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Photoxels Report on Digital Imaging

Updated April 22, 2003 Reports by the Photo Marketing Association (PMA) and Infotrends confirm that digital cameras has almost safely landed across the Chasm: "At the end of 2002 approximately 23 million U.S. households–nearly 20 percent–owned digital cameras. During the life cycle of a technology, a new product is often considered to have reached the early majority – or the mass market – after achieving 22 percent penetration." more [pdf]...

Is the digital imaging revolution here yet?

In a couple of months, the first sure signs of Spring will appear in the buds on the trees. The weather will get warmer, and we will start hearing the squabbling chirps of birds in the morning again. Just as the return of Spring comes announced by subtle signs, the adoption of new technology by the mass market also comes with its own signs.

The Chasm and Digital Cameras
Geoffrey Moore of the Chasm Group popularized the Chasm Theory. In his classic books, Crossing the Chasm and Inside the Tornado, Moore explains the adoption curve of new technology. The idea has its roots in a model called the Technology Adoption Life Cycle. At the introduction of a new technology -- in our case, the digital cameras and digital imaging technology -- only a handful of enthusiastic consumers at first adopt it: these are the early adopters or innovators or Technology Enthusiasts.

Technology Enthusiasts are willing to buy new technology for technology's sake, i.e. even when it is not mature yet and costs a bundle. They love being the first to own the latest and are willing to find ways around the deficiencies. In digital camera forums, Technology Enthusiasts are fiercely loyal to their digital camera of choice and bristle at any hint of criticism about their camera. They find ways around its deficiencies and are the less objective among the crowd. Asking advice from a Technology Enthusiast is the greatest mistake a new consumer can make because the advice is rarely balanced.

Next, the Visionaries see how adopting this new technology can give them an edge over their competitors. They are willing to change the way they do things to get that advantage. These are our professional photographers who can quickly figure out the cost savings of using digital instead of film. They are willing to invest in the latest professional models costing in the tens of thousands of dollars. Only the best will do. After all, their livelihood depend on their equipment. You will rarely, if ever, find them in digital camera forums. They are just too busy using their equipment as opposed to talking about them.

Then, there is The Chasm. If a new technology becomes popular enough, Visionaries start to lose interest (because as it becomes mainstream, it loses its competitive edge), but the mainstream is not yet willing to adopt it. If they do, they choose the market leader, relegating all other competitors into the chasm, never to become a leading market force. If there is no clear market leader, the mainstream may never adopt the new technology, and the latter dies in the chasm. This is fortunately not the case for digital cameras and digital imaging. The mainstream has seen the incredible value of this new technology and has started adopting it en masse. We see this phenomenon everyday in digital camera forums in questions asking which digital camera a newbie should buy. They don't want to get bored with technical details -- just tell me who the market leader is, they ask.

The market leader(s) cross the chasm and enter The Bowling Alley. Here, they target one main market segment first (the lead bowling pin) with the strategy of expanding their market afterwards (the other bowling pins). In the consumer digital camera market, digital camera manufacturers that have successfully crossed the chasm are Canon, Fujifilm, Minolta, Nikon, Olympus and Sony. Their digital cameras are the best and selecting between one or the other keep consumers awake all night trying to figure out the advantages of one over the other. In the professional digital camera market, digital camera manufacturers that have successfully crossed the chasm are Canon and Nikon. Competition is fierce, and reputations are at stake.

Other camera manufacturers that are poised above the chasm are Konica, Leica, Panasonic, Pentax, and Toshiba. Sometimes, it looks like they may just cross the chasm, but it is too early to tell if they will. Other manufacturers sell digital cameras that are more comfortably filed under the 'toy' category than that of serious digital cameras. In fact, today, almost any one can put the electronics together, slap a plastic lens on, and sell a 'digital camera.' Consumers, beware!

Notice, that even though some manufacturers may not make it across the chasm, the technology itself has! In other words, digital imaging technology is here to stay -- it has successfully made it across the chasm and adoption by the mainstream has started.

The camera manufacturers that have made it across the chasm can expect a windfall as the mainstream adopt their digital cameras en masse. They will soon be inside The Tornado, reaping the reward of their effort to be innovative, original and quality conscious.

That is why we see Olympus moving its hugely popular line of Stylus cameras into the digital age. The message to its Stylus owners are clear and loud: 'You loved our Stylus film cameras, you'll love our Stylus digital cameras!' We can expect to see more and more camera manufacturers abandon their film cameras to concentrate on their digital offerings. We can expect to see standards battle rage on as camera manufacturers fight over which storage media standard, which lens standard, which image sensor standard -- if any -- becomes mainstream.

Storage Media Standard
If there is a storage media standard, the de facto winner is CompactFlash (CF). However, not all the market leaders use CF. While Canon and Nikon use CF, Fujifilm and Olympus digital cameras use the xd-Picture Card (xD) and/or SmartMedia (SM) card; Minolta uses SecureDigital (SD); and Sony uses its proprietary MemoryStick (MS) storage media cards. It is interesting to note that the other digital camera manufacturers poised over the chasm mostly use the SD standard. Since the professional dSLRs all use CF, it is logical to say that CF is the de facto standard.

The lure of the other storage media cards is that they are smaller, sometimes much smaller, than CF, thus allowing digital cameras to be smaller. This is an important factor as a new trend toward ultra-compact digital cameras (such as the Sony U20 and Pentax Optio S) is starting to become popular among an important segment of the point-and-shoot market.

