Digital Photography: New Opportunities for Old and New Companies

Report Highlights

• Digital imaging products outperformed the U.S. conventional film camera market for the first time in 2000, with $18.0 billion in sales to the traditional photo hardware market’s $17.3 billion.
• Growing at an average annual rate (AAGR) of 12.1%, the digital market is expected to approach $32 billion in 2005.
• The consumer market segment, fastest growing at an AAGR of 20.9%, accounted for $6.2 billion in sales in 2000 and will overtake the professional segment by 2005.

INTRODUCTION

THE DIGITAL PHOTOGRAPHY "REVOLUTION"

With the advent of digital photography and imaging, there no longer is a question of if digital will overtake both film and video in the still and motion arenas, but when. In the second quarter, 2000, digital still camera sales overtook film camera sales in terms of gross revenues for the first time, and while film cameras remain far more prolific (in more than 90% of American homes), digital cameras (in just 10%), are outperforming their traditional counterparts at an astonishing rate.

In response to the seemingly insatiable consumer and professional demand for digital photography and photofinishing products and services (driven in part by the explosion of the Internet), a slew of start-ups have entered the market. What they inevitably found, however, was old standards like Kodak and Nikon beginning to flex their market muscle as well.

The ability to offer film services as well as digital photographic equipment remains a distinct advantage in this rapidly growing market, and many new, online-only startups are learning the hard way, i.e., they must backtrack into the traditional market to remain viable. This study will explore the tremendous opportunities that exist for both emerging and well-established photographic equipment and processing companies, with sales forecasts through 2005.

REASONS FOR DOING THE STUDY

This study lays the groundwork for a comprehensive understanding of the technological and market forces shaping the burgeoning digital photography market. This will enable industry entrants and watchers alike to readily evaluate the growing industry. The digital photography market currently is moving so quickly, with new product introductions and technical improvements reshaping the market on a monthly basis, it is important to gain a grounding in the market's fundamentals.

SCOPE AND FORMAT

The scope of this study encompasses projected unit and dollar sales of the digital camera market, the impact on film camera and film software sales, and corresponding effects on the traditional photoprocessing and online photoprocessing markets.

Technical discussions have been limited to basics of the digital camera component and online picture delivery markets, without detailed discussions of the mechanisms and processes that make such things as self-service kiosks, photoprocessors or camera semiconductors work.

The reader is assumed to have a basic understanding of amateur photography and the operation of simple camera equipment. No attempt was made to delve into the minutiae of photographic processes and techniques.

METHODOLOGY

Historical data was gathered from the Photo Marketing Association, Digital Photography Review and other trade sources. This information generally projected the market through 1999. Projections then were made through 2005 based on one or more of the following criteria:

• current growth trends (including average units added per year
• agreed-upon industry projections or averages of competing predictions 
• parallel growth trends, such as growth of the home computer markets and of global and national Internet populations
• individual company projections and estimates of shipments and orders for 2001, weighed against current growth trends
• online trends, i.e., growth of the digital camera and online photo processing markets were assumed to be predictable based on the link popularity of individual products and web sites; since the Internet is a primary conduit for digital camera sales, and online sales have been a strong predictor of off-line trends in the digital marketplace, online link popularity was assumed to be predictive of sales trends.

INFORMATION SOURCES

Information sources for this report included the Photo Market Association (telephone interviews and transcripts of the 2000 PMA Digital Imaging Survey), Digital Photography Review, Future Image report, Photo Finishing News, LabsOnline, CNET and Yahoo.com.

In addition, telephone interviews were conducted with Kodak marketing executives and other industry insiders to incorporate their market insights and projections into the study.

AUTHOR CREDENTIALS

Joy-Ann Lomena Reid has worked as an industry analyst for eight years, having conducted primary research on the international beverage, banking and high-technology industries.