When digital cameras hit the mass market in 1997, consumers couldn't get enough of them. Within nine years, nearly 300 million digital cameras were sold, and half of all households in the U.S. and Japan owned one, as did 41% of all European households, making digital photography one of the fastest-adopted technologies of all time. Such dramatic change comes at a price: the icons of photography as we knew it tumbled. Polaroid went bust in 2001. Kodak stopped making film cameras in 2004.

Now, however, it's the sellers of digital cameras themselves who have to worry about possible extinction. With the summer photo-snapping season in full swing, market-research firm IDC is predicting that consumers in Japan and Western Europe will buy fewer digital cameras this year than they did last year (in fact, the numbers already declined in Japan in 2005). Around the world,

404 Not Found

---

nginx/1.14.0 (Ubuntu) they'll purchase only 10% more cameras than a year ago — 103.2 million versus 93.8 million. That's nothing, considering that in 2005 sales jumped by 27%, in 2004 by 51% and in 2003 by 73%. "We're reaching a saturation point," says Chris Chute, an analyst with IDC in Framingham, Massachusetts. "Some of the weak vendors below 8% market share will have to reconsider their place."

The big picture is one of a shrinking market: IDC predicts that global growth will soon vanish as sales flatten in 2009 at 111.1 million cameras, and then begin to sink in 2010. Things look even soggier through the revenue lens. Retail prices will plummet as they always have, especially as consumer-electronics powerhouses like Samsung, Panasonic and BenQ flex their distribution muscles to grab at market share from the other vendors ahead of them — Sony, Kodak, Olympus, Nikon, Fujifilm, HP and Casio — and from leader of the pack Canon. IDC sees an end to revenue growth for the foreseeable future, as the 10% growth in unit sales will translate into only a 2.2% boost in revenue, to $33.3 billion, after which industry sales will drop 2.6% to $32.5 billion in 2007.

The strain of a shrinking market has already forced at least three notable vendors out — Konica Minolta exited last spring, selling patents and assets to Sony. Kyocera shuttered its camera business in 2005, two decades after entering the photography market by buying Japan's venerable Yashica Camera Co. and its Contax brand. And Toshiba all but stepped away in 2004. How, then, are other digital-camera vendors going to eke out a living? It won't be easy: two weeks ago, Kodak reported a $282 million second-quarter loss, almost twice that for the same period last year. Low industry-wide profit margins mean that competing on price will be difficult. Consumers can already buy a decent camera for as little as $80. Although iSuppli, a California-based research firm, says the cost of producing a camera will continue to decline, those cost reductions won't keep pace with plummeting consumer prices.

If vendors don't want to compete on price they'll have to distinguish themselves in other ways. In the heyday of digital-camera sales, all they had to do was improve a camera's image resolution, measured in megapixels. But now that the march of the megapixels has advanced to at least five or six on most point-and-shoot cameras — a level above which the human eye can't spot improvement — vendors are scrambling to compete on other features.