Their entire business model was based on selling film canisters at outrageous prices, so they didn't want to pursue digital cameras, since it would cannibalize

Their entire business model was based on selling film canisters at outrageous prices, so they didn't want to pursue digital cameras, since it would cannibalize their primary revenue source. The execs probably comforted themselves by saying that digital cameras would never become as cheap, as good, or as easy to use as film, yada yada yada. And while they were sitting on their hands, Sony, Nikon, and Canon ate their lunch.