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Shift to Digital Girds Camcorder Pricing

Camcorder unit sales will likely remain flat year-over-year, while consumers continue their steady migration toward digital products, especially DVD camcorders, in increasing numbers, according to camcorder makers.

The shift to more expensive digital products has propped up the overall dollar volume of the category despite the relative immobility of unit sales, but it’s an open question whether the dollar volume of the category will remain flat or drop slightly this year, said Linda Vuolo, camcorder products director, Sony.

“Average selling prices [ASPs] have stabilized, but I think unit and dollar sales will be flat at best,” she said. Vuolo credited DVD camcorders with both propping up ASPs and with bringing in new customers to the market “attracted by the convenience of DVD” to keep unit sales from declining steeply.

The remaining sales are going to consumers looking to upgrade analog or older digital camcorders and are helping to drive the purchase of higher-cost technology such as higher megapixel units.

“We expect about 5.5 million units and don’t see anything that would change that significantly in either direction,” said Dave Owen, consumer video general manager, JVC.

Despite the static macro-picture, segments of the markets are flourishing. There has been healthy growth in two higher ticket items, DVD camcorders and in 3-CCD units, said Rudy Vitti, national sales manager, Panasonic.

“The big growth has been, and will continue to be, in DVD,” Vitti said.

Consumers are also responding to novel features such as recording in the 16:9 aspect ratio to better display their home movies on their new high-definition televisions, said Jeff Fochtman, product manager, Hitachi.

While analog models continue to lose ground before the advance of digital products, Vitti noted that enough of a price delta exists between analog and entry-level digital products to justify keeping a small line up of analog camcorders on store shelves for the near term.

“VHS-C is down 50 percent from last year, and we’re looking at an 80-20 split of digital to analog products in the market this year,” Vitti said.

“The consumer keeps talking with his wallet, and even though entry-level digital products have come down about $100, we’re still not hitting that entry, entry-level customer,” Vuolo said.

The camcorder market is also “under siege” from digital still cameras — whose video features have advanced significantly in the past year — and from a “general saturation in the market,” said Chris Chute, senior analyst, IDC.

“I think better video capture on digital still cameras, and on the multimedia products, have hurt us,” Fochtman said. “When a consumer goes into the store and is deciding between a high-end digital still camera or a camcorder, they’re buying the still camera.”

“It’s a cycle,” Owen said. “A new technology will come out and push the market up a little — then it flattens. New technology is the key for growth.”

All manufacturers noted that the impact of HD video won’t be felt until, at a minimum, late 2006.

“The industry is in a transition to new technology and the newest is high definition. I think that will help increase the overall size of the business,” Vuolo said. “When that happens exactly, I can’t say.”

“I just look at the numbers from CEA: 20 million households will buy an HD set this year. To me, that’s the real movement to watch,” Fochtman said.