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Analog Camcorder Market Shrinks Before Digital Surge

Thanks to rapidly falling prices on entry-level digital models, the analog camcorder market has experienced a sharp decline in sales over the past year.

According to Port Washington, N.Y.-based research firm NPD Group, analog camcorder unit sales fell 34 percent in the month of February vs. the same time in 2003. In that same period, digital models filled in the gap, growing by 34 percent.

“There’s not a lot of future left in the analog market,” said Stephen Baker, IT research director, NPD Group. According to his firm, 2001 camcorder unit sales skewed analog, accounting for roughly two-thirds of the market. By 2003 it flipped to two-thirds digital, and the gulf will only widen in 2004 and beyond, Baker said.

Vendor model lines reflect digital’s growing dominance. Sharp pulled out of the analog camcorder business in 2002, while Canon offered its last analog model in 2003 and discontinued its analog product line for 2004. The remaining competitors, Sony, Samsung, JVC and Panasonic among them, have scaled back the analog offerings in favor of more expansive digital lines.

Sony introduced two new Hi8 models for 2004, while JVC has two VHS-based models in the line. Samsung offers a single Hi8 model for 2004, while Panasonic cut a SKU from the 2003 lineup, leaving two VHS-C models for 2004.

Of the remaining analog market, the Hi8 format rules the roost with about two-thirds of the unit sales through 2003, Baker said.

Sharp discontinued its analog line because it was no longer profitable, said Mark Knox, director, digital media devices, Sharp. The usual culprit, steep price compression, was to blame, Knox said. “MiniDV prices really squeezed the analog business.”

New technologies, such as solid state video recording, either onto hard disk drives or flash memory cards, and optical DVD-burning will drive the final nail into analog’s coffin, Knox said.

Mitchell Glick, assistant manager, product marketing, Canon, said he expects the digital market to account for roughly 70 percent to 75 percent of all unit sales by the end of the year. It was that market reality that led the company to discontinue its single Hi8 SKU.

“Consumers are catching on with all things digital, and the camcorder market reflects that,” Glick said. “The price compression on the entry-level MiniDV side has made digital a more attractive offering for consumers.”

The last Hi8 model Canon offered in 2003 sold for a suggested $299, while its current entry-level MiniDV piece, the ZR60, is retailing for only $100 more at $399.

“When you look at what you’re adding for $100, it just makes sense to go digital,” Glick said.

For Sony, which is still offering two Hi8 models in its 2004 lineup (CCD-TRV128, CCD-TRV328), that price differential is even smaller: its high-end Hi8 analog model (328) retails for $299 while the DCR-TRV260 entry D8 piece retails for $349. However, Sony will continue to offer analog models so long as it “addresses consumer’s needs,” said Linda Vuolo, camcorder products director, Sony. The low prices have continued to keep these models competitive, she said.

Sony has also continued to integrate new technology and features into its analog line, even as the category in general shrinks. Its 2004 models feature “significant design changes” in addition to Sony’s new “Easy HandyCam” mode (found across its entire line) and a new battery read-out.

“If you had asked me five years ago where I thought the market was headed, I would have thought we’d be all digital by now, but analog continues to play a role,” Vuolo said. “There is still business to be had, though the overall pie is smaller.”

Rudy Vitti, national marketing manager, optical group, Panasonic agreed. “The low price points for analog still makes this category attractive to a segmented audience,” he said. He compared the analog camcorder market to another eclipsed technology, VCRs.

“Both are dwindling, but there are still a lot of consumers who see the analog camcorder and VCRs as good value buys,” Vitti said. However, once the analog-digital price gap closes “there will be little reason for the consumer to buy analog.”

JVC’s GM, consumer video division Dave Owen, credited analog’s endurance to mass-merchant traction. “We will support the category for years ahead as long as it’s viable in mass distribution.”

Owen noted that, bucking the trend, one Super VHS model , the GR-SXM260 with LCD screen, is up in units through the first quarter of the year thanks to competitive pricing.

But the analog market’s hold on low prices won’t last forever, and with momentum clearly behind digital formats, the writing is on the wall, said NPD’s Baker.

“The trends are clear, the future is digital and with the advent of newer technologies like optical models and solid state [hard-disk-based and flash memory], the momentum will only grow,” Baker said.