Technology

The Coming Camcorder Conundrum


Sony, Panasonic, and other camcorder makers are facing a growing threat from cell phones and alternative, cheaper recording devices

A short video clip making the rounds on the Internet—"Broken Camcorder Rebuilds It's [sic] Self"—shows a dismantled camcorder swiftly and miraculously putting itself back together. If only fixing the camcorder business were as easy.

Sales of camcorders have fallen 6.7% to $785 million so far this year, according to researcher NPD. Consumers are increasingly moving away from traditional movie cameras and instead capturing snippets of video on cell phones and trying out point-and-shoot devices that cost hundreds of dollars less.

And while there's still growing demand for DVD-based camcorders, which were all the rage last year, more people are looking for alternatives. DVDs used in camcorders can be easily damaged or corrupted and must be changed frequently (see BusinessWeek.com, 9/18/06, "JVC's Everio: User-Friendly Only in Hand").

Point and Shoot and Toss

Little surprise, then, that some consumers are opting for camcorders that record video right onto a hard disk drive (HDD) rather than a disk. The switch helped JVC climb to No. 2 in the market share rankings in the past year, leapfrogging Panasonic and stepping up pressure on the market leader, Sony (SNE).

Not to be outdone, Sony also sells HDD camcorders alongside DVD machines. Sony's recently released Handycam DCR-SR80 offers 60 GB of storage, which can hold up to 14 hours of high-quality video (see BusinessWeek.com, 10/17/06, "Sony's Not-So-Handycam").

As attractive as hard-drive and other high-end camcorders may be, they're still not cheap. The DCR-SR80 costs at least $700. Many consumers are looking for less expensive, less complicated machines, and in growing numbers they're adopting devices on the low end. Pure Digital Technologies specializes in disposable, point-and-shoot, flash-memory-based camcorders. Its latest point-and-shoot model, released in October, holds up to 60 minutes of video and sells for about $129.

Stretching the Low End

It also enables quick and easy uploading of films onto Google Video (GOOG) and Sony's Grouper. Planned versions will also easily transfer video to YouTube.com, which recently agreed to be acquired by Pure Digital partner Google. "We've seen a lot of [consumer electronics] products move to hard disk drives and flash," explains Ross Rubin, an analyst with NPD. "It's all about the ease of use of [video] transfer to the PC, and capacity." Low prices don't hurt either.

Other coming Pure Digital products will be integrated with more video services, while letting users easily edit clips and burn their own DVDs at home, says CEO Jonathan Kaplan. Currently, these capabilities are only available on much more expensive video cameras.

Ultimately Pure Digital aims to stretch the low end of the ailing camcorder market. "For years, camcorders have been big and complicated," Kaplan says. "But people want easy-to-use devices. We are trying to create the same kind of revolution that has already happened in still cameras," which, with their complicated lenses, used to be the domain of professional photographers. Kaplan believes that in the next few years, the camcorder market, reaching fewer than 3 million units a year, will expand to more than 20 million devices sold as disposable and point-and-shoot camcorders proliferate.

Camcorder on Line 1

Cell phone makers are of the same mind. Companies such as Nokia (NOK) are placing big bets that consumers will increasingly use phones to record video (see BusinessWeek.com, 9/12/06, "Nokia's Call-Making Camcorder"). Nokia's N93, priced at $700, offers good quality video recording. But future phone models should offer the functionality—and, eventually, more storage—for a lesser price. The Nokia device uses removable, 128-MB memory cards.

As alternatives multiply, traditional camcorder makers Sony, JVC, Panasonic, Canon (CAJ), Samsung, and Sanyo are pushing features such as high-definition video recording to differentiate their high-end products. Available for the past several years, high-definition camcorders have just become more affordable. In July, Sony introduced several new consumer high-definition models, costing as little as $1,400. The new versions are also smaller and lighter. Many new high-definition camcorders also consume much less battery power than earlier models.

Still, cell phone camcorders and other low-end devices can't compare in terms of video quality. But they make up for it in price and ease of use—and the quality of point-and-shoot recording will only get better in time. "You'll put a video camcorder on every table at your wedding," says Pure Digital's Kaplan. And if you do, chances are you're not going to spend $1,000 per camera.

Kharif is a reporter for BusinessWeek.com in Portland, Ore.

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