November 22, 2000 10:45 AM PST

What price digital photos?

The advent of low prices is threatening to give digital cameras a bad image.

That's the concern of some analysts and manufacturers as consumers flock to buy sub-$200 digital cameras. Plummeting prices have brought the once $1,000-plus category down to a range affordable for many holiday shoppers.

But the cameras that many consumers would want to own, analysts say, still cost much more--in the range of $350 to $999. Consumers buying the lowest-cost cameras may feel more like Santa left a lump of coal in their stockings than a digital delight. Retailers worry disappointment could lead to high returns--as much as 50 percent--after the holidays.

"Prices have been falling fairly rapidly, but not rapidly enough where that feature-rich camera is going to be in the golden, $199 price point," said IDC analyst Chris Chute. "That won't happen until next year."

The promise of digital cameras is alluring: taking pictures that can be stored electronically and transferred to a PC. No film. No processing. Just instant memories that can be printed or sent to faraway friends and relatives via email.

But consumers need to keep in mind that digital capability doesn't automatically mean high-tech wizardry. As with any product, consumers must look beyond the marketing hype and apparent good deals to find the digital camera best suited to their needs. For those interested in easy, low-resolution photos for email, low-cost cameras could in fact be the ticket, but those seeking a replacement for film won't find it for $200, say analysts and camera makers.

Cheap shot
Many cheap cameras are just that--cheap. But unlike their lowest-cost film counterparts, which still take pretty good pictures, digital cameras bring

Get What You Pay For
Prices on digital cameras vary greatly, and here's typically what you get.
Bare minimum
 $200 and below
 Resolution fairly low at 640x480
 Some have higher, megapixel resolution but offer few extras
 Zoom lenses not standard
 USB connections for easy PC hookup not standard
 2MB to 4MB storage

Getting warmer
 $300 to $700
 Resolution of 2.1 megapixels, or 2 million pixels per photo
 Optical 2X and 3X zoom lenses
 USB connections
 8MB and more storage space
 LCD displays for reviewing photos
 Better flash

Digital Ansel Adams
 $700 to $1,000
 Resolution of 3.3 megapixels or better
 16MB or more storage space
 Rivals film
 Some models shoot video clips

with them a wide gulf between picture quality and price. And picture quality varies widely from camera to camera, as do features.

The bulk of the sub-$200 cameras sport a VGA resolution of 640-by-480 pixels, which produces reasonable snapshots for email and small reproductions, but not much better. "We expect we can get an excellent three-by-five picture output out of that but no larger," said Richard Pelkowski, associate product manager at Olympus America.

XGA (extended graphics array) and 1-megapixel cameras push the resolution to 1,024-by-768 pixels, which allows printing of adequate pictures up to 5-by-7 inches.

"They were state-of-the-art 18 months to two years ago," said PC Data analyst Stephen Baker. Still, "you get what you pay for, even when the old technology migrates down."

While well-known names in photography, such as Eastman Kodak and Polaroid, offer 1-megapixel cameras for around $200, many important features for a satisfying experience are missing, analysts say.

The problem is that digital cameras in this price range offer no frills, Chute said. "There's no LCD, multiflash mode, optical zoom" or other niceties that go beyond the basics, he said. "Consumers tend to give up too easy if features like USB are missing."

The sweet spot, in terms of features and performance, is closer to $350 or higher, Chute said. The low-cost models are right for "someone who is new to digital cameras or someone who doesn't care about quality very much."

Coal in the stocking?
There is no question that consumers want digital cameras and are snapping up low-cost models. While prices on 1-megapixel and 1.3-megapixel cameras are rapidly falling into the $199 to $299 range, cheaper VGA models have overrun the sub-$200 category.

PC Data found that for cameras selling below $200, models below the 1-megapixel level represented 86.5 percent of retail sales, up from 58.3 percent in August. The very cheapest cameras, in terms of price and quality, are throwaways: IDC found that promotional cameras, such as those from America Online, made up close to 50 percent of the low-end camera market.

Some retailers worry that low-cost cameras could breed excessive returns following the holidays. Several consumer electronics outlets, asking not to be identified, said returns of $99 digital cameras were running close to 50 percent.

National retailer Wolf Camera had a 50 percent return on one $149 device, said Greg Bragg, the company's vice president of purchasing. "People were just so disgusted...When you're used to seeing a picture from a still camera, and you think you're going to get that from a digital camera and you don't, it's very, very dissatisfying."

Bragg said that experience convinced Wolf to "get away" from the under-$200 price.

Learn more about digital cameras Other retailers said that returns for cameras closer to $200 varied widely depending on the manufacturer and features, but many were below 10 percent. And low-cost leader Polaroid has told analysts that the percentage of returns is in the single digits.

"Under 10 percent is pretty good," PC Data's Baker said. "This shows retailers are doing a good job of managing expectations, or consumers are getting what they want."

Olympus manager Pelkowski acknowledged that absolutely low-cost cameras do disappoint some consumers, "but I think some of them were very pleased with what they got for the money. They were digital. They were sharing pictures on the Internet."

As good as film
People looking for fairly good pictures need to consider the more costly 2-megapixel and 3-megapixel cameras, according to Pelkowski. In fact, say analysts and camera makers, the difference in picture quality between 1 megapixel and 2 megapixels is significant.

This drives the price up into the $300 to $500 range for good 2.1-megapixel cameras and $700 to $1,000 for 3.3-megapixel models.

With important features such as optical zoom, LCD displays, and resolutions up to 1,600-by-1,200 pixels, 2.1-megapixel cameras will please most consumers, said Willy Shih, senior vice president at Kodak. Beyond that, digital cameras offer quality of output and advanced features that can make them strong rivals to film cameras.

"I have some 3-megapixel shots that are every bit as good as film," Shih said.

But getting the most out of a good digital camera is still an expensive proposition. Having the right printer, even the right printing paper, can make all the difference.

"It's amazing sometimes how a good paper can make a cheap camera look better," Shih said.

 

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