Lights Out For Camera Makers?

by: Shareholders Unite

Most technology markets are fiercely competitive. Companies cannot rest for a minute and have to keep producing a continuous stream of better and cheaper product. If they won't, some other company will and only the paranoid survive, as the saying goes.

The digital camera market is no exception to this, the likes of Kodak have already thrown in the towel. But things could get worse for existing producers. Already under pressure from camera phones, there are new kids on the block that promise quite a lot.

A couple of disruptive technologies, one that allows users to focus after having taken the picture. The new camera is called the Lytro, and it's already available for purchase.

These days are no easy days for digital camera makers like Canon (NYSE:CAJ), Nikon (OTC:NINOF), Sony (NYSE:SNE), Samsung (OTC:SSNLF), Panasonic (PC), Fujifilm (OTCPK:FUJIF), Casio (CASIOF.PK), Olympus (OTC:OCPNF), Pentax and Ricoh (OTC:RICOF). Their mass market products, the point and shoot digital camera's are already being made near redundant by the emergence of camera phones.

However, there are still notable quality differences between even the best camera phones and your average point and shoot, but that might be about to change.

First, there is Nokia's rather revolutionary PureView 41 megapixel camaraphone. While it has numerous teething problems (it uses old Symbian operating system, for instance) but these are likely to be ironed out. A Windows version is already in the making. Here is what PCMagazine had to say about it:

At maximum resolution, the F/2.4, 41-megapixel camera with its 5-element Carl Zeiss glass lens takes huge 7152-by-5368 images. The idea isn't to print those images, of course; it's to allow "lossless zoom" after the fact. Nokia estimates that you can shoot a picture, zoom in 3x, and still get a 5-megapixel image without damaging the picture quality. But that's not all. In 5-megapixel and 8-megapixel modes, the PureView oversamples: it combines several pixels into one, throwing away noise and greatly improving performance in low light.

The very large sensor allows for faster shutter speeds as well, as it's collecting more light than your usual camera phone. It can perform these tricks in movie mode, too, recording 1080p HD videos with 4x zoom and 720p videos with 6x zoom. The phone also has Nokia Rich Recording, a high-quality audio technology. According to Nokia, the phone records audio up to about 140db, four times louder than most other phones. That allows for distortion-free recordings of events like musical concerts.

While pixel counts do not say a whole lot, this definitely promises to be a significant step up from other camera phones and take on the point and shoot market directly. And this is not all, there is new competition coming, the Lytro. This is also a technology that is in it's infancy, the cameras that have just become available are the first commercial versions of this revolutionary technology.

Like with the PureView, the Lytro seems to have plenty of teething problems (for an extensive review, see engadget). But for a first commercial take, it's pretty good already and there is lots of room for improvement here as well. It already offers direct competition for the point and shoot market, but the real danger lies in Lytro licensing its technology to camera makers:

stories are trickling out that Lytro CEO Ren Ng met with the late Steve Jobs to discuss using the company's imaging technology in future iterations of the iPhone -- the entire interview transcript may be of interest to our readers.

Well, there can be little doubt that would not be a further severe blow to the point and shoot market. With threats from existing camera phones, and the emerging threat from the likes of the Nokia PureView and the Lytro, the camera makers basically have to retreat to the semi-professional segment of the market where they can still offer a marketable value proposition (which is much better quality pictures but with bigger, more expensive cameras).

For big technology conglomerates like Sony, Panasonic and Samsung this isn't likely to matter a great deal, but for those companies that depend on camera sales for a significant part of their revenues and profits (like Pentax and Olympus), this development would be pretty bad. Kodak has already thrown the towel in the ring.

There is some effort to make a new segment with semi-professional cameras that enjoy exchangeable lenses in a smaller package like the Sony NEX-5n, but these are still expensive and don't fit in a jacket pocket, let alone a trousers or shirt pocket.

Those point and shoot cameras could soon join the dodo.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.