For nearly a century
Kodak completely owned the nostalgia market. Oh yeah! ♪ Got so much style with
that silly old smile ♪ ♪ I'm gonna get you with a Kodak kiss ♪ Any memorable moment from
a child's first steps to a wedding, was branded a Kodak moment. But recently a Kodak moment
has become, let's say less nostalgic. At some point, I think
became a crypto company. And now apparently it's
a pharmaceutical company. In 2020, the American film
giant has made headlines for it's foray into, of all
things, pharmaceuticals. Specifically to treat
COVID-19, with the help of the $765 million U.S. government loan. And if you think that's kind
of odd, you're not alone. Just so many weird themes of
America today, I think are wrapped into this story which
is why it's so fascinating. [MSNBC News Announcer]
$765 million loan for Kodak to begin producing pharmaceuticals. Turn another, it's a Trump story. They're doing something
that's a different field. And it's a field that
they've really hired some of the best people in the world. Governor Cuomo's involved. It will create 300 new jobs. And the story of how
Kodak is trying to become a pharmaceutical company
is just as strange as the announcement itself. This is how Kodak went
from selling nostalgia to making drugs. Kodak is a iconic American company. It once symbolized everything
that was great about America. For the better part of a
century, Kodak could be considered the closest
thing to a monopoly without ever becoming one. And that was no accident. Founded in 1888 by George
Eastman, Kodak was born with one mission, to
revolutionize the world of picture taking. He wanted the camera to be
as ubiquitous and as easy to use as the pencil. And he adopted a business
strategy that says to the customer, "You push the
button and we do the rest". The rest would turn out to be an extremely aggressive business strategy. Look at what happened in
the first 40 or 50 years of the 20th century. Scale was the way to win in this. There were a lot of little
camera companies and a lot of photo companies and photofinishing
companies that sprang up. It got into the camera business
by buying a whole bunch of camera companies that not
always wanted to get bought. Typically that doesn't happen
by just soft management. That happens, pretty tough management. By acquiring these
companies Kodak was able to not only dominate the camera
market but the film market as well. One of the reasons it
became so powerful is that Eastman understood either
sell the cameras cheaply or give them away because
we're gonna make all our money on film and photo processing. And it worked on so many levels. Everything was vertically integrated. You bought your Kodak camera
where you put Kodak film inside and- Well if you brought your film in to get it developed, you brought
it to a Kodak store. Throughout much of the 20th century Kodak could do no wrong. Every product launch from
cameras like the Brownie and the Instamatic, to
engineering feats in film like Kodachrome and Ektachrome were a hit. Even creeping into pop culture. ♪ Momma don't take my Kodachrome away ♪ Kodak didn't just set
the tone for the film and camera industry, it was
the film and camera industry. In the mid-70s, 1976 Kodak owned 95% of the film market and
85% of the camera market in the United States. Employment peaked in the
eighties at like 150,000. This wasn't just a fortune
500 company, this was a fortune 50 company. It was a brand that everybody recognized and it was dominant. But Kodak didn't just do
photography because of the chemicals used in
film, they also developed blood analyzers, x-rays,
pharmaceutical manufacturing and copiers, just to name a few. What Kodak didn't know at
the time was an invention by one of its own engineers
in 1976, would eventually lead to the organization's demise. Kodak engineer Steven Sasson,
invented the prototype that would eventually
become the digital camera. It was a feasibility demonstration. You saw pictures of it
and it was obviously not a commercial product. Kodak saw the writing on
the wall that their days, while still decades away
were ultimately numbered as a film business. I began to look at
something Gordon Moore had come out with just a
couple of years before that and it became known as Moore's Law. Moore's Law said that the
capacity of transistors on an integrated circuit was
gonna double every 18 months. We were able to conclude
in 1978, that by about 2008 consumer electronic
imaging oughtta overtake traditional photography. At the time Kodak wasn't
worried it had a leg up on the competition and had
plenty of time to prepare. Dealing with major shifts in
technology that quickly dated their research, the
transition to digital signaled the beginning of Kodak's decline. During the early 80s
recognizing this transformation was coming, Kodak set up an
internal school where we sent chemists and chemical
engineers to in-house school to turn them into electrical engineers. That turned out to be not very successful. If you just look at the earning
statement of the company you'd have to say, "What
are we doing this for? Because at this point
they're still making money hand over fist. There was kind of an ingrained fear of cannibalizing that
core business, of killing the golden goose. They were a monopoly in
film but they couldn't stop disruptive technologies. You know, from coming along
and unseating their business. It's sort of the classic
innovator's dilemma problem. If you have this great cash
cow which is your film camera business and you're one of
the dominant players there you're reluctant to totally
disrupt it yourself. By the time the 90s rolled
around, Kodak's push into digital was in full force. CEO Georg Fischer, who headed
Kodak from 1993 to 1999, pumped $2 billion into
research and development for digital technology. They had this event in San Francisco. It was March 28th, 1995. They call it the big event. The Chicago Tribune, I remember
they had their headline was "The Big Gamble". And it was Fischer's big
announcement that you know, Kodak was moving you know,
full steam ahead to digital. And each attempt was a flop whether it was the massively overpriced DCS
100, the photo CD that could hold up to 25 images,
which was quickly outpaced by the growing capacity of hard drives. And the DC 20, an incredibly cheap camera that everyone agreed took awful pictures. The disc camera was a disaster. They called it the
adventure of the incredibly shrinking negative. And it was so small that
the images were horrible. The 90s were also a time when Kodak started spinning off its other businesses to pay down its debt. Selling its entire office
imaging business, its digital printer and copier division and turning its chemical division
into Eastman Chemical. In 2003, under new CEO
Antonio Pérez, who joined from Hewlett Packard, the
company once again made the claim that Kodak would become the
