Digital Imaging's Impact Tackled At InfoTrends

SAN JOSE, CALIF.— The "'03" in the title of the InfoTrends Digital Imaging '03 conference, held here two weeks ago, will be remembered as more than just an annual placeholder. It has been an epochal year in the photo industry — the year when digital cameras finally outsold film cameras.

It also will be the year that camera-equipped cellphones outsell both film and digital cameras, forcing the industry to incorporate yet another new technology.

The lineup of speakers and panelists at the conference reflected the fundamental changes wrought by digital technology. Alongside the photo industry veterans such as Kodak and Fujifilm, and the CE/computer makers like Sony and Hewlett-Packard, were new names: Nokia, Motorola, Microsoft, Lightsurf and Sprint.

All were buoyed by the explosive sales of digital cameras and were optimistic about future growth. Kristy Holch, group director of the Norwell, Mass.-based research firm and event sponsor InfoTrends, noted that approximately 35 million digital cameras have been sold in North America to date and that in 2008 digital cameras sales will have almost completely replaced film camera sales.

By all accounts, the photo industry is still grappling with the lack of digital photo printing at retail. Kerry Flatley, senior research analyst, InfoTrends, said that of digital camera owners surveyed this September, 80 percent made digital prints at home vs. 16 percent at retail (with multiple responses allowed). What was new, in part, was the attitude toward home printing. No longer viewed as an unalloyed threat to retail, home printing was presented as another way for retailers to profit.

Wal-Mart's photo division VP Dave Rogers sounded the new refrain: "If the consumer wants to print at home, we want to be their source for papers and inks and accessories."

Jim Ruder, Hewlett-Packard's personal inkjet printers VP/GM, acknowledged, if inadvertently, that home printing was a boon to retail when he said that "it costs $90 to replace all three ink cartridges on the new 8-ink Photosmart 7960."

Wal-Mart's Rogers noted that his chain has already fully committed to digital on both the camera side and the photofinishing end.

"If you're only in film today, you'd better be worried," Rogers said. He stated that Wal-Mart can now process digital images in all of its PhotoCenter locations and is now stocking two thirds of its camera store shelves with digital cameras. Just six months ago the split was 50-50.

Rogers expressed less concern about the relatively small number of digital prints being made at retail than about the large number of images that aren't printed at all. "We've got to find a way to make money off those images," Rogers said.

J.P. Wollersheim, business development manager, digital imaging group, Microsoft, said the imaging process had to be "brain-dead simple" if the industry is to profit from those untouched images. Wollersheim said future improvements to Microsoft operating systems and software will be aimed at monetizing the percentage of images that just reside on consumers' hard drives.

The Photo Marketing Association (PMA) will be hitting airline televisions with a succinct message for digital camera owners this holiday season: print. The organization had previously focused driving printing back to retail, they were now taking a broader approach that will encourage printing regardless of location.

The commercial and in-store education effort will be centered around the tagline "Prints are Memories" and will feature a Web site detailing the various ways consumers can make prints from their cameras, whether at home, online or at retail. Televised ads will initially run on American Airlines' in-flight TV service starting later this month, and the video clips and other in-store ad material will be available to PMA members to create their own shorts and POP displays.

Fujifilm marketing director Joe Welch cited research conducted by a cultural anthropologist that studied a cross section of American women to gauge their photo habits. The fruits of that research, Welch said, confirmed the company's view (and massive investment) that customers value prints and will make them from digital cameras.

Welch unveiled his company's new Get the Picture online service that will allow consumers to upload their images to a Fujifilm Web site and have them printed by a local Fujifilm retail partner, for in-store pickup.

"People want to print from home, but not necessarily at home," Welch said.

The other major issue tackled at the conference was the explosion of the camera phone category, that is cellular phones with embedded digital cameras.

The camera phone, said Motorola's senior marketing manager, camera and imaging, Nathan Jenniges, cannot be dismissed as a mere gimmick but a significant addition to the photo category. Camera phone resolutions are already hitting 2-megapixels in Japan and will eventually do so in North America, making them a legitimate alternative, but not direct threat, to digital still cameras, Jenniges said.

"We see it as growing the total market for digital photography," Jenniges said.

Jill Aldort, senior research analyst, InfoTrends, concurred, saying that due to the camera phone's inherent limitations as a standalone camera, it will only threaten the low end of the digital camera market and the one time use film camera market, which is the only growth category for film products.

"Digital still cameras and camera phones play distinctly different roles in the market. The camera phone is fun, for spontaneous shots" and not serious photography, Aldort said.

Yet there is no questioning its popularity, with 13 camera phones on the market in the U.S. and more to come. Nokia's Randy Roberts, director/imaging business unit, said that camera phones were no longer a high-end niche product, but were being migrated down his company's line to hit lower tier markets. And while the digital still camera market has largely moved past the megapixel horse race, for camera phones, "the megapixel war is on."

He said Nokia was paying close attention to driving camera phone users to print.

"Printing is key for us," Roberts said, adding that camera phone owners expressed a greater interest in making prints than their digital still counterparts.

Pierre Barbeau, senior marketing manager, Sprint PCS, whose company is offering seven camera phones from third-party vendors, said that in the next 18 months the barriers preventing mobile customers from sending photos across different networks should be removed, giving the camera phone category another shot in the arm.

Camera phones are also driving the flash memory market, said Nelson Chan, senior VP/GM, retail business unit, SanDisk. "Flash will soon become a permanent image storage option for consumers because of its low cost, and it will replace the tape in digital video camcorders," he added.