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| The photography ecosystem turns upside down |
July 13, 2004 |
By Jim Harris
North american sales of digital cameras in 2003 exceeded those of film cameras, and in 2004 the same will take place worldwide, according to a study by infotrends research group.
Almost 53 million digital cameras will be sold worldwide in 2004, growing to 82 million in 2008. This is threatening traditional photography companies while enabling new ones.
To understand this trend, it is helpful to view the photo industry as an ecosystem. Film-based photography developed as an ecosystem in the 20th century, encompassing camera vendors, photo labs, companies that produced film such as Fuji and Agfa, and companies that made photo chemicals. All of these firms in the film-based ecosystem are now threatened by the switch to digital. That’s because each consumer who goes digital is one who will rarely, if ever, spend money on film again.
Polaroid, the company that defined instant photography, filed for bankruptcy protection in 2001. Kodak’s stock price has fallen from a high of US$90 per share in 1995 to a low of US$20 in 2003, while the company has laid off tens of thousands of employees. Of course, some companies are making money in photography, but their names are not those traditionally associated with the industry — Sony, HP, Casio, and others are all cashing in. Companies selling printers, such as HP, Epson and others are also making money. And the new “digital film” is supplied by flash memory makers such as SanDisk and Lexar. So there is an entirely new ecosystem emerging that is experiencing explosive growth in sales and profits.
WHAT IT MEANS
The point here is that companies, executives and strategic planners need to separate form from function in this arena and everywhere else. Basically, the function is essential, the form is not.
In other words, banking is essential but banks are not. Instant photography is essential but Polaroid is not. Today, instant photography means being able to snap a picture and send it to anyone, anywhere. Consumers have become accustomed to the immediacy of digital photography.
And just as there has been a shift from film to digital cameras, a new shift is taking place. Of the nearly 300 million digital image capture devices in use worldwide in 2004, camera phones will account for about 60 per cent, outnumbering digital cameras, according to InfoTrends. This means the new photography competitors will have company names like Nokia, Ericsson, Handspring, Samsung and Motorola. In The Innovators Dilemma, Clayton Christensen argues companies get blindsided when they pay attention to their most important customers. That seems counterintuitive, but let’s look at camera phones. The resolution of these devices is less than one megapixel. Given most consumers want only three megapixel cameras now, few digital camera producers will see camera phones as a threat. But this was the same logic that led film camera companies to dismiss the first digital cameras. Eventually, the quality of cameras in cellphones will improve, and today’s digital camera makers will realize another shift has occurred. Camera phones are already the most ubiquitous cameras in the world. Yet, the real prize in the world of digital photography now is printing. About 80 per cent of digital images are printed at home, according to studies by ICD and HP.
FALLING PRINTING COSTS
Digital photography changes the economics of photo developing. Remember how you used to develop the whole roll, and pay for all the bad shots? And then you had to go back to the store to get extras of the really good ones? This led consumers to ante up for doubles of all shots, including the bad ones. They wanted the convenience.
With digital you not only preview your photos on the camera and delete the bad shots, you can also preview them on your computer screen and do touch-ups and eliminate red eye. You then order multiple prints of your faves. The cost of prints — film or digital — at developers like Black’s Photography or Wal-Mart is about the same, but given that shooters aren’t paying for bad photos, the consumer value proposition is far, far higher. Consumers are also empowered to print photos in their homes. While the cost of a home-printed photo can be almost double what it is at a photo developer, the instant nature and selective printing capabilities are features consumers enjoy. So companies like HP and Epson are laughing all the way to the bank. But the real competition for the market is convincing users to print photos at all. I have thousands of digital photos on my hard disk and I have never printed any of them. So the real problem with the industry may be that we never actually wanted thousands of old photos we only ever looked at once, and then stuck in storage boxes. The new photography storage of the future may simply be larger hard disks. Finally, as the old film-based photography dies a slow death this decade, our environment will benefit, as fewer toxic photo chemicals will be introduced into it. So even the real ecosystem is benefitting as the business ecosystem shifts.
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