Kodak made a number of surprising announcements Tuesday regarding its involvement in cryptocurrency, including the creation of its own, KodakCoin. But nothing risks its name more than the actual Bitcoin mining operation that is rather misleading to likely unwitting consumers, and all at a potential benefit to the company that’s rather uncertain.
Part of Kodak’s new plan includes a bit of a side-plot: Kodak is now involved in the rental of Kodak-branded Bitcoin mining rigs (essentially computers with specialized parts that make them particularly good at mining Bitcoin and other cryptocurrencies using similar technologies) to customers that pay an up-front fee of $3,400 in order to have the rights to 50 percent of the mining profits from the rig for two years. Spotlite takes care of any energy, storage, maintenance, and repair costs that might arise and promises approximately $375 per month (post-50-percent split) in revenue at the current approximate Bitcoin price of $14,000.
Spotlite, it turns out, is a company that merely licensed Kodak’s name to be able to rent out these machines with a more recognizable and certainly more trustworthy brand. The problem is, this arrangement seems far from something a trustworthy company would offer.
If you subtract out the initial $3,400, that would leave users with $5,725 after two years, which represents a very healthy investment with a 68-percent increase over two years. But the facts show this deal is nothing more than the sale of a bet, and the house is making it look a little too good.
First, Bitcoin becomes more difficult to mine over time. So there is no reasonable way for the amount of Bitcoin mined to stay the same month-to-month, as the actual Bitcoin mined will go down every month as the difficulty increases. The only way for the value of mined Bitcoin to stay the same each month is for the market price to increase by the same amount that the difficulty increases. The chances of that happening are anyone’s guess. If Bitcoin surges again, renters of these machines could make out quite well (as would any company renting them for cash while also taking a 50-percent cut). But if Bitcoin drops in value, renters could lose as much as their initial $3,400 rental fee.
But It’s Not Really Kodak
Kodak, of course, is only licensing its name. It’s Spotlite that is building, renting, managing, and running the machines. But at the end of the day, it’s the Kodak name that people have trusted and will likely continue to trust as they leap into this massive risk.
For any other no-name computer or general business company to do this would not be much of an issue. Consumers’ lack of name recognition would at least give would-be investors more pause. But here, Kodak, which historically has absolutely nothing to do with cryptocurrency and is well-trusted to create imaging technologies that people use to capture and preserve everything from simple memories to incredible Hollywood films, is tying the trust of its name to the volatility of a virtual currency that has risen and fallen 30 percent in a single day. And for what?
Spotlite reported 80 people had already signed up for the service. There is a growing waitlist along with another 300 units that will be available “shortly,” according to a Business Insider article. Assuming there is no profit on the rental of the units themselves (of which there likely is at least a small portion, in reality), all of those units begin mining soon, and that profits will be as expected according to Spotlite, that represents a nearly $3.5 million upside for Spotlite. Perhaps they can create more units over time and repeat the process. But that doesn’t factor in Spotlite’s costs such as energy, maintenance, and storage.
How much Kodak licensed its name for is unclear. But the fact remains, this is at best worth a few million dollars to Kodak. Perhaps there’s a revenue-sharing agreement in place. But the fact remains, Bitcoin is notoriously volatile and its future, uncertain. And perhaps this all works out just fine for everyone involved. But the fact remains, it’s a huge risk for Kodak to get involved in something that it simply didn’t have to. All we need to do is examine history and see what the Trump name means to people today in nearly any industry.
This is the riskiest part of its new business plan, which includes an ICO for its own cryptocurrency at the end of the month, an image copyright verification and protection service, and an image licensing business — all slightly uncertain, yet intriguing ideas. But this other deal is just too much. It’s not just that it’s something new: it’s outright strange.
Then again, maybe it just doesn't matter now that Kodak's stock
doubled [update] quadrupled.
Update: Evidence is mounting that shows KodakOne, the new platform announced yesterday, is also simply a rebranding of a stagnant coin launch for RYDE. Ars Technica reports that it seems RYDE's rebranding to KodakCoin through a licensing deal with paparazzi parent company WENN Media is simply a way for the cryptocurrency to get a much-needed boost. This concept of paying for trust isn't a bad business move, but it's one that's sure to make many skeptical of the quality of the actual products and services being offered.
While it was clear Kodak licensed its name extensively in the past for other imaging-related uses as well, this new licensing deal, combined with departures from the traditional market ecosystem in which Kodak historically participated since its bankruptcy, is another reason to hold Kodak-branded products to even more scrutiny going forward. The more Kodak licenses its name, the more it is putting that name into the hands of third-party businesses that have plenty of opportunity to destroy it. Even if it could work once, there are only so many times Kodak could possibly claim, "But it's not really us," before people start to re-examine what they think of the brand entirely.