Kodak and blockchain: A token for survival?
01 May 2018

By Raisa Ostapenko

Nearly 130 years ago, George Eastman founded the Eastman Kodak Company – or Kodak, as most people know it today – and with it revolutionised and democratised the art of photography.

It was Eastman’s company that gave the once abstruse, almost elitist craft, in which every image was a formal portrait in the making, a human face.

In making both the camera (operationally speaking) and photo processing far more accessible, Kodak emerged as a pioneer of recreational photography, giving ordinary men and women the means to relish in their self-expression and capture those picture perfect “Kodak moments” in the comfort of their spontaneous lives. Kodak quickly became a giant, building the core of its business on sales of photographic film.

Nevertheless, despite the ironic truth that Kodak invented the digital camera, the company was slow to embrace the digital age, and by the late 1990s was struggling financially, finally declaring bankruptcy in August 2012.

By the time it re-emerged in September 2013, the company had sloughed off its vibrant legacy, having sold approximately 1,100 of its patents, predominantly via an intellectual property licensor, to the stronger and more relevant “new kids on the block” – namely technology companies like Google, Apple, and Microsoft. The price of this legacy? Around $525 million – a mere fifth of the $2.6 billion predicted in the past.

Sudden fortune

The situation continued to look bleak for the company until a surprising 9 January 2018 announcement saw its stock price more than double within 48 hours. Kodak had signed a partnership agreement with AI-enabled image recognition platform WENN Digital and jumped on the blockchain bandwagon, introducing a new image rights management platform KODAKOne and “a photo-centric cryptocurrency” KODAKCoin.

“For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem,” said Kodak CEO Jeff Clarke at the time.

The move, as per Kodak’s press release, promised to harness blockchain technology and web crawlers to enable photographers to exercise “greater control in image rights management” by assigning cryptographic hashes to registered images, both new and old, and monitoring them as they make their way across the Internet.

Prima facie, Kodak’s decision is consistent with its time-tested, human-oriented traditional of putting the photographer first, an attitude that the image licensing industry is certainly in need of.

“The arts and culture sector has always struggled with the issue of proof of intellectual property,” said Nicolas Bouzou, an economist at French engineering consultancy Asterès.

“The Internet provides for dissemination [of information], but not intellectual protection. Blockchain solves this problem.”

“Music to photographers’ ears”

“Image owners face unprecedented challenges in staking a claim in the online value chain,” said Isabelle Doran, Chairperson at the British Association of Picture Libraries and Agencies (BAPLA).

The number of ‘micro infringements,’ said Doran, is systematically increasing across millions of commercial websites, as ‘giant’ online platforms take advantage of technical loopholes, such as ‘right-click & save,’ that bypass copyright owner consent.

Though some photographers rely on ‘image recognition & copyright compliance services’ to circumvent online copyright infringements, such tools, said Doran, cannot cope with the sheer volume of violations, that has made rights disputes largely ineffective in the sector and left few infringers in fear of significant repercussions.

“In principle, the idea of an indelible immutable record of ownership [such as KODAKCoin] for a digital image would be music to most image owners’ ears. Coupled with bots which could identify whether an image is ‘licensed or not,’ [this] would be a compelling formula that most image owners would likely choose,” said Doran.

Experts sceptical

But many experts are sceptical about Kodak’s sincerity. Some have even speculated that Kodak’s foray into blockchain is not, as presented, a desire to harness a modern trend for the protection of a beloved art, but nothing more than a scam to drive up the company’s stock price up.

“Dying people do desperate things, and evidently, dying companies are no different,” said Emin Gün Sirer, an associate professor of computer science at Cornell University and co-director of Initiative for Cryptocurrencies and Smart Contracts.

Kodak is not the first company to suddenly reorient itself towards blockchain and cryptocurrency, with Long Blockchain Corp. (formerly Long Island Ice Tea Corp.) perhaps being the best example.

This strategy has been criticised as a seemingly effortless and baseless method by which to reverse one’s fortune, even if temporarily, by means of capitalising on a craze.

“[This] is typical blockchain. Throw a buzzword at the problem and idiots throw money at you,” said Nicholas Weaver, a researcher at the International Computer Science Institute and lecturer at the UC Berkeley.

“Blockchain [is] actually poorly suited in particular to storing images, because [you] change a single pixel on an image and the hash is totally different … As for cryptocurrency, I don’t know any photographer who’d want to be paid in volatile tokens instead of actual money.”

