[Commentary]
Almost 15 years ago, the leader of Kodak’s digital imaging group told us his company lost more in digital photography than everyone else, combined, ever made.

He was hardly bragging of course. He was instead illustrating two points:

1. Despite criticism even back then in 1998, Kodak was heavily involved in digital photography: researching, developing, producing, manufacturing, and partnering.

2. Few if any critics of Kodak’s lack of success in digital had any concept of the scale of Kodak’s business, and how small the digital photography market was in comparison.

Now it’s 2012, and everybody with a blog or a business column has jumped on the Kodak-bashing bandwagon. If there was a pun to be made about the famous “Kodak Moment,” you can bet some wannabe-analyst made the joke.

It is far too easy, in these days of ubiquitous digital capture and image sharing, to coach from the couch with 20/20 hindsight. “How could the world’s largest photography company not have seen this coming?” everyone asks. “And how could they not have profited from this huge boom in image capture?”

The first mistake many critics make is believing those two questions must have the same answer: that Kodak dropped the ball.

The truth is Kodak obviously did see the change coming. Not only did the company, as has been widely recounted in these last few weeks, develop the first handheld digital camera, it also led the way in analog-to-digital services, online storage and print ordering, in-store custom photo printing, and many other initiatives.

The problem is that second question — because even though the answer is that Kodak did profit from digital, those profits were not enough to counter the sheer magnitude of what was lost with its near-monopoly on film processing and picture printing.

What’s also missed in the criticism of Kodak is a simple fact: no other company has made enough money in digital photography to counter the massive loss of the analog film and photofinishing business. As my old colleague Harry McCracken observed, while Kodak failed to become the “Kodak of digital photography” — no one else has ever earned the equivalent of that position either.

Yes, companies like Canon and Nikon successfully transitioned from selling analog film cameras to digital cameras. And yes, they (as well as “newcomers” to photography like Sony) grew and profited immensely as digital imaging made much greater inroads in the consumer market than film photography ever had…

But no maker of best-selling cameras ever made profits equal to those that Kodak pocketed for decades from its film processing and picture printing.

It’s easy to demand, “Why didn’t Kodak try this, or that?”

But the difficult answer is that, even if it had succeeded more in cameras, home printers, online photo finishing, or other digital business models — Kodak today would still be a fraction of its past size.

The fact is the millions and millions of dollars once spent on film, processing, and prints is now all-but gone. Just as Kodak enjoyed the majority of those revenues for decades, it now bears the biggest brunt of their loss. [Of course Kodak is not alone in feeling this loss.]

Digital imaging has delivered easier, better photo capture to millions of people. It has not however, delivered unending millions and millions of dollars to any one particular company, as film did for Kodak.

In general terms: film photography was much, much more expensive per-shot for the user than digital. Thanks to its pioneering founder and decades of aggressive business practices, Kodak more than any other company benefited from all the costs associated with film.

On a per-picture basis, digital photography is cheap for the user. And so, even if Kodak had somehow, in these much more competitive times, been able to hold onto 80% of the photography business — it still would be but a shadow of its former self.

So please, let’s hear no more of all the many opportunities Kodak missed out on, or overlooked out of ignorance, or worst yet, chose to ignore out of arrogance. Name a digital imaging business model proposed or put in practice by anyone, and odds are Kodak tried it as well — and tried it with products and services that were always at least pretty good, and sometimes really great.

Most strikingly, critics point to successful camera and phone makers, and ask: How could Kodak have missed those markets?

Answer: it didn’t. Kodak offered lots of cameras — some of the first consumer pocket cameras, the first professional digital backs for high-end SLR’s, the first camera docks and share buttons for simpler use, the first consumer camera with well-implemented built-in Wi-Fi — and even some of the first mobile imaging devices with such attempts as a camera add-on for the original Palm PDA. Kodak was also for many years one of the top five best-selling camera makers in the United States and other leading markets.

But unlike in the analog days, selling a consumer a digital camera does not mean that customer will continue to generate revenue over the years by buying consumables.

And trying in digital imaging does not mean succeeding. Kodak’s lack of overwhelming success over many decades of effort does not mean Kodak’s leaders were morons. It simply means that for every option Kodak tried, there were many competitors also trying to stake out the new territory. It simply means that many if not most of Kodak’s efforts met with failure — just as most new business efforts do, and just as most digital imaging competitors did. And it simply means that success in one new niche would not have countered the losses elsewhere. (C’mon, criticizing Kodak for not being Shutterfly? Maybe Ofoto/Gallery never did as well — but it’s a drop in the bucket either way!)

Most simply, it means no one could have held onto 80% of the pie — not when dessert eaters switched to ice cream.

What’s next?

First: we’re not speaking of Kodak in the past tense: filing Chapter 11 bankruptcy is not going out of business — it means reorganization, from which a company emerges anew.

Kodak announced that in its next incarnation it will again focus on output: both home photo printing and large-scale high-volume commercial reproduction.

These goals seem to more reflect the experience of CEO Antonio Perez during his years at HP than they do the best potential use of Kodak’s heritage. Those goals are not the best bet on how people will use imaging in the future.

What should the company focus on? And is that area also a better option for many others in the photography industry?

We’ll discuss that next week. Until then, remember a certain famous slogan:

“Push the button, and we’ll do the rest.”

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