Kodak Invented the Digital Camera, Then Went Bankrupt

In December 1975, in a lab in Rochester, New York, a young engineer pointed a strange machine at a lab technician named Joy Marshall and pressed a button. The machine weighed about 8 pounds and was the size of a toaster. It had a lens from a movie camera, a new kind of electronic sensor, and a cassette tape recorder.

The image took 50 milliseconds to capture and 23 seconds to record to the tape. Then the tape went into a playback unit wired to a television, and a black-and-white picture, 100 pixels by 100, appeared on the screen.

The engineer was Steven Sasson. The company was Eastman Kodak. He had built the first digital camera, at the company that made more money from film than anyone on earth.

The Great Yellow Father

Kodak’s business was one of the best ever invented. George Eastman had worked it out around 1900, when the Brownie camera sold for $1 and a roll of film cost 15 cents. Sell the camera cheaply, then earn on every roll of film, every print and every envelope of developed pictures, for as long as the customer kept taking photos.

In Rochester people called the company the Great Yellow Father, and a job there was seen as a job for life. In 1996 Kodak’s revenue was about $16 billion. In 1997 the stock market valued it at more than $30 billion.

“Don’t tell anyone”

Sasson showed his camera to Kodak executives. They were polite, and unconvinced. He told The New York Times in 2015 that they could not imagine anyone wanting to look at their pictures on a television set. In another interview he summed up the reaction as: that’s cute, but don’t tell anyone about it.

The doubts were partly reasonable. The camera was crude, slow and nowhere near the quality of film. But there was a second reason. A camera that used no film, no paper and no chemicals threatened the products that paid for everything at Kodak. According to the Times, the marketing side told Sasson that Kodak could sell such a camera, but would not, because it would eat into film. Kodak patented the design in 1978 and kept it out of public view for years.

Sasson guessed that digital photography would reach ordinary consumers in 15 to 20 years. He was close.

The ten-year warning

In 1981 Sony announced an electronic camera, and one of Kodak’s biggest photofinishing customers asked whether it should worry. Vince Barabba, then Kodak’s head of market intelligence, ran a careful study. Its findings, as he later described them, came in two parts. The bad news: digital could replace Kodak’s film business. The good news: it would take time, and Kodak had about ten years to prepare.

Kodak treated the ten years as breathing room, not a countdown. It kept investing in digital technology. Through the 1990s it spent some $4 billion developing imaging technology that would end up in cameras and phones, and it built up a portfolio of more than a thousand digital imaging patents. It also sold digital cameras early: the DC40, one of the first consumer digital cameras, went on sale in 1995, and its EasyShare range of 2001 became a big seller. But it treated digital as a sideline, protecting film for as long as film paid.

Why Kodak failed

When the change came, it came quickly. Digital cameras became cheap and good. Then phones replaced cameras for most people, and people stopped printing pictures at all. Every digital camera Kodak sold replaced a stream of film and prints that had been far more profitable.

Kodak stopped selling traditional film cameras in 2004. Its revenue fell, year after year. In the first nine months of 2011 its sales dropped 18% to $4.3 billion and it lost $647 million. By then it was trying to sell its 1,100 digital imaging patents to raise cash, and could not find a buyer at the price it wanted.

On January 19, 2012, Eastman Kodak filed for Chapter 11 bankruptcy protection, listing $5.1 billion of assets and $6.75 billion of debts. Three weeks later it announced it would stop making digital cameras, the product it had invented. Its camera business had shrunk to about a quarter of company revenue and was losing money; leaving it was expected to cut losses by about $100 million a year. Steven Sasson, by then retired, called it a bit sad.

Selling the ideas

In December 2012 Kodak agreed to sell its digital imaging patents for about $525 million to a group organized by Intellectual Ventures and RPX, with a dozen technology companies taking licenses. Analysts had once thought the portfolio might fetch $2 billion to $3 billion. The sale was a condition of the loans Kodak needed to leave bankruptcy.

The company that emerged in 2013 was a fraction of its old self, focused on commercial printing, chemicals and film for the movie industry. In 2025 Kodak reported revenue of $1.07 billion, about a fifteenth of what it earned in 1996.

The camera Sasson built in 1975 still exists, a toaster-sized box that marked the moment the future arrived, at the one company that most needed it not to.

What the record shows

• Inventing isn’t the same as committing. Kodak built the first digital camera and still lost the digital age.
• High margins can hide a threat. Film was so profitable that its replacement looked like the enemy.
• A deadline is not a delay. The 1981 study gave Kodak ten years. It used them to protect film.
• Patents can outlive products. Kodak’s ideas were still worth about $525 million when the company could not survive on them.

Blockbuster made a similar mistake with streaming, and Yahoo with search. For a company that did reinvent itself in time, see Lego’s comeback. And for an inventor who refused to let incumbents bury his idea, read about James Dyson’s 5,127 prototypes.