Vendors: Make It Easy On Consumers

By Staff -- TWICE, 8/5/2002

TWICE: As the market looks at its next stage of development, from an early adopter to a mass market phenomenon, what are some of the challenges from a technical or marketing standpoint that you are facing?

MINNOCK: There is still a lot of opportunity in the area of ease of use and the ability to have the camera and all the other elements of the ecosystem work much better together.

SIENKIEWICZ: There are a lot of different ways to say the same thing. I guess I'll address the energy issue. The power supply, the battery, still takes up too large a percentage of the physical device. Some people stress that by saying that the batteries don't last long enough, that consumers are not satisfied with how many pictures they can take or how long they can play it back. But I think the correct way to frame that is that the battery still is too large a percentage of the camera.

PAUL D'ANDREA (Fujifilm): Two things stand out for us. One is, continuing to provide a range of feature sets to meet the needs of a mass audience, which is going to be a little different [then the current early adopter]. So the right amount of pixels and the right amount of zoom are two of the key characteristics that we're focusing in on.

The other thing that we really think is going to become critical this year is the need to start to get these pictures printed. As it goes mass, all our indications are that consumers want these pictures printed just as they did with the pictures they captured on film cameras. And retailers are going to need to get serious, we think, this year, about starting to install that basic equipment that is going to allow them to do that.

GREG YOUNG (Sony): Although I would agree with Paul [D'Andrea], and I think a number of my other colleagues here, that a lot of pictures are going to be printed in the next two years, I think we are seeing a substantial ... I hate to use the word paradigm shift ... but we are seeing something happening in the market that is driven by these technologies that is changing the way people use images. And it is not going to drive most people to print their images.

I think that only about one of every ten images captured over the next five years is going to be printed. That is a substantial shift and we all have to learn to make more money in the different environment as we move to that. But I really don't think there are huge technical hurdles to be overcome at this moment. I think really there are more perceptual hurdles.

We're all attacking ease of use in our own ways, certainly. But also, what do people do with their images? Where do they share them? How do they see them? I think the only company I see that is missing here, interestingly enough, that might have a significant play in this is Nokia. And I think we are all going to have to think about how integrated cellular and wireless devices play in the future. And I think that's going to be another major shift in the next couple of years that has immense consequences.

CARR: First of all, as we move from early adopter to mass consumer, the number one issue that we have to face is customer satisfaction. In the film world, customer satisfaction is up around ninety to ninety-five percent. We're not there today with digital and all of us have to face that.

The second thing is, in the life cycle of a digital snap-shooter, the first issue was getting images out of the camera. We've solved that. Next is showing consumers how to print it and print it with good quality. We're working on that. How do they find places to print their pictures? But as billions of pictures start to be taken, this goes to Greg's comment, how do you organize them? How do you find them? And that's another issue we really have to address next.

PECK: I agree we've gotten past our hurdle of how do I get the picture out of the camera. And I see the industry, both from the manufacturing and the retailer side, of how do you get the end user to be printing more of these pictures; because the majority still want to take a picture, they want to put them in an album, a frame or a shoebox. I think that once we can make that a simple process, an easy process, and show them the quality is as good, if not better, than what they've seen over the past years, that this is the next quantum leap.

JERRY GROSSMAN (Nikon): It has to get easier to use for people to really, on the mass level, accept digital cameras. And whether it's in the hardware or whether it's in the software, or whether it's in a combination of both, people have to think that a digital camera is as easy to use as a film camera — as a point and shoot camera. And I think we're going to get there.

I don't think we can ever lose sight of the fact that people are not buying pieces of hardware, they are buying memories — they are buying pictures. So making the camera not only easy to use, but enabling them to take better images, and take them easier is going to be very important in the long run.

OSTERSTOCK: If I take this back and try to compare it to a category that I was involved in from the launch, which was DVD, that was successful because there was a clear message to the consumer of the benefits of what DVD offered. There was a clear understanding for the consumer of what this offered as opposed to maybe VHS.

