Kodak’s Troubles Hold a Lesson for the AI Age

Kodak tried to prepare for digital cameras, but couldn’t fix itself quickly enough to fend off new competitors. (Emmanuel Dunard/AFP/Getty Images)

Eastman Kodak was founded in the 19th century and is on the verge of bankruptcy for the second time. Once a giant of consumer products, Kodak was disrupted by digital photography in a way that has sparked conversations in business schools ever since. Today, it holds an important lesson for the Big Tech tech incumbents.

The company said on Monday it would have trouble meeting upcoming debt obligations and that “these conditions raise substantial doubt about Kodak’s ability to continue as a going concern.”

In a statement to Barron’s, a Kodak spokesperson said, “The ‘going concern’ language in Kodak’s 10-Q is essentially required disclosure because Kodak’s debt comes due within 12 months of the filing. Kodak is confident it will be able to pay off a significant portion of its term loan well before it becomes due, and amend, extend or refinance our remaining debt and/or preferred stock obligations.”

In the 19th century, photography was for professionals, with a lot of technical knowledge required to operate the new and cumbersome rigs. Kodak was the first company to successfully target mass consumer markets after the release of the Kodak Brownie camera in 1900. The simple design, using cheap materials like cardboard, allowed Kodak to charge only $1, a fifth of the cost of the company’s previous model. It made up for the low price with film sales and processing services.

The Brownie was a runaway success and led to Kodak becoming a pillar of 20th century industry and the stock market. It controlled a huge market share for film and processing, and the name “Kodak” became synonymous with photography and safe investing. The company was able to successfully meet the challenge of Polaroid’s instant gratification, but it couldn’t transition into digital photography, though not for lack of trying.

In 1978, two Kodak engineers were granted a patent for an “electronic imaging apparatus, preferably an electronic still camera,” the company’s first digital camera design. From there, Kodak tried for years to be part of the inevitable rise in digital photography. Its engineers invented image sensors, photo storage, and printing technologies. Its first commercial digital camera was a very expensive 1991 model aimed at professional photographers.

George Fisher, Kodak CEO in the 1990s, articulated strategies for the digital future, even as film photography remained dominant through the decade, and his successors followed that path. Kodak had its peak profit year in 2000, with $1.4 billion in net income on $14 billion in revenue.

But by then, digital cameras did start to take off, and camera and electronics companies like Canon, Nikon, and Sony were much better suited for this market than Kodak, primarily a film and processing company.

The beginning of the end for Kodak was the rise of the camera phone. While these produced notoriously poor images at first, they got better and better, and the advent of touchscreen smartphones beginning with 2007’s iPhone accelerated adoption. As one photographer wrote in 2009, “the best camera is the one that’s with you.”

Kodak underwent a bankruptcy restructuring in 2012. The stock that had been a foundation of investment portfolios for decades became worthless. Its revenue dropped 90% from 2007 to 2024.

By contrast, Kodak’s main film competitor, Fujifilm Holdings, saw revenue grow in this period, and the company has remained profitable. Instead of trying to transfer its past successes to the digital domain like Kodak, the company took a hard left turn by diversifying and challenging its own business model. In 2000, In 2000, Fujifilm’s imaging segment generated 53% of the company’s revenue. By the time Kodak declared bankruptcy in 2012, that was down to 15%.

Kodak also tried to diversify, but not as early or as quickly as Fujifilm. Too little, too late.

In the end, Fujifilm’s imaging business stuck around long enough to start growing again, a reflection of how it was willing to upend its business model. Like Kodak, Fujifilm was known for cheap cameras like the first disposables, with profits coming from film and processing. But what’s driving today’s resurgence is the renewed popularity of high-end compact digital cameras like the company’s popular X100VI. It lists for $1,800—if you can find one—and new cameras have recently sold on eBay for $1,900 or more. Fujifilm imaging revenue has grown at an annualized rate of 17% in the past four years.

By adapting and shifting to emphasizing hardware over film, Fuji managed to survive with both.

There is a lesson here for incumbents in the age of AI: It’s hard to know where the competition is coming from during an inflection point like today. Kodak thought it was in a race with Canon and Nikon, when it was Apple, Samsung and Alphabet’s Google that ultimately passed all three.

As the internet was blossoming in the mid-1990s, Google and Meta didn’t yet exist, and Amazon.com had just been founded. Some of the winners from the AI revolution may not be on anyone’s radar yet, and some of the losers may be household names like Kodak.

Write to Adam Levine at adam.levine@barrons.com