Steve Blank

This part 2 of the Secret History of Polaroid and Edwin Land. Read part 1 for context.

Kodak and Polaroid, the two most famous camera companies of the 20^th century, had a great partnership for 20+ years. Then in an inexplicable turnabout Kodak decided to destroy Polaroid’s business. To this day, every story of why Kodak went to war with Polaroid is wrong.

The real reason can be found in the highly classified world of overhead reconnaissance satellites.

Here’s the real story.

In April 1969 Kodak tore up a 20-year manufacturing partnership with Polaroid. In a surprise to everyone at Polaroid, Kodak declared war. They terminated their agreement to supply Polaroid with negative film for Polacolor – the only color film Polaroid had on the market. Kodak gave Polaroid two years’ notice but immediately raised the film price 10% in the U.S. and 50% internationally. And Kodak publicly announced they were going to make film for Polaroid’s cameras – a knife to the heart for Polaroid as film sales were what made Polaroid profitable. Shortly thereafter, Kodak announced they were also going to make instant cameras in direct competition with Polaroid cameras. In short, they were going after every part of Polaroid’s business.

What happened in April 1969 they caused Kodak to react this way?

And what was the result?

Read the sidebar for a Background on Film and Instant Photography

A Secret Grudge Match

To understand why Kodak tried to put Polaroid out of business you need to know some of most classified secrets of the Cold War.

Project GENETRIX and The U-2 – Balloon and Airplane Reconnaissance over the Soviet Union
During the Cold War with the Soviet Union the U.S. intelligence community was desperate for intelligence. In the early 1950s the U.S. sent unmanned reconnaissance balloons over the Soviet Union.

Next, from 1956-1960 the CIA flew the Lockheed U-2 spy plane over the Soviet Union on 24 missions, taking photos of its military installations. (The U-2 program was kicked off by a 1954 memo from Edwin Land (Polaroid CEO) to the director of the CIA.)

The U-2 cameras used Kodak film, processed in a secret Kodak lab codenamed Bridgehead.  In May 1960 a U-2 was shot down inside Soviet territory and the U.S. stopped aircraft overflights of the Soviet Union. But luckily in 1956 the U.S. intelligence community had concluded that the future of gathering intelligence over the Soviet Union would be with spy satellites orbiting in space.

Air Force – SAMOS –  1^st Generation Photo Reconnaissance Satellites
By the late 1950s the Department of Defense decided that the future of photo reconnaissance satellites would be via an Air Force program codenamed SAMOS.

The first SAMOS satellites would have a camera that would take pictures and develop them while orbiting earth using special Kodak Bimat film, then scan the negative and transmit the image to a ground station. After multiple rocket failures and realization that the resolution and number of images the satellite could downlink would be woefully inadequate for the type and number of targets (it would take 3 hours to downlink the photos from a single pass), the film read-out SAMOS satellites were canceled.

Sidebar– Kodak Goes to The Moon

CIA’s CORONA – 2^nd Generation Photo Reconnaissance Satellites
It was the CIA’s CORONA film-based photo reconnaissance satellites that first succeeded in returning intelligence photos from space. Designed as a rapid cheap hack, it was intended as a stopgap until more capable systems entered service. Fairchild built the first few CORONA cameras, but ultimately Itek became the camera system supplier. CORONA sent the exposed film back to earth in reentry vehicles that were recovered in mid-air. The film was developed by Kodak at their secret Bridgehead lab and sent to intelligence analysts in the CIA’s National Photographic Interpretation Center (NPIC) who examined the film. (While orbiting 94 miles above the earth the cameras achieved 4 ½-foot resolution.) CORONA was kept in service from 1960 to 1972, completing 145 missions.

Film recovery via reentry vehicles would be the standard for the next 16 years.

Sidebar – The CIA versus the National Reconnaissance Office (NRO)

Air Force/NRO – GAMBIT – 3^rd Generation Film Photo Reconnaissance Satellites
After the failure of the SAMOS on-orbit scanning system, the newly established National Reconnaissance Office (NRO) regrouped and adopted film recovery via reentry vehicles.

