This bankruptcy filing had been predicted for months, but when it finally came last week it was still a harsh surprise. In a nostalgic sort of way, Eastman Kodak has been a 131-year old American institution. Now, as with many fallen analog icons around it, the company has hit the financial bottom—unable to adapt to a rapidly changing digital environment.
However, Eastman Kodak will not go away and will continue to operate as it attempts to reorganize under Chapter 11 bankruptcy protection. As part of its filing, made in the federal bankruptcy court in the Southern District of New York, the company will seek to continue selling a portfolio of 1,100 digital imaging patents to raise cash to operate.
“Kodak is taking a significant step toward enabling our enterprise to complete its transformation,” said Antonio M. Perez, the company’s chief executive. “At the same time as we have created our digital business, we have also already effectively exited certain traditional operations, closing 13 manufacturing plants and 130 processing labs, and reducing our workforce by 47,000 since 2003. Now we must complete the transformation by further addressing our cost structure and effectively monetizing non-core I.P. assets.”
Still today, many cinema and TV productions are shot on Kodak film stocks. The company helped set the standard for 35mm film, and introduced the 16mm film format for home movie use and lower budget film and television productions. Kodak also pioneered the 8mm and Super 8 formats for the consumer market.
Kodak even entered the professional television production videotape market, in the mid 1980s, under the product portfolio name of Eastman Professional Video Tape Products. Kodak owns the visual effects film post-production facilities Cinesite, in Los Angeles and London, and also LaserPacific, in Los Angeles. Kodak also owns Pro-Tek Media Preservation Services in Burbank, California. Pro-Tek is the world’s premier film storage company.
In its bankruptcy filing last Thursday, Kodak listed $5.1 billion in assets and $6.75 billion in liabilities as of Sept. 30. It obtained $950 million debtor-in-possession from Citigroup to provide it funds to operate during bankruptcy. Kodak said that its non-American subsidiaries are not part of the filing.
In the end, Kodak could not sustain its business in the digital era. Manufacturing costs in Asia and increased competition forced it mostly out of the business. It explored chemicals, bathroom cleaners and medical-testing devices in the 1980s and 1990s, before deciding to focus on consumer and commercial printers in the past half-decade under Perez, who took over in 2005, having previously headed the printer business at Hewlett-Packard. The company never made money and the viability of Kodak’s printers has yet to be proven.
The financial crisis came to a head last year, as Perez’s strategy of using patent lawsuits and licensing deals to raise cash ran dry. Bankruptcy was the final step.
A major question that remains is what business is Eastman Kodak now in and can it come back from bankruptcy. In its heyday, Kodak was the Apple or Google of today.
The company’s troubles date back to the 1980s, when it struggled with foreign competitors that stole its market share in film. Later came struggles with the rise of digital photography and smartphones. Ten years ago, Kodak said it would stop making investments in film. It was the beginning of a long ending.
Founded in 1880 by George Eastman, Kodak became one of America’s most notable companies, helping establish the market for camera film and then dominating the field with a 90 percent share in 1976. Eastman treated his employees well and contributed to the growth of the town of Rochester, NY, its corporate headquarters. Now, its bankruptcy protection could also allow Kodak to shed hundreds of millions of dollars in pension obligations to those same workers.
Kodak has also filed new patent infringement suits against a number of competitors, including Fujifilm and Apple, an effort to shore up the value of the patents it hopes to sell.