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.