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PC cameras' future not in focus

The market for PC-connected digital and videoconferencing cameras will grow in the next five years, according to a new report, but still won't live up to its full potential.

The market for PC-connected digital and videoconferencing cameras will grow to be a $1 billion business in the next five years, according to a new report, but still won't live up to its full potential.

The home and corporate videoconferencing business will grow as a result of falling camera and component prices and active support from the software and PC industry, according to the new report from market research firm Cahners In-Stat.

However, the market for PC or "networked" cameras will not reach its potential until the corporate market fully embraces networked videoconferencing and upgrades existing computers with digital cameras, the study found.

The market will grow from $140 million in revenues in 1998 to $935 million by 2002, according to Cahners InStat. This growth will be mainly consumer-driven, since large corporate customers will shy away from costly upgrades and early adoption of videoconferencing equipment.

To date, even mainstream computer users have stayed away from using PCs to send images or video, deterred by the complex technology and the high prices for cameras and PCs. But the same factors that have driven down computer prices, namely plummeting component costs and integrated chips which perform several functions, are also driving down imaging hardware prices.

For example, high-end "megapixel" cameras which take pictures of resolutions higher than 1 million pixels were introduced to the market last year priced at more than $1,000. Today, two megapixel digital cameras are hitting the market at that price, driving one megapixel cameras below $400. These price drops will eventually result in $40 entry-level low-resolution cameras with integrated chips, according to the new report.

This consumer-friendly pricing will in turn drive sales, with the market growing sharply through 2003, according to Mark Kirstein, vice president of research for Cahners In-Stat. "Today you can get a [Nintendo] Gameboy camera for $40 which is a low-resolution camera that pleases kids, but would not be used for videoconferencing," he said. By 2001 consumers will be able to buy a $40 camera for video conferencing equal to today's entry-level cameras which can be bought for between $70 and $150.

In addition, once high-speed Internet access becomes more prevalent among households, videoconferencing will become practical for more home PC users, Kirstein said. By 2002, 45 million homes will have installed high-speed modems, the study found, which will drive adoption of network-based applications like videoconferencing. In the meantime, video email, which is less of a bandwidth hog, will remain the "killer app" for PC cameras.

"Video email removes bandwidth as a barrier, and provides some level of utility that you don't have right now," he said.

Moreover, widespread industry support from PC and software companies will drive consumer interest and adoption. Microsoft, for instance, said last week at its WinHec developers conference, that one of the major reasons it is retooling its Windows 98 operating system for an update in 2000 is to include enhanced support for digital imaging. In addition, Intel executives at the conference said increased interest in digital imaging will drive sales of high-end computers with Pentium III processors.

"I predict that editing and publishing pictures will be major growth drivers for our industry in the next couple of years if we can make it easy for users," said Carl Stork, Microsoft general manager, in a keynote speech last week at the show. Simplifying connecting the PC to the camera and the download process is an important way to make digital imaging more appealing to PC users, he said.

Along those lines, most cameras will use the USB port for connection, rather than serial or parallel ports, which are more complicated to use, the report found. By the end of 2000, 80 percent of digital cameras will be USB-compliant, migrating to the IEEE 1394 "FireWire" connection scheme after 2000.

PC companies will increasingly bundle digital cameras with their computers, the new report found, although large organizations will be slow to include cameras with new PCs and upgrade older PCs to enable videoconferencing.

In fact, the corporate market, which still makes up the majority of PC and peripheral sales, will be a major stumbling block for PC camera acceptance, the study found. Large organizations will be slow to upgrade older PCs to work with PC cameras, Kirstein said, until there is a proven return on the investment.

"Consumers buy things because they are fun or interesting, corporations move to things because there is a return on investment," he said. "The market isn't ready," for corporate videoconferencing, he added.