Now the consumer obviously understands at this point that a digital camera can offer some clear benefits; they can take a picture and they can erase the ones that they don't want and keep the ones they do. They have a nice, removable memory card. They can take that memory card and transport it from one device to another. They could use it in their digital still camera, maybe they can use it in their camcorder, they can obviously use it in their PC. But I think one of the things that hasn't been talked about is really what the consumer does with that format. Now everybody supports different memory cards and that's terrific and they have their reason for doing that. But I think as consumers buy more products that accept these removable memories, that potentially will become a factor because we're going to have multiple formats. And if they're stepping into a new DV camcorder, or they're stepping into a new portable device, are those memory cards going to be compatible with all those different devices?

I don't think it's really a major thought right now when they purchase their camera, because most memory cards are competitively priced. They focus on the camera first, which is what I know we need to do and as well as on the ease of use. But eventually, I think, as those cards become used in more products, that's going to become an issue down the road where maybe they're going to have to make some of those decisions earlier on. I think that's out there as far as a technology decision that's on the horizon.

MULLER: There aren't necessarily huge technological hurdles to overcome right now. However, I think there is a big hurdle to overcome in ease of use, which a lot of people have mentioned already. With only about seventeen to twenty percent household penetration right now with digital cameras, we have really only scratched the surface of the American consumer. And for the mass consumer, which this question is focused on, I think the out-of-box experience of the digital camera is still extremely intimidating.

So I think we can go a long way with taking the technology we currently have, we have four and five and six million pixel CCDs. The mass consumer doesn't need a whole lot more than that right now. I think that's where our next real leap can be, not necessarily in the technology, but how to deliver the current technology we have to the mass consumer.

Do Megapixels Matter?

TWICE: As prices have fallen and higher megapixel cameras are available to more consumers, do megapixels matter in the market anymore? GROSSMAN: Megapixels shouldn't matter as much as they do. I think that unfortunately they are becoming the driving point of reference, if you will, in the category for consumers, especially mass market consumers who really don't understand the category yet.

I think that what people should be focusing on, and what we, as manufacturers and marketers should be focusing on, is what's going to make the product easy to use. What's going to give you a better picture? What's going to give you a better experience? You shouldn't buy a 4-megapixel camera if you're not going to blow up pictures beyond 8 x 10 inches — and most consumers don't. So I think it's incumbent upon us to pull people out of the megapixel war and bring it back into a discussion of what is the right camera for the person who's trying to buy it.

D'ANDREA: I think that we're seeing, like on film cameras, consumers very interested in the zoom features, particularly the optical zoom and not so much the digital quality. And then the ability to capture video is probably coming up there third. We are seeing a lot of interest in that in our research.

MULLER: I think in the computer industry there is no light at the end of the tunnel in the megahertz war. That can go on forever. But when you're talking about megapixels, my technical people tell me that a piece of silver halide film is the equivalent of about 8.6 million pixels. The megapixel war is going to end because there's not going to be any output device that can handle more resolution than that.

I think once we get to a point where maybe consumers realize that three or four million pixels is all they need, and professionals realize that six or seven million pixels is all they need, then it's going to be the traditional camera features that are the differentiator — like lens quality, focal length, shutter speed, speed of operation.

You know as good as digital cameras are now, they are slower, for the most part than film cameras, the shot to shot speed, the shutter speed.

PECK: I think it's important for the manufacturers to convey to the consumer more information. Megapixel is very easy: two, three, four, five, six, like horsepower in a car, people can very easily understand that. But it's important for the manufacturers to convey that there's more to it. Lens quality, that was mentioned, ease of use, that was mentioned. But things inside the camera that are not visible, like the CPU or processor that the cameras use to determine the color balance, the processing speed, how quickly the camera can write the images, those things really do affect not only the ease of use but what the output actually looks like.