Prodded by the NRO and Air Force, Kodak put in an “unsolicited” proposal for a next-generation imaging satellite codenamed GAMBIT. Kodak cameras on GAMBIT had much better resolution than the Itek cameras on CORONA. In orbit 80 miles up, GAMBIT had high-resolution spotting capability – but in a narrow field of view. This complemented the CORONA broad area imaging.  GAMBIT-1 (KH-7) produced images of 2-4 feet in resolution. It flew for 38 missions from July 1963 to June 1967. The follow-on program,  GAMBIT-3 (KH-8), provided even sharper images with resolution measured in inches. GAMBiT-3 flew for 54 missions from July 1966 to August 1984. The resolution of GAMBITs photos wouldn’t be surpassed for decades.

CIA – HEXAGON – 4^th Generation Film Photo Reconnaissance Satellites
Meanwhile the CIA decided it was going to build the next generation reconnaissance satellite after GAMBIT. Hexagon represented another technological leap forward. Unlike GAMBIT that had a narrow field of view, the CIA proposed a satellite that could photograph a 300-nautical-mile-wide by 16.8-nautical-mile-long area in a single frame. Unlike GAMBIT whose cameras were made by Kodak, HEXAGON’s cameras would be made by Perkin Elmer.

CIA Versus NRO – HEXAGON versus DORIAN
In 1969 the new Nixon administration was looking to cut spending and the intelligence budget was a big target. There were several new, very expensive programs being built: HEXAGON, the CIA’s school bus-sized film satellite; and a military space station: the NRO/Air Force Manned Orbiting Laboratory (MOL) with its DORIAN KH-10 film-based camera (made by Kodak). There was also a proposed high-resolution GAMBIT-follow-on satellite called FROG (Film Read Out GAMBIT) – again with a Kodak Bimat camera and a laser scanner.

In March 1969, President Nixon canceled the CIA’s HEXAGON satellite program in favor of the Manned Orbiting Laboratory (MOL), the Air Force space station with the Kodak DORIAN camera. It looked like Kodak had won and the CIA’s proposal lost.

However, the CIA fought back.

The next month, in April 1969, the Director of the CIA used the recommendation of CIA’s reconnaissance intelligence panel – headed by Edwin Land (Polaroid’s CEO) to get President Nixon to reverse his decision. Land’s panel argued that HEXAGON was essential to monitoring arms control treaties with the Soviet Union. Land said DORIAN would be useless because astronauts on the military space station could only photograph small amounts of territory, missing other things that could be a few miles away. In contrast, HEXAGON covered so much territory that there was simply no place for the Soviet Union to hide any forbidden bombers or missiles.

Land’s reconnaissance panel recommended: 1) canceling the manned part of the NRO/Air Force Manned Orbiting Laboratory (MOL) and 2) using the DORIAN optics in a robotic system (which was ultimately never built) and 3) urging the President to instead start “highest priority” development of a “simple, long-life imaging satellite, using an array of photosensitive elements to convert the image to electrical signals for immediate transmission.” (This would become the KH-11 KEENAN, ending the need for film-based cameras in space.)

The result was:

• Nixon canceled NRO/Air Force Manned Orbiting Laboratory (MOL) and its Kodak DORIAN film-based camera,
• Nixon told the CIA to build the HEXAGON satellite with its Perkin Elmer camera.

Over the next two years, Land lobbied against the GAMBIT follow-on called FROG and after a contentious fight effectively killed it in 1971. But most importantly Nixon gave the go-ahead to build the CIA’s KH-11 KEENAN electronic imaging satellite – dooming film-based satellites – and all of Kodak’s satellite business.

Why Did Kodak Go to War With Polaroid?

Finally we can now understand why Kodak was furious at Polaroid. The CEO of Polaroid killed Kodak’s satellite reconnaissance business.

Kodak’s 1970 annual report said, “Government sales dropped precipitously from $248 million in 1969 to $160 million in 1970, a decline of nearly 36 percent.” (That’s ¾’s of a billion dollars in today’s dollars.)

The DORIAN camera on the Manned Orbiting Laboratory and the very high-resolution GAMBIT FROG follow-on were all Kodak camera systems built in Kodak’s K-Program, a highly classified segment of the company. In April 1969 when MOL/DORIAN KH-10 was canceled, Kodak laid off 1,500 people from that division.

