Digital Camera Schizophrenia

At the recently concluded CES, every major digital camera maker expanded the number of their point-and-shoot SKUs endowed with Wi-Fi. Many product managers told me all their point-and-shoot SKUs would include Wi-Fi in just a couple of years.

This connected feature addition is obviously a reaction to the termite-like affect smartphones are having on the digital imaging business.
 
About 687 million smartphones and tablets (a majority include cameras) were shipped worldwide in 2012, and DTC predicts there will be 1.5 billion shipped in 2017.
 
DTC estimates fewer than 135 million digital cameras were shipped worldwide in 2012, projected to drop to below 100 million by 2015.
 
Particularly vulnerable are point-and-shoot models, shipments of which DTC expects to drop from 94 million this year to just 66 million by 2017.
 
This sales deterioration could easily speed up; in the U.S., as smartphones plummet in price, smartphone owners are expected to top 60 percent of all mobile phones by mid-year.
 
To compensate for this digital camera collapse, camera makers have turned in force to higher-margin compact system models, a tactic which seems to have staunched their overall sales and revenue hemorrhages.
 
On the point-and-shoot end, however, manufacturers are flummoxed on how to compete against enhanced smartphone camera capabilities. This year, all top-line smartphone models are expected to offer 12 or 13 MP images, resolution expected to become the new normal, with more advanced camera-like face-recognition, zoom, HDR and editing features.
 
Hence the expanded number of connected cameras. Camera makers figure adding smartphone-like Internet connectivity, or even models with the Android OS, will help their point-and-shoot models compete against smartphones.
 
Except in most cases, digital camera Wi-Fi does not necessarily provide a link to the Internet for instant sharing. Instead, camera Wi-Fi provides a direct Wi-Fi link to a smartphone, to which photos can be automatically transferred and from which can then be shared.
 
But this is a Catch-22 point-and-shoot Wi-Fi inclusion strategy.
 
A point-and-shoot camera with Wi-Fi would only appeal to the owner of a smartphone. Except a smartphone owner already owns a camera with Wi-Fi – their smartphone, which takes photos that are “good enough.” Or, a standalone digital camera doesn’t take photos that are vastly superior enough to warrant carrying around an extra device and performing an extra step for sharing snaps.
 
Conversely, Wi-Fi in a digital camera would be largely useless to the largest population of potential point-and-shoot purchasers – feature phone owners.
 
So what will happen to the digital camera business? Mainstream makers may decide to completely abandon the low-end of the point-and-shoot market to drug-store brands such as Vivitar and Polaroid and concentrate instead on the more lucrative CSC product. While overall digital unit sales would continue to drop, profitability would at least stabilize.