So, I think the next step is for manufacturers to convey this information to the consumer in an easy way so that they can understand it.

SIENKIEWICZ: But Elliot [Peck], I don't think it stops with the manufacturer. I think the retailers have to do the same thing. Because all too often I see an ad that says '3-megapixel, three times zoom'.

PECK: You're absolutely right.

CARR: To Elliot's point, in talking to the consumer, because our marketing is all focused on snap shooters, we do say it's a 2-megapixel, 3-megapixel, but we also say picture size. So that 'this camera will give you a great 4x6 or a great 8x10 or a great 20x30' and that way the customer understands the picture size versus the megapixel.

OSTERSTOCK: It's very easy to segment the market, by resolution. It's easy to build the line up on the floor. It's easy to take a look at their number of SKUs and quickly pigeonhole them. But it does do the consumer a disservice to perceive that every camera and every resolution, based on pixel content, is going to produce the same image.

Prints And The Potential For Profits

TWICE: One of the ways that retailers generally make up for price compression is through printing. And it's been alluded to already that the consumer habits right now that are emerging are troublesome for those who depend on printing revenue. What, if anything can, or should, be done about this? Is this something that as more mainstream, more soccer moms, pick up, the old habits will reassert themselves?

D'ANDREA: That's certainly what our research is suggesting will happen. We've seen that what the mass consumer wants is to print their pictures and share them. None of those basic features of why they buy a camera in the first place have changed. We don't think that the technology is going to change their desire to have physical pictures to share. Technology gives them some new opportunities for sharing, it gives them new ways to make pictures. It enhances the old desires but it doesn't make them go away.

As the installed base of equipment at retail catches up with that desire, and it's going to happen in a big way starting this year, we'll see old habits reappear. We like to think about these cameras as being unique and different but they are just the next generation of image capture device.

SIENKIEWICZ: But there's a big difference. This morning I showed Elliot [Peck] a picture of my one-year-old daughter on my camera. Five years ago, I would have shown him a print. So the camera is also, in a secondary role, a display device. The images, frankly, look better, in many cases with transmitted light than they do with reflected light so I enjoy them more on my computer monitor than I do in a print.

YOUNG: I concur with that one hundred percent. We're bringing out devices that are really designed to do just that. I'm carrying my photo album with me all the time now [holds up a Sony Clie]. And it also has this camera. It certainly will not produce even a 4x6-inch print of any quality. But eventually that technology will happen in devices like this. That's something that is enabling about digital imaging that could not happen with film photography and it will drive very different devices like this, like cellphones.

CARR: I agree with Greg [Young] but I'd also like to say that consumers will want choices.

MINNOCK: I think that's one of the things that makes digital really exciting, that you can fulfill the need for sharing in so many different ways. But I think the research also shows there's an awful lot of people that really want to have their old friend, the 4x6-inch print. Whether it's at retail or in the home.

I agree with you Greg, in your point that a small percentage of the digital images will be printed. But I think there's going to be an awful lot more digital images captured because it's just so much fun and you have so many different opportunities to use it.

YOUNG: Ten percent of fifty billion is still a lot.

GROSSMAN: I think it's important for the retailer, to obviously make additional margin on printing and in order to do that they have to get the infrastructure in place. And at the same time, make it really easy, or as easy as it was to take in a roll of film to a retailer or to a photo specialty store and get a print — that's how easy it has to be to get a digital print. I think that consumers don't get that yet. Consumers think it's not easy to get prints other than at home. But I think people miss prints.

D'ANDREA: And this next generation of kiosk that's coming out right now really makes it pretty much that easy. We're being very careful about putting various features on them, so it's just as easy to come up, put in the media card and select 'I want all my pictures printed', one button, give me everything in a 4x6-inch. It's the metaphor for what's on the envelope when you drop a roll of film off.