Kodak also had 1,400 people in a special facility that developed the film codenamed Bridgehead. With film gone from reconnaissance satellites, only small amounts were needed for U-2 flights. Another 1,000+ people ultimately would be let go.

Louis Eilers had been Kodak president since 1967 and in 1969 became CEO. He had been concerned about Land’s advocacy of the CIA’s programs that shut out Kodak of HEXAGON. But he went ballistic when he learned of the role Edwin Land played in killing the Manned Orbiting Lab (MOL) and the Kodak DORIAN KH-10 camera.

Kodak’s Revenge and Ultimate Loss
In 1963 when Polaroid launched its first color instant film — Polacolor –  Kodak manufactured Polacolor’s film negative. By 1969 Polaroid was paying Kodak $50 million a year to manufacture that film. (~$400 million in today’s dollars.) Kodak tore up that manufacturing relationship in 1969 after the MOL/DORIAN cancelation.

Kodak then went further. In 1969 they started two projects: create their own instant cameras to compete with Polaroid and create instant film for Polaroid cameras – Polaroid made their profits on selling film.

In 1976 Kodak came out with two instant cameras — the EK-4 and EK-6 –and instant film that could be used in Polaroid cameras. Polaroid immediately sued, claiming Kodak had infringed on Polaroid patents. The lawsuit went on for 9 years. Finally, in 1985 a court ruled that Kodak infringed on Polaroid patents and Kodak was forced to pull their cameras off store shelves and stop making them. Six years later, in 1991, Polaroid was awarded $925 million in damages from Kodak.

Epilogue
1976 was a landmark year for both Kodak and Polaroid. It was the beginning of their 15-year patent battle, but it was also the beginning of the end of film photography from space. That December the first digital imaging satellite, KH-11 KEENAN, went into orbit.

After Land’s forced retirement in 1982, Polaroid never introduced a completely new product again. Everything was a refinement or repackaging of what it had figured out already. By the early ’90s, the alarms were clanging away; bankruptcy came in 2001.

Kodak could never leave its roots in film and missed being a leader in digital photography. It filed for bankruptcy protection in 2012, exited legacy businesses and sold off its patents before re-emerging as a sharply smaller company in 2013.

Today, descendants of the KH-11 KENNEN continue to operate in orbit.

Read all the Secret History posts here

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The connections between the world of national security and commercial companies still has surprises.

December 1976 – Vandenberg Air Force Base, U.S. military space port on the coast of California

As a Titan IIID rocket blasted off, it carried a spacecraft on top that would change everything about how intelligence from space was gathered. Heading to space was the first digital photo reconnaissance satellite. A revolution in spying from space had just begun.

For the previous 16 years three generations of U.S. photo reconnaissance satellites (257 in total) took pictures of the Soviet Union on film, then sent the film back to earth on reentry vehicles that were recovered in mid-air. After the film was developed, intelligence analysts examined it trying to find and understand the Soviet Union’s latest missiles, aircraft, and ships. By the mid-1970s these photo reconnaissance satellites could see objects as small as a few inches from space. By then, the latest U.S. film-based reconnaissance satellite – Hexagon – was the size of a school bus and had six of these reentry vehicles that could send its film back to earth. Though state of the art for its time, the setup had a drawback: Pictures they returned might be days, weeks or even months old. That meant in a crisis – e.g. the Soviet invasion of Czechoslovakia in 1968 or the Arab-Israeli war in 1973 – photo reconnaissance satellites could not provide timely warnings and indications, revealing what an adversary was up to right now. The holy grail for overhead imaging from space was to send the pictures to intelligence analysts on the ground in near real time.

And now, finally after a decade of work by the CIA’s Science and Technology Division, the first digital photo reconnaissance satellite – the KH-11, code-named KENNEN – which could do all that, was heading to orbit. For the first time pictures from space were going to head back to the ground via bits, showing images in near real time.

The KH-11/ KENNEN project was not a better version of existing film satellites, it was an example of disruptive innovation. Today, we take for granted that billions of cell phones have digital cameras, but in the 1970s getting a computer chip to “see” was science fiction. To do so required a series of technology innovations in digital imaging sensors, and the CIA funded years of sensor research at multiple research centers and companies. That allowed them to build the KH-11 sensor (first with a silicon diode array, and then the using first linear CCD arrays), which turned the images seen by the satellites’ powerful telescope into bits.