Sony's MS earlier this year faced a crucial survival test when it was superceded by the new MemoryStick Pro (MS Pro). As of writing, the MS Pro is incompatible with all of Sony's existing digital cameras, except the F717 Cyber-shot. The MS had disappointingly maxed out at 128MB for a long time -- and fans continued to purchase its digital cameras when Sony promised larger storage sizes. When it at last came out with the incompatible MS Pro, it suffered a backlash from consumers, with many vowing never to trust Sony again. It was not so much that the MS Pro was incompatible with the existing digital cameras but more that Sony gave the impression for a long time that larger storage media was coming for those existing cameras. Consumers have a right to know about the incompatibility issue much earlier, and many feel there is an element of deception in Sony's marketing strategy. Though Sony should be able to absorb the loss of some disgruntled fans, it was certainly a gaffe that could have cost its reputation. The MS Pro comes in 256MB, 512MB and 1GB sizes, and Sony has already announced replacements for its existing digital camera models.

Image Sensor and Lens Standards
Cameras never had a lens standard. Nikon, Canon and the other camera manufacturers all had their own lens standard with third-party manufacturers providing cheaper models for corresponding brand name models. Digital cameras, with their image sensors that are smaller than the 36x24 mm film size, optimally require lenses made for their smaller size. There is an opportunity to standardize image sensor size and thus lens mount. This would be an incredible development and mean that consumers could at last buy camera bodies and lenses from different manufacturers.

To that effect, Olympus proposed its Four-Thirds System (4/3 System) as a standard. The 4/3 System makes a whole lot of sense, but, as usual, it is easier for the countries in the United Nations to agree with one another than to get camera manufacturers to agree on a standard. We have yet to see the 4/3 System in any existing or announced digital camera, not even one from Olympus.

Canon introduced a full-frame CMOS image sensor (full-frame as in 36x24 mm) in its top of the line EOS 1DS professional digital camera. The use of a full-frame image sensor means that any Canon lens can be used with the 1DS. Now, professional photographers who had invested heavily in Canon lenses could switch to digital and reuse their expensive Canon lenses. Canon is in the bowling alley and has successfully hit the first pin.

Nikon, on the other hand, has yet to announce a similar full-frame entry for its professional models. In fact, all announcements from Nikon give the impression that it has decided to stay with its smaller image sensor, and develop specialized lenses for it. Smaller lenses mean smaller digital cameras, which consumers seem to prefer, so there is logic behind Nikon's madness. However, as far as the professional digital camera market segment is concerned, they are not going to be happy having to part with their expensive investment in Nikon lenses.

Nikon is also in the bowling alley, but it is obviously going for a strike; it wants to hit all the pins at once. Whether Canon's or Nikon's strategy is better remains to be seen. Canon has obviously taken the advantage, and Nikon risks alienating its current 35mm film camera professional users by not introducing a full-frame image sensor digital camera targeted to them. If they have to switch lenses, why should they stay with Nikon? If Nikon does not show loyalty to them, should they? Nikon's strategy, unlike Canon's, in fact allows its professional users to choose to not stay with it when they switch to using digital cameras. It is indeed a very dangerous strategy that Nikon is pursuing.

To summarize: Yes, the digital imaging revolution has arrived and adoption by the masses has started. Canon and Nikon are the two market leaders, but surprises from the other camera manufacturers cannot be discounted. Watch out especially for Fujifilm, Minolta, Olympus and Sony. In storage media cards, CompactFlash (CF) is the de facto standard for the professional digital cameras, but in consumer digital cameras, the other storage media cards will proliferate since consumers do not seem to have any loyalty for one or the other (as long as they are affordable). Standard in image sensor size is dead on arrival, and a standard lens mount is therefore a dream that will not come true. Canon's strategy in the professional digital camera market segment seems to be on target; Nikon's strategy in this market is fraught with danger. Down one notch, in the prosumer market segment, Nikon's strategy seems to be the correct one since smaller lenses mean smaller and lighter digital cameras, which consumers seem to prefer.

If you have any comments about this report, we will be glad to receive your feedback.

Y
Contributing Editor

Readers' Feedback:

"Digital cameras, with their image sensors that are smaller than the 36x24 mm film size, optimally require lenses made for their smaller size. There is an opportunity to standardize image sensor size and thus lens mount."

Image sensor size or film format size has nothing to do with the design of the lens mount. Or, the thought process here has not been completed.

This makes no sense as the film format size is a standard among all 35mm cameras. Lens mounts were different because each camera manufacturer "had a better idea."

Also, there is/have been Nikon based cameras from Kodak. The new Kodak is full-frame based on the N-80. So Nikon is in the position of having someone else do the R&D and they still make money selling the body to Kodak & more lenses.

Sounds even smarter than Canon's approach.

-- Steve (Feb 24, 2003)

Editor: Correct, I should have explained myself better. It is the 4/3 System that is proposing a standard in both image sensor size AND lens mount. One does not necessarily derives from the other.

BTW, you may wish to correct this line in your report: "Fujifilm and Olympus digital cameras use the xd-Picture Card (xD) and/or SmartMedia (SM) card." FujiFilm uses CFII/Microdrive in the consumer s602 camera, which was released early 2002.

-- Chris Wolff (Feb 24, 2003)

Editor: You are absolutely correct! As you will have noticed, on Photoxels we currently cover only consumer digital cameras and so I missed the prosumer specs of the S602. All the consumer digital cameras from Fujifilm use either the xD-Picture Card or SM, with the newer models standardizing on the xD-Picture Card. The Fujifilm S2 Pro is based on a Nikon body and uses SM/CF II.