As Sales Swell, Digital Frame Makers Try to Stand Out

By Greg Scoblete On Jun 2 2008 - 6:00am

Digital frames are expected to enjoy another year of strong growth, if not the triple digital explosion the category experienced last year.

Both Parks Associates and IDC are projecting unit shipments will exceed 9 million in the United States, and Dean Finnegan, CEO of Pandigital believes growth could be higher still. "I think we'll see demand between 12 [million] and 14 million units."

Among the camera-buying public, frames are becoming a must-have accessory, said Liz Cutting, digital imaging analyst, The NPD Group. In 2007, there were five frames sold for every 100 digital cameras. To date, the average is nine frames per camera, Cutting said, with the gap narrowing to one frame for every three cameras during peak seasonal periods.

Although ostensibly a CE product, digital frames are selling just as strong — if not stronger — outside CE channels. "Department stores make up about 20 percent of frame sales," said Robert Gee, Coby marketing VP. "Frames have introduced us to those channels," he added.

"If you look at how the market is moving, mass merchants are really gaining," Cutting said. The mass-merchant channel had twice the sales growth as the category as a whole, whereas e-commerce channels only grew 25 percent, she added.

The influx of competition has placed the onus on manufacturers to differentiate their product or be lost in a sea of similarity. "The challenge is that the market is saturated with me-too digital frames, which translates into eroding profit margins for the retailer," observed Norm Levy, Media Street President.

To avoid the copy cat stigma, vendors have been exploring new iterations of the product: Earlier this year, SmartParts announced a digital frame with a built-in photo printer, while Fidelity Electronics said it would offer a digital frame with an 80GB hard disk drive, vastly exceeding the storage capacity offered on most frames. New touchscreen interfaces are emerging from firms like Kodak and Pandigital to sideline tactile controls.

Frames are also being fitted with themed mattes for weddings, birthdays or other special occasions or are slimming down to be placed on a range of novelty items such as desk mugs and key chains.

In April, the e-commerce site Pet-Urns.com staked out an even smaller niche: a 7-inch frame that doubles as an urn for animal ashes.

Content is playing a larger role in frame differentiation. Kodak recently announced that consumers could preload up to 100 personal images on select frames from its Gallery Web site. Pandigital and Westinghouse Digital are also poised to announce new content relationships this summer, while Media Street hosts a Web site where its consumers can download professional photos to their frames.

Although wireless technology is represented in a small fraction of the frames sold today, many vendors see it gaining prominence as a means of transferring images and regularly updated Internet content to a display.

"We believe Wi-Fi technology can greatly simplify the process of getting pictures back into your life and sharing pictures between people," said Larry Landry, Kodak's digital capture and devices research and development manager. The company currently connects its Wi-Fi-enabled frames to its Gallery Web site, and intends on opening their Wi-Fi frames to third party content as well, he said.

"The hurdle with Wi-Fi is that customers don't appreciate the value it brings," Landry said.

Westinghouse Digital will introduce its first wireless frame for commercial markets this month, Roque said. "As we see greater consumer demand, we'll move it over to our consumer line," he added.

Retailers haven't jumped on the wireless bandwagon yet, Finnegan observed. Although the company can bundle a Wi-Fi or Bluetooth adapter with its wireless capable frames, "none of our retailers are asking for that."

"We see wireless in the line sometime in 2009, Gee added. Coby also plans to introduce frames with a touchscreen interface in 2009, he added.

One area of product differentiation frequently lost on many consumers is the frame's aspect ratio. While 16:9 ratio panels are more plentiful, and thus less expensive than 4:3 panels, they need to crop images to make them fit properly. While most vendors believe a 4:3 ratio frame provides the best image reproduction, they continue to support 16:9 models to hit aggressive price points. "I think 16:9 is a necessary evil for retailers," Gee said.

With more cameras shooting video in HD, consumers may prefer 16:9 frames, Landry countered.

Given the relative immaturity of the category, and the potential for households to own more than one frame, the market has a lot of overhead room to grow, vendors say. To analogize the market with digital cameras, "We're only at the 1-megapixel stage today" Landry said.