Getting those bits to the ground no longer required reentry vehicles carrying film, but it did require the launch of a network of relay satellites (code named QUASAR (aka SDS, Satellite Data System). While the KH-11 was taking pictures over the Soviet Union, the images were passed as bits from satellite to satellite at the speed of light, then downlinked to a ground station in the U.S. New ground stations were built to handle a large, fast stream of digital data. And the photo analysts required new equipment.

More importantly, like most projects that disrupt the status quo, it required a technical visionary who understood how the pieces would create a radically new system, and a champion with immense credibility in imaging and national security who could save the project each time the incumbents tried to kill it — even convincing the President of the United States to reverse its cancelation.

More detail in a bit. But let’s fast forward, four months later, to a seemingly unrelated story…

April 1977 – Needham, MA, Polaroid Annual Meeting
Edwin Land, the 67-year-old founder/CEO/chairman and director of research of Polaroid, the company that had been shipping instant cameras for 30 years, stood on stage and launched his own holy grail – and his last hurrah – an instant film-based home-movie camera called Polavision.  At the time, you sent your home movie film out to get developed and you’d be able to view it in days or a week. Land was demoing an instant movie. You filmed a movie and 90 seconds later you could see it. It was a technical tour de force – remember this was pre-digital, so the ability to instantly develop and show a movie seemed like magic. Much like the KH-11/KEENAN it also was a complete system –  camera, instant film, and player.  It truly was the pinnacle of analog engineering.

But Polavision was a commercial disaster. Potential customers found it uncompelling and its $3,500 price (in today’s dollars) daunting. You could only record up to 2½ minutes of film. And believe it or not, with Polavision you couldn’t record sound with the movies. The 8mm film couldn’t be played back on existing 8mm projectors and could only be viewed on a special player with a 12” projection screen. There was no way to edit the film. It was a closed system. Worse, two years earlier Sony had introduced the first Betamax VCR and JVC had just introduced VHS recorders that could hold hours of video that could be edited. The video recorders looked like a better bet on the future. Polaroid discontinued Polavision two years later in 1979.

For decades Land’s unerring instincts for instant products delighted customers. However, Polavision was the second misstep for Land. In 1972 at Land’s insistence, Polaroid had prematurely announced the SX-70 camera – another technical tour de force – before it could scale manufacturing. In 1975 the board helped Land “decide” to step down as president and chief operating officer to let other execs handle manufacturing and scale.

But the biggest threat to Polaroid came in 1976, a year before the Polavision announcement, when Kodak entered Polaroid’s instant camera and film business with competitive products.

After the Polavision debacle, Land was sidelined by the board, which no longer had faith in his technical and market vision. Land gave up the title of chairman in 1980. He resigned his board seat in 1982, and in 1985, bitter he had been forced out of the company he founded, he sold all his remaining stock, cutting all ties with the company.

Steve Jobs considered Land one of his first heroes, calling him “a national treasure.” (Take a look at part of a 1970 talk by Land eerily describing something that sounds like an iPhone.)

Meanwhile, inside Polaroid Labs, work had begun on two new technologies Land had sponsored: inkjet printing and something called “filmless electronic photography.” Neither project got out the door because the new management was concerned about cannibalizing Polaroid’s film business. Instead they doubled down on selling and refining instant film. Polaroid’s first digital camera wouldn’t hit the market till 1996, by which time the battle had been lost. 

What on earth do these two stories have to do with each other?
It turns out that the person who had consulted on every one of the film-based photo reconnaissance satellites – Corona, Gambit, and Hexagon – was also the U.S. government’s most esteemed expert on imaging and spy satellites. He was the same person who championed replacing the film-based photo satellites with digital imaging. And was the visionary who pushed the CIA forward on KH-11/KEENAN. By 1977, this person knew more about the application of digital imaging then anyone on the planet.

Who was that?

It was Edwin Land, the Founder/Chairman of Polaroid – the same guy that introduced the film-based Polavision.

More in the next installment here.

Read all the Secret History posts here

Read all the Secret History posts here

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