Polaroid: The Instant Camera That Didn't Change Fast Enough

The story

Edwin Land was a brilliant inventor who left Harvard as a teenager to work on a new material that could polarize light, the same idea used in many sunglasses today. In 1937 he founded the Polaroid Corporation in Cambridge, Massachusetts. During World War II, Polaroid made goggles and optical equipment for the U.S. military.

Land's most famous idea came next. According to company lore, his young daughter asked why she couldn't see a photo right after it was taken. In 1947 Land showed the world a camera that produced a finished print right out of the camera, and the first model went on sale in 1948 for $89.75. In 1972 Polaroid launched the SX-70, a camera that pushed out a picture that developed before your eyes. Polaroid had a monopoly, meaning it was the only seller of instant photography. At its peak, around 1978, it employed about 21,000 people.

Polaroid made most of its money the way a razor company does: the camera got you started, but the real profit was in the film you kept buying. A later CEO said instant film earned gross margins well above 65 percent, meaning most of each film sale was profit after the cost of making it. When Kodak started selling instant cameras in 1976, Polaroid sued for patent infringement and won. In 1990 a court awarded Polaroid about $909 million, and the court had already ordered Kodak out of the instant camera business.

Polaroid did not ignore computers and electronics. It took out early patents on electronic camera parts in the 1960s, formed an electronic imaging group in 1981, and by 1989 was spending 42 percent of its research budget on digital imaging. In the late 1990s it was even a top seller of digital cameras. But leaders kept believing that people would always want a printed picture in their hands. A digital camera needs no film, and film was where Polaroid's profits lived.

Other problems piled up. To fight off a hostile takeover attempt in 1989, Polaroid took on heavy debt. One-hour photo labs and then digital cameras cut into demand for instant pictures. Business customers who used Polaroids for ID cards, insurance claims and real estate switched to digital. Revenue peaked at about $3 billion in 1991 and then slid.

In October 2001, with more than $900 million in debt and its stock trading at about 28 cents a share, Polaroid filed for Chapter 11 bankruptcy, a legal process that protects a struggling company from creditors while it reorganizes or sells itself. Most of the business was sold. The new owners later went through their own bankruptcy in 2008.

The name did not disappear. In 2008 a group of fans called the Impossible Project took over a former Polaroid film factory in the Netherlands and figured out how to make instant film again. Years later that business took the Polaroid name, and instant cameras became popular with a new generation. The lesson is not that Polaroid's idea was bad. It is that a company built around one profitable product can find it very hard to replace that product, even when it can see the change coming.