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Digital photo market out of focus

Digital photography always seems to make everyone's list of hot technologies, but companies banking on its acceptance have yet to see the mass market crop up.

Digital photography always seems to make everyone's list of hot technologies, since photography is one of the world's most popular hobbies, but companies banking on its widespread acceptance have yet to see the mass market crop up.

Speaking this week at the NationsBanc Montgomery Securities Conference, Microsoft CEO Bill Gates said digital photography still needs to be improved, especially the printing and communications technology needed to print photos and share them over the Internet.

It could be another five years before the necessary improvements arrive, Gates added.

An elusive goal for standard digital cameras is the capability to take a photo that can be printed in the 8-by-10-inch format that "looks good by comparison to a photograph," said Alexis Gerard, executive editor of Future Image Report. There are cameras with this capability, but they still cost $800 to $900 and need to be priced at $300 dollars, he added.

While still not technically perfected, retailers expect digital cameras to sell well in 1998. The worldwide digital camera market In a recent poll conducted by Associated Research Services, computer retailers and electronic dealers were asked to predict the hottest selling peripherals for 1998. Digital cameras won, followed by handheld computers and scanners.

"It's going to be a huge market in 1998," said Gary Peterson, an ARS analyst.

High- and low-end cameras are expected to be released during the year, several industry observers have said. Olympus has already released an SLR-like camera and may release additional models. Kodak is expected to release a professional-quality digital camera in the coming weeks. Consumer models with better resolution at lower prices are also expected from these companies, as well as from manufacturers such as Casio.

Peripherals for these cameras like special photo printers will also start to sell, but sales won't really take off for a few years.

For one thing, photo-quality printers are expensive. They start at $400 and go up from there, according to Peterson. Second, they are not very versatile. While able to print in up to six colors, they are also slow and generally impractical for printing large, full-color documents. Some of the so-called "dye-sublimation" printers are actually made strictly to be used with cameras, but prints from die-sublimation printers are subject to fading, a problem that must be fixed, he noted.

Although adoption will be slow, more products are expected. Kodak is expected to release an improved photo printer in the $500 to $600 range within the first quarter of 1998.

PC companies such as Hewlett-Packard have tried to closely tie sales of digital cameras, photo printers, image editing software, and imaging peripherals like scanners to consumer PCs. Analysts think the strategy may not play very well for a mass market not ready to do photo touch-ups or picture development themselves. These peripheral-device packages are also pricey, often at well over $3,000 including the PC.

"A lot of people aren't that interested in doing it all on computer," at least not until the whole process is automated, Future Image's Gerard said. "What they care about is the pictures, not the process."

"When the digital camera market got rolling in 1996, there was a fairly strong expectation that the majority of buyers would be consumers, but certainly in 1996 all of the users were what we'd call business users," says Kristy Holch, principal of InfoTrends Research Group.

The firm did a survey last year that showed 35 percent of digital cameras were almost entirely for personal use, while 30 percent of them were used mostly for business purposes; the rest were used in both capacities. Of the home users, the study also showed 80 percent have a color ink jet printer, confirming to a degree the wisdom of HP's consumer strategy that users will eventually spring for printers too.

Many analysts think services such as photo development kiosks at retail locations will be used for printing out photos. Also, the Internet will become more popular as a delivery mechanism for sending photos to be printed--once high-speed cable or DSL (digital subscriber line) Internet access becomes more readily available.

"The standard is when digital photography becomes as easy to use as conventional photography," said Holch. "It doesn't have to cost the same. We think consumers are willing to pay more, but it has to deliver more benefit."

"A lot of people buying cameras don't have computers. For them, it will be beyond five years" before digital cameras become a viable alternative, she added.

But price will drive the market too. "My sense is that volume [sales] will drive the price of cameras down," said Gerard. Lower-cost cameras with very high picture quality should be available by the year 2000 at the latest, he predicted.