leader in digital cameras. Kodak is back! They're taking this digital
thing to a level on dreamed of. They learned early on that
the devices weren't the thing. It was what the devices allowed you to do. It was the fall on business,
all the ancillary stuff is where they made the money. They didn't have the right
kinda culture to sell cameras, digital cameras in a frenetic
you know, low barrier to entry market and to beat back everybody else. Compared with cameras that require film margins related to the
use of digital cameras are a disaster. Film generates a profit
of as much as 70 cents on the dollar. Digital imaging might make a nickel. It's like that old joke
about like we're losing money on every unit we make
but we'll make it up on volume. In 1987, the company
employed 145,000 people at its enormous facility in Rochester. 20 years later in 2020, that
number has fallen all the way down to 4,900 and it keeps on shrinking. I would like to take this
time to answer a few important questions about Kodak. In light of our decision
to file for reorganization. With the failure to successfully pivot to digital complete, on
January 19th, 2012 Kodak filed for bankruptcy. This once great company
files for bankruptcy and now they're trying to
build with whatever you can. So you get Jim Continenza
comes in as the chairman at that point, is sort of
their standard barer. While this was the end of Kodak as mainly a film business Kodak emerged
from bankruptcy in 2013 and started the first of its many pivots. Well, some investors are
crazy about cryptocurrencies right now. Kodak is launching its own
cryptocurrency KodakCoin. The cryptocurrency system
will allow photographers to register work that
they can license and then receive payment. It was coming at a time where
it seemed like everybody was announcing a coin as a
way to raise a bunch of money because there was so much mania. And so you have Kodak, which
is a publicly traded company. A lot of the crypto coin ideas
didn't have a public company to latch on to. So you attach this idea to
a public company and all of a sudden, the stock price soars. In one day of trading shares soared 120%. Going from $3.10 to $10,
but it wouldn't last. It was widely lampooned
I think by the press. I think the BBC called
it one of the worst ideas to come out of CS or something
like that at the time. It was during legit crypto mania. From the peak of the
announcement of KodakCoin until early 2020, Kodak's stock
price fell from $36.88 cents to around $2.70 cents. Until- Shares of the company soared
yesterday after news that the U.S. government awarded
the firm $765 million in loans. They just need to become
a cannabis company and a meat-free company
and then they've really got the trifecta of all things, millennial and gen Z.
Don't forget electric cars. Most people heard about the Kodak loan on you know, July 28th. We have president Trump
himself talking about the $765 million loan,
we have Peter Navarro, the trade representative,
going on TV talking about it and the governor of New
York, Andrew Cuomo, thanking the president for it. That all of a sudden wakes
everybody up in the world to this. And just like with the
announcement of KodakCoin- The share price goes crazy,
it tops out at $60 when it had been trading around $3
for months and months. For a moment, it was
actually a feel good story a once great American company,
having its second act. There's a ton of media attention
on it, everybody's asking why this company, can Kodak really do it? Why are there all these
strange things about how they handled the announcement? And then suddenly you have
everybody investigating. Regulators look into
improprieties allegations of insider trading. [MSNBC News Announcer] The
trading volume for Kodak shot up right before the deal. Kodak, after the announcement
comes out, files that just before the announcement
came out, they had granted options to a
bunch of their executives. Which would seem to give
them access, the ability to buy shares at a low price. Dated to before the share
price really surged. Kodak said it made the
mistake of not placing an embargo on the press release. And without the embargo,
journalists were quick to report the news which impacted trading. The source of the loan was
also a big area of interest. It was given out by the U.S. International
Development Finance Corporation or the DFC. This is bout investing in
a company that is going to not only produce 25% of the
generic pharmaceuticals that we need the ingredients in the United States. But it's going to be
financially sustainable for the long-term. So they had a big advanced
purchase order and we were able to give them that money, the
$765 million collateralized on that. So I knew we're gonna build
a brand, we're going to make Americans safer and
we're going to make money for the American taxpayer. Randomly Adam Boehler is Jared Kushner, Trump's son-in-law's
former summer roommate. So it's very Trump world. So you have the DFC it's
this outward facing body focused on international
development but it seemed like you know, a friendly
entity in Trump world. While a review commissioned by Kodak says CEO Jim Continenza's stock
options did not violate internal policies, the SCC
investigation is ongoing. And the damage in the eyes of
some has already been done. What happened at Kodak was
probably the dumbest decisions made by executives in corporate history. Peter Navarro certainly
has plenty of reason to try and distance himself from this deal. You know, when he was announcing
it he was trying to take all the credit in the world
and this was really his baby trying to shepherd it through
and encouraging the government to give Kodak this loan. The underlying question here
is, was Kodak some sort of pump and dump scam, where by
shooting the share price up with this loan announcement did
Kodak or anyone around Kodak unfairly profit off just the
share price skyrocketing alone? In a statement Kodak said based on an exhaustive review of
law and facts, our lawyers have concluded that Kodak
and its officers, directors and senior management did not violate the securities regulations
or other relevant laws, engage in a breach of
fiduciary duty or violate any of Kodak's internal
policies and procedures. So while Kodak is in trouble,
both as a company and as a company defining its identity,
it doesn't necessarily mean that they made the wrong decisions. Some say that companies just
aren't always meant to be on top. It's not obvious that
companies exist forever. The notion that a company
has to exist and if it doesn't exist, somebody
failed, not accurate. The function of management
is not to keep the company in business, it's to create wealth. If you don't have a balance
where the revenue exceeds your cost, you eventually
go out of business. This isn't just an iconic
company, this isn't just a corporate tragedy. It's a piece of America that's
being lost you know, forever.
