LOS ANGELES (Reuters) - Kodak’s star may never shine again in Hollywood.
The bankruptcy of the American icon that invented the handheld camera is reverberating beyond Wall Street and around the world’s entertainment capital. Insiders say Hollywood may be on the verge of scaling back a decades-old symbiotic relationship, and seeking business alternatives.
Kodak’s star began to fade in the late 1990s as digital technology began chipping away at its century-long stronghold on film distribution. But the company still provides a significant amount of film to Hollywood and it remains a presence in the land of make-believe, where the Kodak Theater is home to the Oscars.
Sources say major studios - listed among Kodak’s top unsecured creditors - fear they will not get repaid and have started to look elsewhere to buy film.
Major entertainment companies listed among Kodak’s top 50 unsecured creditors include Sony, owed $16.7 million; Warner Brothers, due $14.2 million; NBC Universal, short $9.3 million; Paramount Studios, owed $6.8 million; and Walt Disney Studios, $4.2 million.
Two sources with knowledge of the contracts say most of these debts are related to film rebates owed to the studios who buy film from Kodak on a picture-by-picture basis. The price of film varies and often drops as a studio uses more, which is why they are often owed rebates.
None of the studios wished to comment.
One source, who works for a company that buys film from Kodak, said studios have been stockpiling Kodak film in anticipation of a bankruptcy filing. Now, they are also talking with other film suppliers, like Fuji.
At its peak, Kodak probably generated about $500 million from film distribution for motion pictures annually, experts estimate.
In addition to setting the standard for 35mm film, Kodak also won numerous Oscars for technical achievement. Its founder, George Eastman, was named an honorary member of the Academy of Motion Picture Arts and Sciences.
Chris McGurk, CEO of Cinedigm and former COO of Metro-Goldwyn-Mayer Inc, said that in the late 1990s, studios, filmmakers and theater chains stepped up efforts to digitize movies, eventually rendering Kodak’s staple 35 mm film a relic of the past.
“Kodak failed to recognize the game-changing impact the digital technology would have on the film-making business. Those who didn’t see it have fallen by the wayside,” McGurk said.
“It’s easy to see how that could happen. Industry has been resistant to change and projection film on 35 mm had been happening for 75 years but the fact is that the world has changed and digital takes enormous costs out of the distribution system.”
Beyond mere film supply, speculation persists that the Academy of Motion Picture Arts and Sciences, which hosts the Oscars, may exercise an option in its contract that allows it to find a new home for Hollywood’s glitziest awards show.
About 10 years ago, Kodak agreed to pay $75 million to developers to see its name on the 3,400-plus-seat theater.
The Academy said it has not begun venue negotiations for the Oscar telecast beyond 2013. But many industry watchers feel the Oscars may want to disassociate itself from Kodak - or prepare for the company to become a punchline at the upcoming Academy Awards.
“I don’t think it’s good branding at all for the Oscars to be associated with a bankrupt company,” branding expert Adam Hanft said.
The ripples of the bankruptcy extend even to the Magic Kingdom. In 2002, Kodak and Disney renewed a multiyear promotion accord first set in 1989, which marketing experts said could be valued at tens of millions of dollars.
Under the original deal, Kodak paid Disney for the rights to use Disney characters in promotions and advertisements worldwide, and to advertise its products on Disney’s cable television channel and in Disney publications.
In 2002, the companies renewed their alliance and provided for sales and promotion at Disney properties of traditional film and one-time use cameras and other services.
Bankruptcy lawyer Edward Neiger said this deal could be revisited as well.
“One of the biggest assets that Kodak has going for it is its brand-name recognition and its goodwill. Very few companies have the name recognition that Kodak has. It’s up there with Xerox and General Motors,” he said.
“In its bankruptcy, Kodak will analyze whether they’re getting the right bang for their buck with these arrangements, or whether the money could be better spent elsewhere, for example, on R&D.”
Reporting By Susan Zeidler; Editing by Gary Hill