Report: Digital cameras approach critical mass

This Christmas marks the first time Digital Cameras approach consumer critical mass. Once solely considered a toy of the affluent technophile, the format's inherent appeal, increased features, and lower price point, all aid in its growing momentum in the computer peripherals market.

According to the mid-year Technology User Profile report, the number of PC-using households with a Digital Camera increased almost threefold from this time last year and while those numbers mean extremely good news for the industry overall, no vendors are in a more favourable position than the two market leaders; Sony and Kodak.

The latest numbers from StoreBoard show Sony and Kodak locked in a virtual tie for first place this month, separated by less than a percentage point in unit share. Together, they account for 60-70% of the entire Digital Camera market, depending on the performance of their closest competitor, Olympus. If we take a year-to-date view, however, Sony is the clear leader with an average share of 37% to Kodak's 26%.

So how did two seemingly disparate companies -- one a global electronics powerhouse, the other a name synonymous with the word "camera" -- come to dominate this fledgling industry? True to their form and strengths, each took different, but effective paths to create consumer demand and ultimate sales success.

Sony did it, ironically, by hedging its bet on an old technology -- the lowly 3.5 floppy. The simplicity of a floppy factored with its enormous installed base produced a winner. Right from the start, Sony was on top with its Mavica FD7. Its early success is a testament to the floppy disk; its ubiquity allowed a less painful transition to a new technology and removed a sufficient amount of risk in the early adopter's mind.

Judging by the resounding crash into the top 5 in its first month out, Sony's new FD81 looks to extend an already successful product line. The floppy is still being used to solve current-day problems. Not enough speed or bandwith to send pictures to the family? Just mail ‘em the disk. On the road a lot? The floppy oozes portability, so camera to laptop is a snap.

As for Kodak, it had an initial, built-in advantage in its strong association with the practice of taking pictures. Like an entrenched technology, brand recognition and respect in a field helps to overcome the risk in adopting a new technology. How many of us still say we're "Xeroxing" something?

But because name can carry you only so far, Kodak knew it couldn't rest on its laurels and put out just any camera. It was one of the first to come out with a "mega-pixel" consumer model, while continuing to support a wide range of products that cater to the entire gamut of consumers; from the imaging professional to Joe Consumer who simply wants an easy way to share pictures with his family.

Kodak is also establishing strategic relationships with other market leaders. Its recently announced partnership with Dell computers will greatly expand Kodak's exposure as well as capitalise on Dell's online e-commerce strengths.