How Kodak Succumbed to the Digital Age

A Century on Film

By Ullrich Fichtner

The most important moments of the 20th century were captured on Kodak film. But the once-dominant American company could not compete in the digital age. Eastman Kodak's bankruptcy has left the company's remaining employees with uncertain futures.

Robert Shanebrook pulls his Dodge minivan up to an immense building in snow-covered Kodak Park, in Rochester, New York, and says: "These days they make spaghetti sauce here." He takes pains to sound morose, as if he wanted his words to bridge the entire period since the day, more than 40 years ago, when he first came to Kodak as a young engineer. Back then, the company was building the camera that would capture the images of the Apollo 11 mission, which delivered perhaps one of the greatest "Kodak Moments" of all time, or pictures of the first men on the moon and of our planet seen from space.

Shanebrook, a tall, gray-haired man with a scraggly beard, wears hiking boots. He's kept active since retiring from Kodak in 2003. For 35 wonderful years, he had the privilege of working -- and traveling the world -- for the company. He was at Kodak in the 1990s, when its shares were worth as much as $70 (€54) each. He was there in the 1980s, when the company employed more than 30,000 people in this city on Lake Ontario. At that time, the employees' biggest worry was finding a parking spot near where they worked on the sprawling campus of 195 buildings.

"It's hard to imagine nowadays," Shanebrook grumbles. He drives his Dodge across snow-covered parking lots that are much larger than football fields but only have a few cars in them. These days, Kodak employs fewer than 7,000 people in Rochester, and the news from the 19-story corporate headquarters at 343 State Street is devastating. On Jan. 19, or two days before our trip with Shanebrook, the company was forced to file for Chapter 11 bankruptcy protection. "Did I cry?" Shanebrook asks. "No. Was I shocked? Yes. And I still haven't recovered from it."

The very next day, published reports indicated that panic was spreading in Rochester. Newspaper editorialists cast Kodak's move as yet another symbol of the dismal state of affairs in America. Others said Kodak served as an example of a company that had disregarded the signs of the times -- and only had itself to blame for having dozed its way to doom.

However, none of these interpretations is correct. If anything, Kodak symbolizes the deep-seated structural changes that have taken place across the world in recent years. Indeed, the story of Kodak is not a simple parable of rise and fall. Instead, it is a complex tale with an ending that is more comforting than one would initially expect.

From Small to Huge to Nothing

If you were to turn back the hands of time to almost any point over the last 132 years, you would come across Kodak without having to look for long -- and often without even realizing it. The red-and-yellow logo and yellow film boxes were as much a part of everyday life in the West as Coca-Cola. Indeed, film made in Rochester was the universal storage medium for pictures from weddings, holidays and vacations long before the dawning of 12-megapixel digital cameras and wafer-thin smartphones.

All around the world, people immortalized themselves on Kodacolor, the first "true color negative film," introduced in 1942. Later, they put Ektachrome slides in gray plastic frames and flimsy carousels. Eventually, they would use Kodachrome, the film its creators claimed could see "better than the human eye" and which, according to the Paul Simon song of the same name, "makes you think all the world's a sunny day."

Kodak was at the heart of all the world's images. Company founder George Eastman was hailed as the Steve Jobs of his era, and Kodak was its Google. In 1900, Eastman gave the world's consumers the "Brownie," the first relatively portable photographic camera for the everyman. The Brownie would change our view of the world forever and spawned an amazingly novel -- and profitable -- business idea: While selling its cameras cheaply and in bulk, Kodak made a killing by developing the film that went in them.

This ingenious model paid off handsomely for exactly a century and, in 1999, the company enjoyed record profits of $2.5 billion. For one, last time, the company could look back with satisfaction on a century of having decisively shaped the world of images.

Indeed, Rochester produced far more than the raw materials needed to take photographs. It made film for X-ray photography, microfiches for archives, reels of 16mm and 35mm movie stock, and film for Super 8 video cameras. Slide projectors were manufactured in huge numbers, as were video cassettes, lithium batteries and floppy disks for the first desktop computers.

In all those decades, Kodak literally flooded the market with newer and newer cameras. In fact, it wasn't unusual to see the company launch 20 or even 30 new products a year. And then there were printers, photocopiers, recordable CDs, disposable cameras, photosensitive paper and films of all kinds.

