On Digital Camera industry...

Even Annie Leibovitz, a famous American photographer, has proclaimed that the iPhone 4S is now her compact camera of choice. I own a Samsung Galaxy S2 and the 8MP sensor is sufficient to capture my precious moments straight out of my pocket. The increase in the interest for sharing pictures, whether it is Facebook, Twitter or Instagram further strengthens their respective position, leaving compacts (which have no access to Internet) in an awkward position, questioning their own purpose.

The demise of point-and shoots

During 2011, the sales of compact cameras dropped by 30% compared to 2010 (quote). Although manufacturers have been implementing innovative ideas such as wireless updating or a wide range of auto and scenic modes, they must surely be seeing the end of their journey. Minox, a German optical equipment manufacturer has announced in January 2012 that it would be pulling out of the compact camera market (quote), Polaroid is slowly shifting towards software, having abandoned instant cameras and films in 2008 and Kodak, one of the pioneers in photography and digital image, has filled out bankruptcy documents. The compact digital camera is a dying breed. As much as some people dislike photo sharing applications, it is undeniable that they have attracted a massive audience that now seek picture-taking opportunities at every corner. And smartphone cameras will only improve from now on. Just look at the Nokia 808, which has a 41MP sensor. The question is, what is next for those players, who are still in the game? There are several choices the companies can take and we will look at them individually, however, a lot depends on the fact whether the company has the required competences to capture the market.

Declining market strategic alternatives

First of all, the company can choose a market segment, turn it into a cash cow (within the boston growth matrix) and harvest on it until the market dries out completely. The acquired capital could then be re-invested in either innovation or different products within the portfolio, for example lenses and optics.

The second one, which I see as a more feasible one, is to focus on a niche, which is camera enthusiasts. This market has traditionally been dominated by dSLR cameras, especially Canon and Nikon (if I omit the more expensive brands, like Hasselblad). There has traditionally been a major gap between compact cameras and dSLRs, whereby people did want the benefits of superior quality offered by dSLRs, but without the bulk.  And this is where the new format, hybrid or mirrorless cameras, come in. While Canon and Nikon have been focused on innovating within their more traditional field i.e. sell cameras and lenses, companies such as Panasonic Lumix, Olympus and Sony have shifted their competences in making consumer electronics, combined them with the marketing abilities and gained foothold in the hybrid camera market. Nikon did recognize that they have missed their opportunity and tried to enter with the majorly underperforming device, Nikon 1 J1. Whether Canon managed to make one, we are yet to see, however, it will be interesting to see how they combine it with the emerging trends in the photography industry. Can the hybrid camera, with its increased portability, interchangeability of lenses and relatively high quality of pictures be a ‘one-camera-for-all? Probably not in the near future. The cameras are still of relatively high costs, while people may not be aware of the added benefits, as of yet. Furthermore, the portfolio of devices, as well as the arsenal of lenses and accessories is not so wide to attract the more serious amateurs or camera professionals. 

The third (and final from me) option that camera companies could take is to divest the compact camera market and focus core competences on different activities and markets. Canon and Nikon could shift their expertise in lenses into medical industry or laboratory equipment (not to say they are doing badly per se, but they might find themselves in a more challenging environment if the hybrid systems get a more solid foothold). Furthermore, they could partner with smartphone manufacturers and produce internal lenses for those cameras, which could surely improve the quality of smartphone photography and increase marketability of the products, seeing OEM branding opportunities. Nokia has already been doing this with Zeiss for a few years, creating themselves a solid reputation and quality-camera-phones. 

The Future of the Camera industry?

It is interesting to see how this industry is going to develop. Despite traditional point-and-shoot loosing their market share, the increasing popularity of photography through different social media platforms will definitely increase the customer requirements for cameras, creating optimistic scenarios for hybrid camera manufacturers. Many professional are already looking after hybrid cameras as a complementary to their gear (and possibly a replacement in the future). 

The current compact camera market is stagnating and it is in need of more innovation. The state of the market will depend heavily on the competencies and capabilities of the current players and how they will behave once the competition intensifies. The hybrid camera systems seem optimistic and it looks like more cameras are jumping on the bandwagon. Samsung recently announced the NX series and there is a rumour of Canon introducing theirs (which, in combination with their lenses, could be a mouth-watering combination). Another aspect where more development could be in the future is the integration of social media itself into the cameras. Most of the latest cameras already have touchscreen capability, hence combining that with wireless capabilities could allow users to automatically upload pictures to social media platforms or even post-process pictures straight away on their devices like on smartphones.

In my opinion, only those with the long-term expertise such as Canon and Nikon and those with substantial financial backing will survive, as they will have the capability to drive innovation ahead. How the market will look like in a few years time, we are yet to see.