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Digital-camera makers change focus

The target market is shifting away from early adopters as digital-camera makers drop the price and increase the quality of their products.

A new market is developing for digital-camera makers.

Shipments of digital cameras grew to 15.1 million in 2000, a 130 percent increase over the previous year, according to a new report from market researcher IDC. By 2005, the total number of shipments is expected to hit 39 million annually and should be helped along by several trends, according to Chris Chute, an IDC analyst who wrote the report.

"The target audience is changing from the early adopter to the newbie--those that feel that the price and time are right to buy a digital camera. And manufacturers are adjusting their game plans to address them," Chute said.

This new segment is a large potential market, and manufacturers are already conjuring up plans to make such buyers customers for life.

"Up until today, market penetration has only been around 5 percent," said Nancy Carr, Eastman Kodak vice president of digital imaging. "We want to get at the other 95 percent, and we're going to do that by addressing (resolution) quality, price and ease of use."

Services, such as online photo storage, will also play a key role in keeping these new customers coming back for more. The services can also be a source of returning revenues for manufacturers.

"There is definitely money to be made in services," Future Image analyst Paul Worthington said. "Once a camera is sold, there can be more money to be made off of services than the camera itself."

In order to make the bait more appealing, manufacturers have been lowering prices on cameras.

There was a concern last year that the market was concentrating too much on price and not enough on picture quality, leaving customers with a bad impression of digital photography.

"Last year was damaging to the market because consumers thought that the pixilated pictures they got from low-end cameras were what digital photography was all about. But that's changing," Worthington said.

During the holiday shopping season, Hewlett-Packard got a boost in camera sales as it began shipping the PhotoSmart 315, a 2.1-megapixel digital camera for $299.

HP was the seventh largest camera manufacturer in the third quarter last year, according to IDC. By the end of the year, the company had moved up to the No. 4 spot. The PhotoSmart 315 accounted for nearly 75 percent of HP's digital-camera shipments last year, IDC noted.

"These 2-megapixel cameras for $300 are just good enough for the average consumer. And for $300, they're in the range of SLR cameras and they won't break the bank," Worthington said, referring to a single lens reflex cameras.

"Other manufacturers saw what was going on at HP and have jumped on the bandwagon," Chute said.

SiPix has been shipping a 2.1-megapixel camera, the SiPix SC-2100, since late February for $279. This month, Fuji Photo Film released a 2.1-megapixel camera, the FinePix 2300, for $279.

In early May, Kodak will begin shipping the DX3500, a 2.2-megapixel camera for $299.