CARR: But Jerry [Grossman]'s right. I was in a store yesterday, a very large mass market retailer and went into their one hour lab and asked if I could output a digital picture and she was like: 'I don't think so'. I said, "well are you going to be getting that soon?" She goes, 'I don't know'— and she was the lab person! So here again, the retailer has to take this step forward. They have to see that consumer behavior is changing.

PECK: I'd like to add one point about the profit issue, and I think that varies by the channel. The photo specialty channel, which has traditionally relied very heavily on the output and the printing, is probably much more challenged in how to change that to capture the digital printing side. The CE channels, which never really relied on the customer to come in and make prints and pick them up, is probably going to see a very easy transition from the profit side, because they are used to selling the CE products without the developing and printing.

D'ANDREA: But we're missing the mass channel. We know they are going to get extremely aggressive investing in the output solution. Who's going to be the leader in that output solution remains to be seen but if anybody underestimates the mass channel they do so at their peril. They are heavily invested in the profit that comes from printing pictures and they are not going to walk away from that very easily.

And CE is beginning to recognize, interestingly, the opportunity that exists in the output side. So again, I think we're going to see a lot of convergence, a lot of interest on all the retailers parts in finding ways to take the new technologies and translate them into incremental profits.

TWICE: How about online printing?

Muller: We feel strongly that the traditional, physical outlet, whether it is food and drug, whether it is CE, whether it be photo specialty, will win out over online photo processing. Now there certainly is a place for online photo processing but I've heard that's maybe five percent of the market. A couple years back there was this obsession with the retailers and manufacturers talking about building into your software the ability to immediately send images to this retailer's online print service or this manufacturer's on-line print service.

I don't think the customer necessarily wants to be that cornered in to that solution.

So I think ninety, ninety-five percent of the market is probably going to bring it to the traditional retail outlet to drop it off. I think one question we haven't addressed though, when they do that, are they going to go to a self-service kiosk? Is that going to win out? Or is it going to be a manned photo processing center, because there is no self-service in traditional photo processing right now. You may fill out the form yourself and drop it off, but someone else is processing the images.

So, I think that's one of the questions that needs to be answered, is it going to be a self-service kiosk or the photo specialty dealer who builds a reputation on the service. I would think they'd want to have something behind the counter where they do the processing themselves.

I think what we are all saying is that there are too many options. When someone asks you how do I get my prints, you gotta go through a whole litany of answers to that question. Where, with traditional film it was 'go drop the film cartridge off at your photo processor.'

D'ANDREA: I agree. And also to your point, simplicity really lies in the eye of the beholder because I spent years in the mail order photo finishing business. The people who use it would say 'what could be easier than taking the film out of the camera, putting it in an envelope, sticking it in my mail box, waiting five days and the prints come back. I don't have to go anywhere, I don't have to do anything.' And yet it has always been a niche part of the photo finishing business and remains one, and is in fact going down now. The point is that old habits die hard.

If the retailers jump on those old habits and try to enhance them by letting people either drop the memory card off or downloading all the images themselves, all of a sudden they can build and enhance old habits with more choice.

OSTERSTOCK: But I think we have to look at how they're sharing. If we look at how people use a camcorder image, yes, they can share it on their LCD screen, but traditionally they're not going to. They're going to connect it to their TV and when the family gathers around, they are going to watch a video. Why wouldn't people want to do that with a digital still image? Why wouldn't they want to connect that image to their TV and have a slide show of the pictures that they just took that morning? So we think that's also critical, the way they share it, not just printing which is important, but how they share those images.

YOUNG: Yeah, this moving it out of the office and into the family room is a very, very critical step. We have camera products out and TVs now that will accept memory cards and they are just starting to hit the market.

But moving it out of the computer centric mindset is very, very critical to the adoption of this technology beyond where it is now.

SIENKIEWICZ: But for some reason, looking at still images has never translated well to the TV set.

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Vendors: Make It Easy On Consumers

By Staff -- TWICE, 8/5/2002

Do Megapixels Matter?

Prints And The Potential For Profits

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