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Camera Phones, Peripherals and Printing
Turn the Imaging Market Upside Down

by Dan Havlik

It was only seven months ago at a PMDA meeting in early Spring that a trio of photo industry analysts shrugged off the potential impact of digital camera phones on the marketplace, with one panel member even belittling the hybrid phones as the second coming of "the spork and the El Camino."

What a difference half a year makes.

At a recent PMDA meeting this past November featuring a different panel of experts, the talk was all about the camera phone. And with some research firms predicting that over a billion camera-enabled phones will be snapping pictures in the next three years, they sure weren't comparing them to convergence busts like "the spork."

"If you haven't heard a lot about camera phones already, wait until 2004. We'll hear a lot about them next year," said Kristy Holch, group director of the InfoTrends Research Group. "With all the pictures getting out there (taken by camera phones), it gives opportunities to everybody in the marketplace."

The timing of Holch's statement couldn't have been more fortuitous. On the same day as the meeting, the Eastman Kodak Company announced it had teamed up with Cingular and Nokia and created Kodak Mobile Service to offer camera phone users unfettered 24-hour access to their digital photos and phone-captured video. Kodak also announced it will enable its Picture Maker kiosks with Bluetooth and infrared technologies so camera phone users can "beam" their images to a kiosk for quick editing and printing. CVS Pharmacy will be the first national retailer to offer the service, starting in early 2004.

According to Steve Baker, director of Industry Analysis for the NPD Group and also a panel member, in-store printing-such as what Kodak is offering with its PictureMaker-is one of the keys to profiting in the digital market.

"[In-store printing] not only lets you sell the image, it brings people into your store," Baker told the audience at the November meeting.

Baker, who noted that he formerly worked for Staples, describing himself as "retail guy," emphasized the many "aftermarket opportunities" that digital cameras present, namely printing and storage.

"Printing is a great opportunity," Baker said. "Ink and papers are the 'tunafish' of the IT (information technologies) business."

Regarding storage, Baker was bullish on memory cards and blank CDs and DVDs. Statistics he showed in a PowerPoint presentation indicated that sales of blank CDs were nearing the 2 billion mark in units sold. With memory cards, he noted that even though the number of megabytes per card was increasing, the price remained the same. "The average price (per card) will still be $55. So even though the value of the cards is going up, the important thing to know is that those average prices are staying stable."

Speaking more generally about the digital camera market, Holch noted that overall things could be described as "so far, so good." She cited recent stats that showed 35 million digital cameras have been sold in the United States, and 70 million worldwide, noting that digital cameras have reached the point where they've "outsold film cameras in revenue and units sold."

"Digital cameras will nearly completely replace film cameras by 2008," Holch said. "There won't be many reloadable film cameras left at that time." Regarding whether people's printing habits will decrease because of digital, Holch was more optimistic than most analysts have been. A recent InfoTrends survey shows that 57 percent of digital camera users expect to print more images than with their film camera, with 75% saying the number of prints will stay the same. While the vast majority of digital images are still being printed at home, the number of people using retail as the source for their digital prints has risen from 3% in 2002 to 12% in 2003. Kiosk usage has also gone up from 1% in 2002 to 4% in 2003.

Consumer awareness that they can print their digital images at retail has also risen. In 2003, 59% weren't aware that it was an option, compared to only 39% today. "The main reason that consumers are not printing at retail is because they perceive it to be more expensive than printing at home," Holch said, while noting that the opposite actually has proven to be true. She added that consumers did believe that the quality of the images processed at retail was better than at home.

Susan Stoev, Kodak's director of Worldwide Business Research, picked up this point later in the Q&A portion of the panel discussion.

"I think it is the photo retailers game to lose," Stoev said. "The big issue is-the quality is in your hands. And that's a pretty big responsibility for consumers. If I were a retailer, I would talk about the quality you get [by going to retail] with absolutely no work."