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Analysts: Q4 Camera Outlook Flat As Economy Continues To Sputter

10/12/2009 10:23:00 AM Eastern

Imaging analysts are predicting digital camera unit sales to be virtually flat over the fourth quarter of 2009, with one calling for 14.7 million camera sales for the period just entered. Some renewed vitality is also expected to come in the digital-SLR segment and select compact point-and-shoot models.

“The best case scenario is flat,” said Chris Chute, IDC's worldwide digital imaging solutions group research manager. “The problem this year has been the economy and the fact that the compact camera category has matured at the same time that the economy has gotten worse.”

Without making any predictions, Liz Cutting, The NPD Group's senior imaging analyst, said she has also seen camera volume trends softening in the latest 12 months, ended August 2009.

“We've seen digital camera units decline by 8 percent and dollars decline by 15 percent vs. the prior year,” she said, citing findings in NPD's consumer tracking service.

Year to date through the first half of the 2009, the digital camera market has shrunk 10 percent, Chute said. For the full year, he predicted the industry will sell approximately 37 million units, down 9 percent from 2008.

“This is a market that has been used to growing by double digits for years and years,” he added. “There's only one vendor doing very well, and the others are suffering from a year-over-year perspective.”

Chute said Nikon is one of the only vendors to have done consistently well throughout the year, and he attributed that success to a combination of the company's sustained national advertising blitz as competitors pulled back spending, and adding an assortment of value-priced compact point-and-shoot digital cameras “that look like they are more expensive than they really are.”

Chute said he expects to see “huge promotional pushes across categories over the holidays from dealers looking to avoid what happened last year.”

NPD's Cutting said that “as digital cameras get closer to saturation, features with tangible applications should help inspire consumers to purchase their next camera.”

For key selling features this holiday season, she pointed to size — where ever-smaller form factors with larger LCD screens and longer optical zooms are becoming more prevalent — in addition to “features that help consumers easily take a better picture, like image stabilization, face detection and automatic scene selection.”

Another popular addition in both point-and-shoot and digital-SLR models this year has been HD video recording, which she said “represents a clear point of difference in feature offerings from last year.”

“Last year, the HD video feature was present in only 4 percent of compact digital cameras selling through in August of 2008 and has ramped up to 17 percent in August of 2009,” she observed.

Among compact cameras priced $200 and above, HD video (nearly all with 720p HD resolution) enabled cameras represented 50 percent of all units sold in August 2009, Cutting said.

Among HD-video-enabled compact cameras in August 2009, 41 percent sold were in bodies less than 0.8 inches thick, significantly thinner than those without HD video capabilities.

“A niche of compact digital cameras marches toward the holidays in the HD video camp as a highly pocketable still/video solution,” Cutting said. “On a parallel track, we see low-end HD flash camcorders also on the rise.”

In digital-SLRs, HD video features moved from 0 percent to 38 percent of all camera models this year, she said.

As for the overall d-SLR category, IDC's Chute said the once explosive growth segment “was hit a little earlier in the year, but it looks like it should be trending upwards for the second half. For the holiday timeframe that is going to be a real bright spot,” he said, adding that the segment should represent about 8 percent of total camera sales for the full year.

Chute said he expects to see manufacturers offer a lot of holiday promotions in the d-SLR segment with some good prices on entry-level d-SLRs at around $500 “from some top players.”

He said he expects to see a lot of hard bundles being promoted, particularly d-SLRs with dual-lens kits, from virtually all of the major brands.

“Digital SLRs represent about 8 percent of the cameras in use today, so there is still huge room for growth,” Chute said. “I think in general the notion of taking better pictures, just because the camera has a much bigger lens and a much bigger sensor, coupled with the professional-looking nature of the SLR, is what is really going to drive sales.”

Chute said he doesn't see the compact camera segment being threatened at all by the growing number of advanced mobile phones with built-in cameras or by new iPod Nano products with built-in photo- and video-capture features.

“Consumers still tend to want to own devices that can do one thing very well as opposed to one device that can do multiple things just OK,” said Chute.

However, this holiday season, he said, he expects to see more finite budgets for gift giving, leading to a cannibalization effect in some compact camera segments.

“Compact cameras could be one of those categories that doesn't win compared to a new Nano, for instance, that is really attractively priced,” Chute said. “We've seen the same thing in the camcorder category for years, where when given a choice between a new camcorder and an HDTV, consumers would select the HDTV, because there's so much more usage they would get out of it. Also, the camcorder is very expensive compared to a digital camera.”

As for companies expected to be most aggressive with Black Friday promotions this year, Chute said he is looking at Kodak and Fujifilm to again lead the charge with the return of some higher-end players, including Sony and Nikon, as was demonstrated over the past two Black Fridays.

“I think we are going to see some $69.99 to $79.99 8-megapixel and 10MP digital compact camera SKUs in Walmart, Best Buy or maybe Target,” Chute predicted.

As for specific models he picks to sell well, Chute cited select models from Nikon's L Series “continuing to be very big sellers” and Fuji's J series.

“In a way they may not be the most interesting models out there, but from a gift-giving sales perspective, there is a lot of value offered in those lower price points,” he said.

As for camera market share changes by retail channel, NPD's consumer tracking research showed that from Q4 2007 to Q4 2008, the mass-merchant channel had the most share point gain among digital cameras, up 4 points to 39 percent of units, and up 2 points to 26 percent of dollars.

Yet, electronic specialty, with 25 percent unit share in Q4 2008, still outsold mass merchants in revenue in Q4 2008 at 30 percent of digital camera dollars.

“From a seasonality perspective, in 2008 both the mass merchant and the e-commerce channels had the largest proportion of their own digital camera revenue vs. market average in Q4, both at 40 percent of their total respective annual revenue vs. 37 percent market average,” noted Cutting.

However, fourth-quarter 2008 average selling prices differed greatly between the two channels, with $217 for the e-commerce channel and $104 for the mass-merchant channel.

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