Maturing Digital Camera Market Still Growing

TWICE: Some industry projections are indicating a slowdown in growth for 2005. From the past two quarters, are those predictions accurate? What can we expect over the holidays?

Chuck Westfall, Canon: 2005 is still a little bit slower in terms of growth than 2004 and the previous years. We're probably talking, for the U.S. in the compact camera category, in the vicinity of 15 percent unit growth. It looks to us like there could be possibly a total of 24 million units roughly in the U.S.A. market. So far, it looks to us that the numbers on the first half are coming in very, very well, not too far off of what was forecast. A little better than what we forecast but not that far. And by all indications, it looks like the second half should be a very healthy one.

Philip Scott, Kodak: I think what's interesting is, it seems like this category, this industry, has under-predicted the size of the growth every year, at least for as long as I can remember. So I think the category continues to be strong. It's not as strong, or the growth percentage isn't as great, as prior years, but I think this is going to be another year where we just under-predicted the size of the category for the full year. And the fourth quarter shouldn't taper off in my estimation.

Stewart Muller, Olympus: One area of growth which will be robust this year as it was last year — meaning in excess of 60 percent unit growth — will be the digital SLR category. And that's obviously a good place for growth, because that keeps the average selling prices up for everyone in this room as well as the retailer. There's also always talk in a maturing industry — as we reach 40 percent household penetration and a lot of capacity — that there's an oversupply of products. But there is room for breadth in this market. It doesn't necessarily follow the 80/20 rule, because the top 20 models in the industry only account for about 40 percent of the total market, whereas in some industries the top 20 models will be roughly 80 percent of the market. So there is room for breadth. Is there room for 150 compact digital cameras? Probably not. But is there room for 50 successful compact digital cameras? There probably is.

Also what's interesting is how much room there is for growth in this business. Whereas household penetration of film cameras probably peaked well above 80 percent, we're only in the 40s right now as far as household penetration. On top of that, people bought film cameras once every seven or eight years, whereas they're buying a new digital camera every two or three years. And on top of that, just like cellular phones, families own more than one digital camera, whereas maybe they had one film camera, they own two and three digital cameras.

So there's plenty of room in this U.S. market and all of the Americas for a tremendous growth in both camera phones and true digital camera devices.

Bill Giordano, Nikon: I think we've just really scratched the surface here in terms of digital photography and the opportunities that lie ahead of us. The category is growing really dramatically, and we're extremely pleased with our results so far. And digital SLRs are doing extremely well, and compact cameras have really seemed to find their place. And when my 80-year-old mother asked me the difference between digital zoom and optical zoom, I scratched my head. Something must be working here.

Ron Gazzola, Fujifilm: I think the key opportunities for growth are cameras that really speak to what the consumers are looking for. I think we're dealing with a savvier consumer. The consumer is expecting a little bit more than just megapixels. And delivering those key benefits and image quality in picture taking is what consumers are looking for.

B.J. Adams, Pentax: Obviously [the market is] maturing, and it'll grow slowly, but what Ron was alluding to, the second-time buyer, that return customer, they are a savvier customer. They are looking for unique products, something that's going to step them. I think that the digital SLR market is certainly going to grow from a revenue standpoint significantly.

Paul Zakrzewski, Konica Minolta: We're very pleased with the growth that we've seen so far this year. With the digital SLR market we're seeing that the return buyer is looking for those extra features. They're looking for that step-up to make their photographic experience that much better.

Bert Desmond, Panasonic: I think that the industry is outpacing what we initially thought it was going to do this year, which is a very positive trend. We're very bullish on the category. We see there's a lot of opportunity for growth, and we'd like to take advantage of that.