Kodak was everywhere. Between 1928 and 2008, every single movie to win the Oscar for best film was shot on Kodak stock. The fact that this honor has gone to Fujifilm every year since 2009 says a lot. But it says even more that cinematic production will soon be able to do away with film stock altogether by becoming completely digitized.

Only the Best for the Best

In that earlier, carefree era, Robert Shanebrook had the best job the company had to offer. As a research engineer, he worked on optimizing the films used by professional photographers. His products had names like Portra and TX and, since they were the latest and greatest thing in the world of photography, they were tested by the century's greatest photographers. Shanebrook visited these master craftsmen the world over -- in Brazil, Uganda, France, Japan, Mexico and Singapore. He brought them prototypes for trials in the field and the studio and solicited their feedback.

He watched Ansel Adams at work, he discussed kernel sizes with Sebastião Salgado, and he listened to what Steve McCurry and Eric Meola had to say about color saturation and contrast. Shanebrook was constantly flying around the world to deliver new films, only to return four weeks later to collect them. And, when he wasn't flying, he was rubbing elbows with all the artists and reporters who immortalized the world's wars and crises, who shot the famous portraits of Hemingway and Kennedy, and who captured the poses of Marilyn Monroe and Sophia Loren for posterity. Shanebrook helped the people who created the images that were first etched into the emulsion of Kodak film and then into our collective memory.

Shanebrook is a man of few words when discussing his work at Kodak because he doesn't want to make his role sound overly important. He cares more about a thin book he published himself. With many pictures and few words, he provides an extremely detailed description of how film is manufactured. It is a technical manual, though one as dated as the processes it describes.

Nevertheless, reading it, you marvel at the amazing abilities of the Kodak plants, at the light-sensitive layers they put on films at a speed of 300 meters (1,000 feet) per minute. The films themselves were actually made up of a dozen layers and yet were only 0.06 millimeters (0.002 inches) thick. Shanebrook has sold a thousand copies of his book. The rest are stacked in huge piles around his house.

Nostalgia and Pride

During our drive through Kodak Park, Shanebrook ponders questions more fundamental than technical: How could his company have gone bust? How was it possible for a company to go out of business when, in the 1970s, it was making fully 90 percent of all the films exposed in the United States and 85 percent of all the cameras sold? Could such a thing really happen to one of the most valuable and well-known brands of the entire 20th century? How did Kodak miss the dawn of the digital era? How could a company that had always been one of the world's most innovative, implode so dramatically that its share price fell to below 50 cents at the start of the year, prompting the company to be delisted from the New York Stock Exchange? If you want to know the answers to these questions, you must be prepared for a few surprises. To start with, who would have believed that it was actually Kodak that developed the world's first digital camera in 1975? Robert Shanebrook recalls seeing the first prototype and can describe its size with his hands. Together with all its parts, the device was about three times as large as a shoe box. The camera, which was invented by Kodak engineer Steve Sasson, took a single, appalling black-and-white photo comprising a total of 0.01 digital megapixels. Likewise, Shanebrook remembers that saving the image took a full eight minutes rather than the mere 28 seconds one can find people claiming online. For these reasons, Sasson's device didn't seem like a very marketable product.

But the Kodak technicians continued researching and doggedly improving the sensors that would soon be found in military equipment and, later, in both Nikon and Leica cameras, the latter costing as much as a car. Indeed, executives in Rochester weren't dozing off. Rather, they were wide awake -- but facing a nightmare scenario.

A One-Way Street to Oblivion

Larry Matteson, another Kodak veteran, remembers those days well. Matteson was a manager in the company for many years, and even a senior vice-president. Today, he is a professor at Simon Business School at the University of Rochester. Four years after the invention of the digital camera, Matteson was tasked with drafting a report about the future of digital technology for the company's executive board. In hindsight, his report seems almost prophetically accurate.

Matteson tells me by telephone about the report he made more than 30 years ago. Judging by his voice and the picture on the university's website, one would think he's a good-humored elderly gentleman. Back in 1979, he summarized the prospects for digital photography in a series of rapidly rising exponential graphs. The graphs showed that -- inevitably, if not immediately -- all the products Kodak had been successful at selling -- film, photos and cameras -- would switch from analog to digital by 2010 at the latest. The world as Kodak knew it was destined to vanish, and its business would shrink to practically nothing. Almost overnight, Kodak found itself heading down what seemed like a one-way street to oblivion.

