodak frames only marginally stood out, and the company couldn’t make any substantial money on them.
The field of photo printing, which Kodak is expected to emphasize if it emerges from bankruptcy, experienced a total transformation over the last decade. Everyone outside of professional photographers used to get prints of all their pictures out of necessity, but today few print photos in any quantity. Ever fewer want the hassle of owning a photo printer, instead choosing to get prints mailed to them from online services like Snapfish.
“They made a big bet on consumer imaging technology — point-and-shoots and photo printers and picture frames — at a time when people increasingly using their phones,” says Leuchter. “And they’re not printing as much. Home printers are nice, but nobody’s printing. They’re only printing the photos they care most about.”
A significant number of consumers do print photos, however, and the cheap-printer-as-means-to-sell-ink model is a proven model for companies to make money. If indeed Kodak survives, it makes financial sense for it to try and continue to be a force in the business, though since prints have been demoted to an ancillary way people experience photos, the company will never become the influencer it once was by focusing on it.
The most immediate takeaway from the fall of Kodak is clear: Don’t be afraid to cannibalize your own business in the name of progress. This is seen time and again in the digital revolution: Sony’s reluctance to develop a competent digital Walkman left an opening for the iPod. Blockbuster laughed off Netflix in the early days, then went bankrupt when it couldn’t compete with its Web-based competitor. And iPads may be eating up some Mac sales, but Apple’s bottom line is stronger than ever.
But Kodak’s inability to make any of its products stand out over the last decade is demonstrative of an overall reluctance to innovate. Certainly, if you asked Kodak executives in the early 2000s if they were committed to innovation, they would have answered yes, but real innovation requires risk and vision. You don’t kill all Wi-Fi cameras just because the first model got a lukewarm response from the market — that is, if you really believe in the core idea.
The story of Kodak’s downfall is an affirmation that true innovative spirit is much more often found in smaller companies and startups rather than old-school behemoths of yesteryear. After all, if you don’t have much to lose, you tend to make many more all-in bets. But, as Kodak has shown, if all you do is play it safe, the cost just to stay in the game will whittle you down until you’ve got nothing left.