Layoffs, the 'M' Word and an End to Prostitution

Weaknesses in Kodak's market power appeared well before digital technology started to squeeze margins in the '90s and 2000s.

Through most of its history, Kodak controlled a dominant share of the film market. The business model was fairly simply, and incredibly profitable: Give the consumer a cheap point-and-shoot camera, and sell them the film and photographic print paper at huge profit margins.

Executives took the "M"-word seriously. They were sensitive to those who uttered "monopoly" throughout the halls of Kodak, mostly because it was true, says Larry Matteson, who sits in a lecture room at the University of Rochester's business school wearing a yellow shirt, garnet and gold tie, brown blazer and thick glasses that magnify his blue eyes against an aging face.

But a number of dynamics began to challenge that monopoly status in the 1980s.

"Fuji had become a considerable global competitor, making fine products, and Kodak no longer had what, in retrospect, I think, could be called a monopoly position in film, and so profits were under pressure from traditional areas," Matteson says.

When asked if he can pinpoint the year Kodak began its long slide toward bankruptcy, Matteson doesn't hesitate: "1983."

Kodak launched several major products in 1983, including a blood analyzer, a brand new copier product and the disc camera.

The year also marked a decade since the company had released a new film format. In the 1960s, they introduced the Instamatic camera with simple cartridge-loading film and it controlled the market. The company's Web site says it produced more than 50 million by 1970. Kodak introduced in 1972 the Pocket Instamatic camera, which offered consumers greater convenience. The company says it produced 25 million of the new cameras in less than three years.

When Kodak introduced the disc camera -- a camera built around a rotating disc of film -- in 1982, Matteson says it became clear by 1983 that it would not be a successful product.

"Every decade was an indication of the market power. The company got to decide when the industry changed," says Matteson. "When it introduced the disc camera, the marketplace decided that Kodak no longer had the power to set those directions."

The copier product, called the Kodak KAR 4000, was a system that offered computer storage of documents on microfiche. But the graphic arts industry favored Apple's new PCs for their work without the burden of film.

Kodak's EKTACHEM DT60 Analyzer was a desktop unit that would analyze blood inside the doctor's office. The analyzer continues to be a successful product for Johnson & Johnson (JNJ), but Kodak had trouble getting it started.

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