Pure Digital not flipping out over a little competition

The success of Pure Digital's original Flip Video has launched a slew of copycat products, and Pure Digital CEO Jonathan Kaplan embraces it.

"It makes me even more proud of the team," he said in an interview this week. "Imitation is an absolutely fine form of flattery. I'm happy every time a competitor launches a new product."

Kaplan's sunny outlook on the competition likely stems from the relative lack of success they have had. Electronics makers much larger and longer-established than the San Francisco-based maker of tiny flash-based digital camcorders--like Sony and Kodak--have attempted to cut themselves a slice of the market. But none has tapped into the almost inexplicable appeal of the slightly boxy, plasticky handheld video camera with the pop-out USB arm, which gets a refresh on Thursday. Plus, now that Cisco Systems has agreed to purchase Pure Digital, the company will have an even bigger platform to stand on.

"We haven't seen significant erosion (of market share) from some of the bigger names that have entered, such as Sony, Kodak or RCA," said Ross Rubin, director of industry analysis for The NPD Group. Besides jumping into the market later, Sony's WebbieHD and Kodak's Zi6 are rendered less convenient and sometimes more expensive by either not including a USB connector or additional memory cards, according to Rubin.

As of February, Pure Digital's Flip cameras were the top selling of similar devices that cost $200 or less in its category, followed by Aiptek, which makes the A-HD camera, Taiwan's DXG Technology, RCA, and Sakar, according to NPD. Though NPD doesn't give out retail data on individual companies, Kaplan claims Pure Digital sells "under 10 million" Flip cameras worldwide per year. That's actually good enough to be the No. 2 seller of digital video camcorders in the U.S., regardless of price, putting them right behind Sony.

Now the device that basically invented the $200 flash memory-based digital camcorder category is getting some tweaks in an attempt to keep competitors at bay. The Ultra model, first introduced in 2007, is branching off into two devices: the Ultra II and the Ultra HD. The biggest change is the addition of high-def recording capabilities to the UltraHD. Video is shot in 30 frames per second (fps) and encoded at 720p, the same resolution as high-definition sports broadcasts. The 8GB of internal flash memory allow up to two hours of recording. It also gets a slightly larger, 2-inch LCD screen, and a soft touch coating, and now has the option of charging via the pop-out USB arm or by removable rechargeable batteries. It will be available at Amazon.com, Best Buy, and Wal-Mart on Thursday for $200. See CNET's full reviews of both new Ultra devices here.

The Ultra II is essentially the same, except it's not HD, and has just 4GB flash memory and therefore a cheaper price tag at $150.

All the changes made to the Ultra line are things Kaplan says he's been nagged by customers to change. Many parents are using it as a kind of "brag book," and want to playback video directly on the device and a 1.5-inch screen wasn't cutting it, he said. And adding HD was a must: "People are all upgrading their TV sets and want high quality" for video playback at home.

But while he's OK with competitors copying his device, Kaplan says he's less inclined to reciprocate. The main feature Pure Digital's products do not have that others, like Toshiba's Camileo, do: 1080p high definition recording. And there are no current plans to add that any time soon.

"We don't think 1080p provides a tremendous value to the consumer. It wouldn't be better than 720p," he said, likening it to the difference between a 10-megapixel camera and a 12-megapixel camera. In other words, the average consumer wouldn't be able to tell the difference nor necessarily need it for at least another two years, he said.

"That's not to say you don't display 1080 on your TV, but you don't display at 1080 on YouTube," which is the main destination for most videos filmed on Flip cameras, he said.

The next big thing on the agenda for Kaplan and company is integrating into new parent company Cisco. The deal is expected to close later this year. Once that happens, Kaplan says there are definitely "networked" Flip video cameras in store, as well as new ways of moving that video through various consumer devices around the home in a way that will demystify the process that can be intimidating for many consumers.

"The consumer has traditionally been afraid of video," Kaplan said. He thinks being hooked up with Cisco will bring a fundamental change to the industry, causing him to make a rather bold promise: "The way Apple has revolutionized music, we will revolutionize video."