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The Kodak moment ends

January 22, 2012

FROM the point of view of business, it’s the demise of a dinosaur rendered irrelevant by modernity. Symbolically, though, it holds meaning greater than the sum of its parts.

Last week, the company that brought mass amateur photography to the world — Kodak, formally the Eastman Kodak Company — filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code that would allow it to reorganise itself.

The new millennium has not been kind to an enterprise whose research enabled celluloid film, home videos, print and digital photography. The company, which employed at the height of its success during the 1980s 145,000 workers, had been reduced to a workforce of 50,000 as it entered the 21st century but nevertheless turned a healthy profit.

Over the past few years, though, it has been leaking money at a crippling rate: hundreds of millions of dollars a year, and just 19,000 employees at the cusp of 2012.

It was told by the New York Stock Exchange in the first week of this year that it faced delisting if it could not get its stock price back over the $1 mark.

At its height, Kodak shares had topped $80 in 1996, at the threshold of the revolution that Kodak itself initiated: digital photography, which replaced the need for customers to buy the film for that perfect ‘Kodak moment’ — the company’s advertising catchphrase that became embedded deep in the consciousness and vernacular of multiple generations.

As writers around the world are saying, while the company may yet survive, the Kodak moment is most likely over.

The irony lies in the fact that it is being killed by its own child: in the mid-1970s, it was Kodak that pioneered research into digital photography, but by the 1990s, Asian electronic manufacturers leaped ahead in that market as, according to business analysts, Kodak did not see the need to break from its old lines of conducting business.

As one analyst put it, “they were the ones who invented the digital camera, but they didn’t believe in it”.

The passing of the Kodak moment comes at a time when another, perhaps even more significant, development in the digital age seems to have occurred. On Friday, the US Congress shelved two pieces of anti-Internet piracy legislation that had become the centre of a storm of controversy.

The Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA) had, in the main, sought to control the online piracy of US-produced film and television shows that, according to Creative America (a coalition of Hollywood studios, networks and unions) costs US workers $5.5bn a year.

The legislation would have allowed the US Justice Department and copyright holders to seek court orders against foreign websites that were suspected of facilitating or perpetrating copyright infringements, barring online advertising networks and payment facilitators from conducting business with alleged violators and forbidding search engines from having links to such sites.

Simply put, if a company such as Warner Brothers discovered a foreign website offering illegal copies of its creations, it could apply for a court order requiring Google to remove links or PayPal imposing an embargo on payments.

The Internet companies’ argument was that since the definitions of terms such as ‘search engines’ were so broad in the proposals, websites whether big or small would become responsible for screening everything on their pages for potential violations — not only a complex and expensive challenge but one that would damage the very architecture of the Internet.

What began as relatively obscure legislative proposals became front-page news as leading Internet companies and Silicon Valley giants rose up in opposition, saying that the bills would limit free speech, stifle innovation and, crucially, discourage new digital-age distribution methods.

NetCoalition, a group of high-profile Internet and technology companies, said that they could wind up being forced to pre-screen all comments, pictures or videos put up by users, which would effectively kill the social media. Last week, the Internet fought back.

Aside from the rallying cry of ‘Internet freedom’ what happened here was a confrontation between the old guard doing business the old way — amongst its ranks Hollywood as represented by the Motion Picture Association of America, the United States Chamber of Commerce, Rupert Murdoch’s News Corporation and the Recording Industry Association of America — and the next generation of the media such as Google or Facebook.

(The scale of the confrontation can be gauged from the fact that, according to a New York Times report, 115 companies and organisations on both sides of the divide had lobbyists working on the anti-piracy bills and spending millions of dollars on swaying the outcome.)

Behind the furore seemed to be a simple point: the old guard wanted to continue doing things the old way, while the next generation argued that new technologies demand updated ways of doing business — as Kodak learned too late.

‘New media’ companies such as Amazon or Apple’s iTunes have managed to adapt to the Internet terrain and the unique challenges and opportunities it represents, turning massive profits while giving consumers on-demand content at reasonable prices. The ‘old media’, however, appear to want to retain a pre-Internet business model.

The same sort of confrontation has been seen before with the music industry. Online alternatives such as Napster came up when it became too hard or too expensive for consumers to obtain physical copies of, for example, obscure music. The music industry was slow in responding, so such behaviour became entrenched.

When the music industry’s sales started falling significantly, it retaliated so viciously through the justice system that it created a rebel culture in which sharing music became ‘cool’. Instead of engaging consumers and attempting to solve the problem of access and expense, the industry tried to get customers to play by its own rules by making the assumption that each one of them was a potential thief.

This led to some companies crippling their own products, such as the 2005 Sony-BMG Rootkit fiasco. Meanwhile, those willing to adapt, such as Apple during the 1990s, forged ahead.

Many analysts argue that the Web has, in fact, completely changed the playing field as far as the rules of doing business are concerned. Rather than attempting to force people to play by the old rules, more innovative methods of doing business are needed. The world turns and, as the end of the Kodak moment teaches us, you must turn with it.

The writer is a member of staff.