From an objective point of view, there were two particular things that the company did extremely well: First, Kodak was a world leader in organic chemistry. And, second, thanks to its unparalleled experience in making films, it had become expert in coating surfaces of all kinds with extreme precision and at lightning speed. "But you can already see where that was heading," Matteson says. "Both were qualities that were no longer needed in the production of digital images."

After focusing on chemicals and film for several decades, it would have probably been impossible -- if not insane in business terms -- for Kodak to try to reinvent itself as an electronics company. What's more, its film business was still booming in the late 1970s and promised to bring in outstanding profits for many years to come.

In addition, it was easy to figure out that the meager margins of the digital market could never hope to match those of analog film or to keep a company like Kodak above water. Thus, as many as 30 years ago, Kodak seemed to have one of two choices: to commit suicide right away or to put it off until later.

Digitalized to Death

"The mistake," Matteson says, "if you want to talk about a mistake at all, was that Kodak could never separate itself from the notion of being a company about images." There were apparently repeated, although half-hearted, attempts to reorganize the company and completely change its direction. Every new board came up with a different strategy. Kodak invested in the hope of expanding its chemicals division into the pharmaceuticals business. It also spent a lot of money trying to dominate the market in digital printing -- a plan that was pursued, abandoned and then revived once again.

Bad luck also played a part in the company's eventual demise. Kodak tried extremely hard to survive the competition between analog and digital technology. It scaled back its film production in as controlled a manner as possible, while ratcheting up its digital capacities. As a result, Kodak was the leading manufacturer of digital cameras on the American market as recently as 2005.

Unfortunately, the next technological leap was just around the corner, and the first smartphones were already replacing digital cameras. Indeed, people soon stopped using normal cameras to take photographs, preferring instead to snap pictures on their phones. This, in turn, triggered a race to the bottom in terms of camera prices and, by 2007, Kodak had slipped to fourth place on the American camera market. Three years later, it was seventh. One by one, Canon, Sony, Nikon and all the other camera manufactures overtook Kodak. Their products were just as good or better, and they looked nicer, more colorful and fresher.

In Tokyo, managers at the rival company Fujifilm came upon the idea of converting their chemical business into a cosmetics one. But Kodak executives couldn't come up with a radical solution that could save their company. Other similarly outside-the-box suggestions -- like using their outstanding coating technology to print wallpaper or to manufacture sandpaper or Post-it notes -- were only given brief consideration before being dismissed as undignified. Rochester was gripped by an understandable but still fatal attitude: They had given the world pictures from the surface of the moon, they reasoned, so someone else could give it wallpaper.

A Rosy Future for Rochester

Visiting Rochester today, you find a city that seems like no stranger to bad news. The downtown area is a collection of office towers, many of which are for sale. Streets are filled with cars, but there are only a few people on the sidewalks. The skyline is dominated by office blocks belonging to Xerox, Bausch & Lomb and Chase Bank. Kodak's headquarters is also downtown, though a bit off to one side, and it can be seen from afar, especially at night, when its old-fashioned logo shines brightly in fiery red.

From there, it's just a few hundred steps to the point where the Genesee River plunges 30 meters (100 feet) into the heart of the city. The base of the waterfall is surrounded by crumbling, abandoned factories older than Kodak's, the remnants of early 19th-century Rochester. The city has long sought to transform the ruins into a fashionable nightlife district, but the efforts thus far have failed. Restaurants and bars have opened up only to close a few months later.

Still, Rochester is doing far better than its cityscape suggests. One reason for this is the fact that Kodak's decline has been rather drawn out. A slew of Kodak executives and researchers left the company to start their own businesses rather than manning the bridge as the ship was sinking. The behemoth that had once, like a Soviet collective, done everything itself -- including printing and folding its own cardboard boxes -- gradually broke apart into smaller units.

Kodak's decline has brought healthy change to the city by spawning new businesses whose products are better-suited to 21st-century needs. One corner of the industrial zone has been taken over by the Eastman Business Park, which Kodak holds a stake in. This cluster of 35 companies already reportedly employs a total of 6,500 people. If correct, this figure almost matches Kodak's remaining workforce in Rochester.

Johnson & Johnson is developing medical-diagnostic tools in the park, while LiDestri Foods is cooking up huge amounts of spaghetti sauce in the massive structure on Lee Road. But there are also small and mid-sized firms with between five and 50 employees. These include the solar-cell company Natcore Technology and Cerion Energy, which was founded by former Kodak employees who have developed a diesel additive that is supposed to dramatically lower fuel consumption.

