Digital Trend Challenging Camera Makers (Newspaper Article)

Apr 9, 10:42 PM EDT

Digital Trend Challenging Camera Makers

By HANS GREIMEL
Associated Press Writer

OKYO (AP) -- They are some of the most legendary names in photography.

Minolta scored the world's first successful auto-focus, single-lens reflex
camera. Fuji invented 1600-speed film, once the industry's fastest. Nikon's
fabled F-series made the 35 mm camera the picture-taking workhorse for the
last half-century.

Now the companies share a more dubious distinction: abandoning part of the
business that made them famous.

Camera makers have battled to adapt to the digital revolution for the last
10 years, but recent retreats by leading brands underline how the industry
has turned upside-down.





With interlopers like Sony, Panasonic and Samsung capitalizing on their
high-tech know-how, traditional camera makers and their black scrolls of
film may soon join 19th-century daguerreotypes as museum-shelf curios.

In just the past few years, digital cameras have catapulted from
cutting-edge novelties to mainstream must-haves. But with the market poised
to plateau, more players are chasing fewer opportunities and the old guard
is losing out.

"It's inevitable that many of the camera manufacturers in the market today
will be either bought up or go out of business," said Ed Lee, an analyst
with InfoTrends Inc., a U.S.-based market research group.

More than three-quarters of all cameras sold today are digital, and digital
images are expected to account for 90 percent of all professionally taken
photos by 2010, compared with 70 percent now, according to InfoTrends.

Camera buffs were stunned in January when Konica Minolta Holdings Inc.,
which traces its roots to 1873, said it was quitting the camera business
altogether - digital and film - and selling its digital assets to rival Sony
Corp.

Nikon Corp. said the same month it would stop making seven of its nine film
cameras and concentrate on digital models.

Fuji Photo Film Co., which plans to cut 5,000 jobs, changed directions last
month announcing it would spend nearly $8.5 million to diversify into
pharmaceuticals.

Europe's biggest film maker, Germany's AgfaPhoto GmbH, couldn't adapt at
all; it's now bankrupt and liquidated.

Meanwhile, Antonio Perez, who is leading Eastman Kodak Co. through a
four-year digital remake, has warned that Kodak, the pioneer of
point-and-shoot photography, is now "at the worst possible place" after a
$1.03 billion third-quarter loss.

Kodak, which is cutting up to 25,000 jobs, is the third-biggest digital
camera maker worldwide, behind Sony. But Kodak was slow to shift its focus
to digital, quitting the black-and-white paper business only last year.

Die-hard film fans in groups like the Konica Minolta Photo Club mourn the
passing of an era.

"Some members are very sad because they've been using Minolta for a long,
long time," club liaison Tadashi Hasegawa said. Some club benefits are being
phased out, including discounts on used camera gear.

Many of the big names in photography were once startups in their own right
as they rushed to market in the 1950s with the advent of 35 mm cameras,
undercutting and stealing market share from European makers.

Now they are the ones having difficulty adapting to the technology used in
digital cameras: image processing chips and sensors called charge-coupled
devices, or CCDs, which capture light and transform it into digital signals.

"In today's era of digital cameras, where image sensor technology such as
CCD, which we don't have, is indispensable, it became difficult to timely
provide competitive products," Konica Minolta spokesman Minoru Ikehara said.

Some names, such as Kodak, Nikon and Olympus, farm out manufacturing of
digital cameras to high-tech firms with expertise. Sanyo Electric Co. and
Taiwan's Premier Image Technology Corp. and Altek Corp. are among the ghost
makers.

One key exception is Canon Inc., which successfully made the transition from
film by investing heavily in digital technology.

Canon shipped about 12.6 million digital cameras in 2004 to lead the world
with a 17 percent market share, according to U.S. market researching company
IDC.

The company has leaned on marketing to make sure consumers don't forget its
well-established brand name amid the onslaught of digital newcomers, IDC
analyst Chris Chute said. Thus, Canon's camera division accounted for only
35 percent of the company's overall sales last year, but 42 percent of total
operating profit.

That performance has helped Canon record six straight years of record
earnings and boosted its president, Fujio Mitarai, to cultlike status in
Japan, where he was recently tapped to lead Japan's most powerful business
lobby.

Global shipments of digital cameras are expected to peak at 92.7 million
units this year, then start declining due to market saturation, according to
IDC. That means a smaller pie to divide among even more producers.

Traditional camera makers like Nikon are hoping to keep a toehold in
high-end digital SLR, or single-lens reflex, cameras. They are favored by
professionals, use interchangeable lenses and tend to have higher profit
margins.

But newcomers like Matsushita Electric Industrial Co., which makes Panasonic
products, are already unveiling their own SLRs.

Meanwhile, camera-equipped mobile phones are crowding the low-end,
point-and-shoot market.

And Hewlett-Packard Co. plans to further undercut Kodak and Fuji by
supplying retailers with kiosks so customers can simply plug in their
digital camera's memory chip and instantly print pictures. Kodak is
currently the world leader in this field, with 75,000 kiosks, but HP says
its system will be cheaper because it's based on inkjet technology instead
of dye sublimation.

"What you're starting to see is a big shakeout in terms of the folks who
have decided to invest in photography, and the folks who've decided to
diversify and stay and the folks who have decided to leave," Chute said.
"Now we're in kind of unknown territory."

Despite the digital push, amateurs and artists who have shot on film since
they first picked up cameras may never completely turns their backs on it,
insisting that film still has the edge in lifelike depth, better resolution
and more natural contrast.

Even today, film is still favored in education, portraiture, fine art and
even in fashion, where many photographers still shoot in film but scan the
images into a computer to take advantage of digital manipulation.

"The fact is, people prefer film," said Steven Brierley, sales director at
Ilford Photo of Britain. "The look and feel of it puts it on a different
level to digital output."

Hideki Fujii, director of the Nippon Photography Institute, a Tokyo-based
photo school, echos the sentiment, even though his school has spent nearly
$700,000 in the past five years to upgrade to digital computer labs.

"I use both, but I can put my heart into film," Fujii said. "I don't think
we'll ever see it totally disappear."


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