Trends

•  Megapixel counts rise as prices fall.
•  Camera phones take off.
•  Fashion drives compact digital cameras.
•  Larger LCD displays appeal to consumers’ taste for convenience.
•  New print and share capabilities expand consumers’ out­put options.
•  Digital cameras enter the wireless age.

Consumers’ passion for digital imaging continues to soar, capped off by a year-end shopping blitz that pushed factory-to-dealer sales to more than $4.7 billion for 2004. The hottest-selling holiday gift item shows no sign of growth fatigue with 2005 sales projected to top more than $5.14 billion, according to CEA market research. Unit sales are expected to jump from 18.85 million in 2004 to 24.3 units in 2005, according to CEA.

Fueling the surging growth are falling prices, rising megapixel counts, compact fashion-oriented styling and a wide assortment of photo sharing options. With household penetration at roughly 50 percent, the industry expects to see a continuation of first-time buyers along with surge of repeat buyers looking to upgrade to higher performance cameras.

At the budget end, digital cameras as low as $29 will hit stores in 2005, and entry-level 5-megapixel cameras now start under $100. Disposable digital cameras have fallen to $20 or less. Per-megapixel prices reached the low $60s at the end of 2004, a $30 drop from the year earlier. Three-megapixel cameras represent the greatest share of the installed base of digital cameras at 33 percent, but the four-year-old technology is giving way to higher resolution models at retail. In 2004, consumers jumped on higher megapixel cameras with 4-megapixel and higher resolution, which accounted for more than 50 percent of sales.

Underscoring the industry shift to higher-megapixel designs, traditional camera makers including Nikon, Olympus and Canon have abandoned 3-megapixel and under cameras in 2005, leaving low-resolution digital cameras to high-volume, mass-market suppliers and multi-function devices.

The megapixel camera phone is largely responsible for dedicated camera companies’ migration upward as 1- and 2-megapixel cameras now are found widely in camera phones and, to a lesser degree, personal digital assistants. Nokia and Sanyo underscored the growing presence of wireless companies in the digital imaging market when both exhibited 1.3-megapixel camera phones at the Photo Marketing Association (PMA) trade convention in February.

At the high end, enthusiasts are snapping up digital single-lens reflex and SLR-style cameras as fast as suppliers put them on the market. Sales of cameras in the $700-and-up category leaped 68 percent to 1.1 million units in 2004, according to CEA. Early resistance to digital photography by film purists has largely disappeared. CEA’s survey of consumers who don’t own a digital camera indicated that cost and complexity were deterrents to going digital. Only 16 percent of those who don’t own a digital camera said they preferred film to digital photography.

While digital cameras continue their rapid growth, film cameras continue their precipitous decline. Sales of 35mm cameras fell 45.7 percent through the first 11 months of 2004, and sales of one-time use cameras dropped 14 percent, according to the PMA. Digital models represented 67 percent of all still cameras sold in 2004.

Mass-Market Adoption

Advances in technology and lower prices have been an irresistible combination in luring consumers to digital imaging. CEA estimates that more than 40 percent of U.S. households now own at least one digital camera.

Cost remains a significant driver in consumer purchasing decisions, but value is high in buyers’ minds too. The $150-$199 segment represented the largest growth category of digital cameras in 2004, up 117 percent to $560 million over the year before. The budget-level $100-$149 segment saw a modest rise of 16 percent to $374 million, according to CEA. More than seven million 5-megapixel or higher cameras sold in 2004, compared with 3.78 million 4-megapixel units.

The correlation between online households and digital camera ownership is high, according to a CEA survey of online adults. Roughly 61 percent of online adults own a digital camera, and nearly 24 percent of digital camera owners in that group have more than one. While 70 percent of online adults surveyed also own a 35mm film camera, about half said their primary-use camera is digital.

According to CEA research, customer satisfaction is a high 84 percent among digital camera owners. Digital camera owners said they take the same kinds of photos they did with film-based cameras, CEA reports, but they use their digital cameras more often, averaging about 47 photos per month.