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Some are banking on the digital slr (or dslr) — a digital version of classic single-lens-reflex cameras. Photo enthusiasts pay a premium for slr cameras because they equate them with quality: slrs let users add different lenses, and are known for capturing more light and for snapping exactly what the photographer views through the finder. Canon and Nikon, both strong slr players from the analog days, are leading the charge.

Sony, too, is moving for the first time into dslrs with its Alpha dslr A100, which hit the market in July. The camera uses slr technology Sony acquired from Konica Minolta, and is selling for around $1,000, lens included. Companies think the dslr will whet the appetites of gadget lovers who will eat up higher-margin aftermarket treats, like lenses, flashes and cases. Sony, for one, offers 21 lenses for its new Alpha.

Skeptics say that dslrs are a false hope, because most people consider them too complicated, big or pricey. IDC pegs them at around 4% of the market today, growing to only around 5.5% by 2010. Fujifilm, which in January overhauled its camera division to offset declining profits, is avoiding entry-level dslrs altogether because, notes Fujifilm U.K.'s director of photo products Adrian Clarke, the market is "fiercely competitive."

Instead, Fujifilm is banking on the printing business, a strategy that stems from its heritage as a film provider. Sales of its "minilab" printing equipment to British retailers such as Tesco, Boots and Jessops had been reliable for five years, at about 600 units per year. But in 2005, those numbers halved. The company says that major retail customers no longer needed to buy new minilabs, so Fujifilm is now promoting "in-store ordering terminals" to new customers as part of its "print at retail" push.

Kodak, too, is relying heavily on the printing business. Jaime Cohen Szulc, general manager of Kodak's camera business in Europe, the Middle East and Africa, points out that people print only about 28% of their digital photos, a long way from their habits with film, when folks often printed two copies of every shot. Kodak is selling products that allow printing at home; its EasyShare printer, for example, lets you connect your camera straight to the printer. Kodak makes money not so much by selling printer hardware, but by selling the paper and ink cartridges, which carry higher profit margins than consumer-electronics goods.

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nginx/1.14.0 (Ubuntu) Companies also hope to persuade mobile-phone-camera users to print out their shots. "For the entry level, the mobile is taking more and more of the digital-camera market," says Kodak's Cohen Szulc. There is some silver lining for the industry. Vendors are looking to emerging markets such as Brazil, Russia, India and China. And even in the mature Japanese, European and U.S. markets, a lot of people still do not have digital cameras. IDC analyst Paul Withington in London says that household penetration levels are far from the 70-80% that the industry reached with film cameras. "It's down to the vendors to try to stimulate that growth," says Withington.

That means that consumers are in for a treat of more features at lower prices, as camera makers constantly improve their wares. "It's all a ridiculous affirmation of how capitalism increases selection for low price," says IDC's Chute. Creative destruction, you might say; we'll see how many camera companies survive it.