Given these developments, it would be a stretch to say that Rochester is almost panicky about its future. The city is home to a respected university as well as the Rochester Institute of Technology, which is sometimes mentioned in the same breath as MIT, its illustrious counterpart in Cambridge, Massachusetts. In fact, the future actually looks rosy in Rochester: The region now employs half a million people, fully a fifth more than were there in Kodak's heyday, and unemployment is below the national average.

The Golden Age

The success stories of the 21st century are more fleeting, modest, less spectacular and less heroic than those associated with Kodak. Indeed, at the very end, the company proved to be a rather crazy organization whose corporate culture in the glory days seemed almost socialist. Robert Shanebrook recalls how Kodak was an "all-inclusive" business: It paid its former employees pensions, it offered free medical treatment and it even helped organize leisure-time activities for its employees. The Dodge minivan rolls past the front of Building 28 on West Ridge Road. Inside the immense, windowless brick structure are gyms and sporting halls in which employees used to play basketball and volleyball. In the golden age, it also had hobby rooms for stamp collectors, cameras were lent out free of charge, and 50 darkrooms were reserved for workers to use for their own purposes. During lunchbreaks, 20-minute segments of Hollywood movies were shown in the almost 2,000-seat auditorium; over the course of a week, employees could see the entire film.

The city used to boast a free dental clinic funded by Kodak-founder George Eastman. Today, it is dilapidated and has its windows boarded up. But the Eastman Theater and the Eastman School of Music are still there and in good condition, as is Eastman's former house on the chic East Avenue, home to the city's most beautiful and bizarre villas.

The living room boasts a life-size cast of an elephant head that Eastman brought back from Africa as a trophy. But the house contains one of the world's most important photography and film museums, including the private film collections of Martin Scorsese, Norman Jewison and Spike Lee. More than 4,000 historic cameras are also stored there, as are priceless photographs from the American Civil War, as are prints developed personally by Eugène Atget and Alfred Stieglitz, photos that link the 19th to the 21st century and are so valuable because they are so rare.

The most remarkable document is the farewell letter that Eastman, then old and sick, penned in 1932 before shooting himself in the heart with a Luger pistol. The note, which is displayed in a glass case, is only three lines long, and could be read like words of comfort for the doomed Kodak of today: "To my friends. My work is done. Why wait?"

A Circuitous Route Back in Time

So what is Kodak waiting for? If it's going to survive, it will need a miracle. As part of its bankruptcy proceedings, the company has been given another $950 million in loans from Citigroup to try to get its finances in order within the next 18 months. Management hopes Kodak can become successful again with printers, but that doesn't seem all that convincing because Kodak has always been about pictures. No matter how wonderful they've been, all stories have to end. And perhaps that's also sometimes the case with companies, as well.

Indeed, the story of Kodak pictures has already ended, and a new story is beginning. But this new story is one told by the torrent of digital snapshots flooding the Web by the billions. Likewise, little is "immortalized" anymore. Despite the wealth of images, fewer and fewer pictures are being printed. In a way, the world is taking an unusual path back to the very beginnings of photography.

In general, people who are in their 90s today have, at best, only a few photographs of their own childhood. Thanks to Kodacolor, today's 60-year-olds have a somewhat larger picture archive. Forty-year-olds already have a photographic record of at least the key moments in their lives, often captured on Ektachrome slides by their parents. However, the children born in the 21st century have been photographed so often that their lives could be charted almost in their entirety by a biographical flip-book of these snapshots -- that is, if the pictures were ever printed.

Strangely enough, despite the flood of digital pictures, moments are becoming fleeting again. "I'm always telling people that they should make paper prints," Shanebrook says. "Otherwise, in 10 years, they won't have any pictures anymore." Shanebrook may have a point. The snapshots we send out today by email are easily lost, and our virtual folders of digital images are constantly threatened both as we move from one computer to the next and by the technological advances racing along at an ever-faster pace.

Perhaps the future will have less need for quality printed photos. And perhaps people will be satisfied with recording their world and their lives with shots taking spontaneously and more or less on the fly.

If so, it might just be that the 20th century will be the best-documented era ever, archived in countless photo albums and slide boxes as well as on movie films, postcards and artfully printed posters. It will be a century that has been captured, a century immortalized.

And, of course, we'll owe it all to Kodak.