“I hope that Kodak sees this as more than a way to simply cash in … We see more and more companies doing potentially similar projects … Blockchain requires a reward system, [so companies] should evaluate existing apps before they undertake their own simply to boost stock price,” said Jack Tatar, co-author of Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond.

“While I applaud Kodak for his innovativeness, they are not the leader in this space.” Doran mentioned German Copytrack and Swiss IPStock as viable competitors to KODAKCoin in digital image rights management.

Back in January 2018, it was reported that KODAKCoin was not the only egg Kodak had in the cryptocurrency basket.

Then Buzzfeed reported that brochures of Kodak’s new mining device – KashMiner – claimed that “customers who paid $3,400 upfront to rent the devices, would receive a pay-out of about $375 per month for the next two years if bitcoin averaged a price of $14,000 in that time frame.”

But this claim, suggested Buzzfeed’s experts, betrays a lack of basic knowledge of how cryptocurrency actually works. Weaver was cited in that same article as saying that it was “ridiculous” to expected “hash rates” to remain steady. The Kodak KashMiner was a project Kodak was pursuing independently of WENN Digital and KODAKOne.

Obstacles emerge

With regard to KODAKCoin, the uncertainty surrounding Kodak’s endeavour has only worsened in light of bureaucratic hurdles and the company’s seemingly poor forecasting skills, as evinced, most notably, by the unexpected postponement of its initial coin offering on the eve of the event.

“Given the large interest in the KODAKCoin ICO,” Kodak said on 30 January, the company would need to vet its 40,000+ potential investors to verify their status as “accredited investors,” i.e. determine whether these individuals have a net worth of at least $1 million or have earned an annual income of at least $200,000 ($300,000 if married) for the past two years, as per U.S. Securities and Exchange Commission (SEC) requirements.

Confusion surrounding the delay produced fertile ground for scammers seeking to profit by means of fraudulent ICO websites and Facebook pages and left some experts feeling uneasy about Kodak’s inability to anticipate the market response and plan its timetable accordingly.

In an interview with KYC360, however, WENN Digital president Matthew Walker established that the delay could not be anticipated, because it resulted from a combination of factors, namely overwhelming interest from investors and a rapidly shifting regulatory environment.

“KODAKCoin and projects like it … have always advocated [for] regulation, [which] enhances transparency and ultimately creates a larger and more efficient market. We have seen interest in KODAKCoin increase with the greater amount of regulatory clarity that has unfolded over the last 8 weeks,” said Walker.

In early March, Kodak and WENN Digital were presented with yet another logistical obstacle when it became known that the SEC could choose to classify KODAKCoins as security tokens as opposed to utility tokens, as initially intended.

Such a turn of events would result in a 12-month lock-up period restricting the currency’s resale and transfer.

According to Walker, however, any such decision would not make KODAKCoin any less accessible to mainstream consumers.

“KODAKCoin is designed to be a regulatory compliant utility token and this … should allow for the token to be utilizable by our community. It is this level of detail and compliance that has taken time and caused some delay. However, we believe that the work has been worth it for the sake of our community and the transition of the crypto economy to the mainstream.”

The SEC declined to comment.

‘Wait and see’

Despite hesitations surrounding KODAKCoin, some experts remain cautiously optimistic about Kodak, its partnership with WENN Digital, and blockchain’s overall potential in creative rights management.

“[Is this a good idea?] That is the million-dollar question that every image owner wants to know the answer to before making any decisions. I think we need to wait and see how successful photo-centric blockchain and cryptocurrency will be,” said Doran.

“It is impossible to say in advance whether Kodak’s initiative will work,” said Bouzou. “I believe in [blockchain’s] development, because traceability, confidentiality, and an inability to be counterfeited correspond to real needs. But the ICO business model is not yet stabile [and] many ICOs will end up in limbo. But even if Kodak’s initiative has an uncertain outcome, it seems interesting for the company and symptomatic of serious evolution … Kodak has become a small business compared to what it once was, [but] the brand remains strong.”

 

Raisa Ostapenko is a writer and political commentator. Currently based in Paris, she spent three years as a journalist in Moscow and has written for numerous outlets including the BBC.

 

 

 

Read more:

The compliance and KYC link between banks, bitcoin and exchanges

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