The Kodak lesson

January 23, 2012
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Eastman Kodak has survived for more than 120 years but on this month the company announced it would seek Chapter 11 bankruptcy protection. All things must pass, especially if a business is reluctant to change.

The Eastman Kodak chairman said that the company’s poor performance was the result of “adverse economic conditions rather than false steps”. He blamed the world economic situation for the company’s troubles and said that markets outside the US were responsible for the 73% drop in earnings.

That was retiring Kodak Chairman Walter Fallon, but he did not say that last week, nor even last year but in June 1983 and the share price halved to less than $5 following his remarks. Current Kodak Chairman and CEO Antonio Perez voiced very similar excuses in a video statement this week when he announced that Kodak in the US is to commence “Voluntary Chapter 11 business reorganisation”. The New York stock exchange subsequently suspended Kodak shares, which were by then trading at just 36 cents.

As the Kodak statement landed on news desks around the world, shares in Apple reached an all-time high of $431.37. According to CNN Money, this valued Apple at $400 billion, which makes the company worth more than Greece or Austria and only slightly less than the largest corporate entity, Exxon Mobil ($420 billion).

The comparison between the fortunes of Apple and Kodak is worth making. In 1985, when Kodak again blamed external forces for its poor performance – this time it was “the strong dollar” – Apple decided it didn’t need the services of its creative and visionary co-founder and instead placed its trust in “corporate America” in the person of John Sculley.

As is well known, Steve Jobs quit, only to return in triumph in 1997 when the then-board of Apple realised it had run out of ideas.

In Rochester, New York, on the other side of the country, Kodak was having a terrible time. In Q4 1985, the company made its first quarterly loss in the 20th century – $194 million in just three months. The full year earnings were down 64%, as Kodak lost almost half a billion dollars in an attempt to compete with Polaroid in the instant camera market.

While Apple’s fortunes took an upward turn in 1997, Kodak lost its battle for better access to the Japanese market for its film products and laid-off 10,000 workers around the world. Back home, the company’s under-funded digital department announced a 1.3 megapixel camera. It cost $13,000.

The story goes on into the 21st century with Kodak management always ready to blame everyone else for what were – and are – fundamental failures in corporate vision. Thanks to a $950 million credit facility underwritten by Citigroup (and repayable in 18 months), Eastman Kodak will continue to trade for the moment. It will also ensure that its many dedicated employees will receive their pay and most of their benefits – although the Kodak UK pension fund anticipated an $800 million cash injection from the parent company to meet its obligations over the next decade. Kodak shareholders are, in all likelihood, left holding worthless pieces of paper.

Yet there are many assets within the organisation even without the intellectual property and patent rights that the management hope will prove the company’s salvation.

Kodak has always been a fount of knowledge and expertise for those who work in the photographic world with the staff and the Rochester headquarters freely provided documentation and technical advice to entertainment professionals.

The Sundance Film Festival, which takes place this year between Jan. 19-21, has traditionally benefitted from the support of Kodak, in both time and money. Speaking at the event, Kodak Entertainment Imaging Division’s Graeme Parcher says, “Film is still a very affordable medium for a wide range of productions. Nothing compares to film’s latitude, flexibility and resolution, and we want independent filmmakers to understand that they don’t have to make compromises to realize their vision. Our newest film stocks offer great options and pristine results for projects at all budget levels.”

He is right, of course. Many filmmakers started their careers with low-budget documentaries shot on Super 16 before graduating to high-budget costume drama. The five-star rated Blu-ray Disc version of “Pride And Prejudice” (pictured) from 2Entertain, released in 2008, is a superb example of what could be achieved with Super 16 film back in 1995. Today, the results can be even better – even without the presence of Colin Firth.

For those schooled in the wonders of cinematography, the digital alternative can never be the same. Sadly, however much you try to hold on to the past, it will slip through your fingers and leave only such brilliant restorations as “Pride And Prejudice” and “The World At War” to vouchsafe what was once achieved. The onward march of digital acquisition and delivery is unstoppable. If a company that was once as big and as wealthy as Eastman Kodak cannot hold back the tide, there is no chance for lesser organisations to stem the flow.

Film at its best is unsurpassed in the hands of still and moving picture professionals but things can and do go wrong when lesser mortals try to use it. There were times when fewer than half of the images on a 24-exposure roll were acceptable, yet all had to be developed and most were printed. Rolls of film came back with “hairs in the gate” or “edge fogging” and there was no alternative but to reshoot.

Digital cameras mean instant playback of moving images, hundreds of pictures on a tiny memory card and distribution around the world within seconds of taking the shot. Smartphones are now as good, if not better, than dedicated cameras and, for many users, they are always to hand.

As economists will tell you, every product has a life cycle, from introduction through growth and maturity to eventual decline. It was Eastman Kodak’s good fortune that, for the photographic industry, the life cycle extended over 123 years. On present form, it doesn’t look as though packaged media will exhibit quite such longevity.

One big unanswered question remains: Now that film canisters have gone, where will we store all our paper clips? 

Paper clips: those things that hold sheets of paper together. You remember paper don’t you?