Could Kodak have made it?

The financial markets are on a death watch for Eastman Kodak Co., whose dominant position in its markets once prompted an anti-trust suit by the U.S. government.  Was Kodak’s decline inevitable?  Michael Hiltzik, an economics columnist for the Los Angeles Times, wrote this week that the answer is probably “yes.”

Kodak executives didn’t always make the best decisions, he wrote, but Kodak’s basic problem was that its expertise in making photographic film didn’t transfer to digital photography, and even stand stand-alone digital cameras are giving way to i-phones and other electronic gadgets.

Kodak’s decline is of a different order from GM’s.  The latter still manufactures a product with a huge market demand; it just got sloppy and inefficient at turning out its cars and trucks.  That’s why the federal government, not to mention GM’s unions and other stakeholders, thought a dramatic restructuring might put it back on its feet.  (That it was a central player in an industry employing hundreds of thousands of Americans was part of the calculus too.)

Kodak, however, markets a process technology; and as the chemistry of film has yielded to digital electronics, consumer demand for Kodak’s traditional products has evaporated.  A similar transition afflicts newspapers, book publishers, movie studios, broadcasters and record labels today, but the issues for those industries are different yet.

Their business models are under pressure because they’re dependent on outdated distribution technologies; but their core products (information, entertainment) are still very much in demand.  So Kodak has faced a tougher challenge than automakers or content producers.

Source: latimes.com.

As I can confirm from my own experience in reporting on Kodak, it was not that Kodak management was unaware of the potential of electronic photography.  Hiltzik noted that Kodak scientists actually invented a digital camera back in 1976—a time when Kodak enjoyed a 90 percent share of the U.S. market for photographic film.  Under CEO Daniel Carp, Kodak achieved a No. 2 position in the digital photo market.  But Kodak didn’t make money in this market, because it didn’t have the experience and expertise of the electronics companies, and wasn’t able to acquire it fast enough.

A well-functioning free-market economy is an ecology in which many companies come into existence, some survive and flourish, a few seem to grow up to the sky, but all in time have to make way for new companies.  My home city of Rochester, N.Y., has been a center of flour milling, of horticulture, of textile manufacturing and of optics, photography and xerography.  The question for us, as for Americans elsewhere, is not how we can hold on to past glories, but what new things we can create that will equal the glories of the past.

Click on Kodak’s long fade to black for Michael Hiltzik’s complete article.

Click on The Rise and Fall of Eastman Kodak for a differing view by a Wall Street analyst.

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