Can Blockchain Save Kodak?

Move Baffles Strategy Professor Brent Goldfarb

SMITH BRAIN TRUST – Can KodakCoin save the struggling Eastman Kodak?

The brand that once dominated the world of photographic film this week announced the launch of KodakCoin, calling it “a photocentric cryptocurrency to empower photographers and agencies to take greater control in image rights management.”

KodaCoin will operate via blockchain, the decentralized digital ledger, which constantly grows as completed blocks of recorded transactions – minus central recordkeeping. The Gartner research and advisory firm predicts that by 2030, business value added by blockchain will total $3.1 trillion in fields spanning “government, healthcare, education, manufacturing, energy and supply chain.”

An IBM-Walmart collaboration, for example, is applying blockchain to speed up food tracing for consumer safety purposes. And companies are increasingly adding language about blockchain or cryptocurrency into their names and mission statements, and subsequently seeing their stocks rise in value.

Long Island Iced Tea Corp. announced a name-change to Long Blockchain Corp., for example, saying the move was “to focus more on blockchain technology, while continuing to make beverages.”

Kodak, the 129-year-old company, “is clearly trying to ride this wave,” says Brent Goldfarb, associate professor of management and entrepreneurship at the University of Maryland’s Robert H. Smith School of Business. "We saw similar patterns when firms added 'dot com' to their names in 2000 and variations of 'tronics' in the 1960s."

Kodak’s share price jumped 119 percent, from $3-to-$6.80 on the day of its Blockchain announcement. And similar to the IBM example, it’s promoting its move as client-driven.

Kodak CEO Jeff Clarke, in announcing the move, said, “Kodak has always sought to democratize photography and make licensing fair to artists. [Blockchain and cryptocurrency] give the photography community an innovative and easy way to do just that.”

But this is questionable, Goldfarb says.

“Whether [Kodak] actually believes that using blockchain for digital rights management (DRM) of photos or creative works is a wise idea is unclear,” he says. He questions why the company is looking to acquire additional servers to mine bitcoin. “That line of business has nothing to do with blockchain for DRM.”

The central question, Goldfarb says, is: “Why is blockchain better for this task than the centralized photo clearinghouses, or platforms that we now have?”

“Is it cheaper?” he asks. “Is it more efficient? Why will it help Kodak make money? What if photographers lose their keys? Is there a system to recover that? Presumably not, and that would be a problem. I can only find statements about how great this will be, not anything about why it is better than what we currently have."

Goldfarb points to Creative Market (with Smith grad Aaron Epstein, ’03 as co-founder and CEO), which operates in a space similar, though not identical, to Kodak’s, in which designers sell their work directly to customers. “They provide a host of other services and provide a coherent platform for designers to showcase their work, the transaction and rights management is only a small part of this.”

Kodak’s stated intention, Goldfarb says, further suggests there’s “a market on the photograph that requires every website to verify they have the rights to the image. “But I am at a loss as to the problem this solves – except to help Kodak shareholders who were fortunate enough to own stock prior to the announcement.”

Shares of Kodak Eastman surged on the announcement, tripling, in a rare rally not seen since the company sold off most of its patents after filing for bankruptcy in 2012. 

Ultimately, Kodak’s move to manage photo rights via Blockchain likely won’t pan out, Goldfarb says. However, he adds “this isn't likely to be a make or break for the company, given that the company is in many lines of business." 

“My hunch is that the effort will slowly disappear, and the stock price gains of the last day or two will revert back to their original levels.”