Originally Posted at The Wall Street Journal
The recession is quelling consumers' appetite for two of their recent favorites: digital cameras and digital music players. As a result, discounts and deals abound.
J&R Electronics Inc. and Fry's Electronics Inc. are selling point-and-shoot digital cameras from Eastman Kodak Co. and NikonCorp. discounted to below $100. Amazon.com Inc. Wednesday was selling a General Electric Co. 10-megapixel digital camera for $180, down 46% from a list price of $336. Most entry-level cameras sell for an average $129, compared to $146 a year ago, according to IDC, a market research firm.
Digital music players, which can cost anywhere from $15 to more than $400, are also getting their fair share of discounts. Online retailer Newegg Inc. is featuring a Centon Electronics Inc. music player for $17, down 43% from $30.
Apple Inc., which has the largest share of the digital music player market with its iPod brand, typically introduces new models at lower price points instead of cutting prices, says Shaw Wu, analyst with Kaufman Bros. LP. On Wednesday the company launched a new, smaller iPod Shuffle for $79, which amounts to a $30 price increase for the device. This could help raise average selling prices or keep them flat, he adds.
While digital music players and digital cameras were the consumer-electronics industry's top holiday sellers for the past three years. Both categories experienced steep sales drops in the fourth quarter of 2008, even as overall electronics sales stayed flat. Revenue from digital music players plunged 30% to $2.1 billion, while digital-camera sales fell 4% to $2.3 billion, according to the Consumer Electronics Association. And as consumers continue pulling back their spending, both categories are expected to sink more than their peers this year, the CEA says.
Another reason sales of digital cameras and portable music players have slowed is that the U.S. market has reached a saturation point -- 77% of households in the U.S. own a digital camera, up from 55% in 2006, according to the CEA. That means that those consumers generally only buy cameras when their current one breaks or becomes too outdated. The typical replacement cycle on a compact camera is about three years., says Chuck Westfall, technical adviser for Canon U.S.A.
"That [digital camera] category has been challenged and will continue to be," says Stephen Baker, a vice president with market research firm NPD Group Inc. "In the U.S., we are clearly seeing the digital music player segment slowing and becoming a much more saturated product category, as well."
Patching Up Old Devices
Hannah Little, a 21-year-old insurance clerk in Lexington, Ky., almost always used to buy the latest gadgets. However since she graduated from college last summer and stopped receiving an allowance from her parents, she has held off on new tech purchases.
Ms. Little has owned an iPod for the past eight years and an iPod Shuffle for two years. She says she uses her Shuffle at the gym, but for the rest of the time, instead of buying a new iPod, she uses her BlackBerry Curve, which she outfitted with a $3 four-gigabyte memory card that stores music.
"Before I go out and buy something new, I try to patch things up to keep them going as long as they can," says Ms. Little. She adds that her next tech purchase will be new or used laptops, which she uses more than her iPod.
While many people used to chase after the latest gizmos, some now appear to be upgrading only in areas where technology is changing rapidly. Sales of flat-panel television sets and laptop computers remain relatively robust, for instance, as consumers move from old-style cathode-ray TVs and dated desktop computers to the newer models.
Camera makers are encouraging consumers to upgrade as well, hoping they'll trade up from their point-and-shoot cameras to higher-quality digital single-lens-reflex, or SLR, cameras, which are more expensive. Camera maker Pentax, a unit of Hoya Corp., dropped the price of its K20D digital SLR camera last month by $200 to around $800. Consumers get just the body of the camera. Lens kits run another $880 to $1,200. Another high-end offering comes from Canon Inc., which in September introduced the EOS 5D Mark II, a digital SLR camera body that shoots up to around 12 minutes of continuous, full high-definition video for $2,700.
Similarly, makers of digital-music players, such as Apple and SanDisk Corp., are focused on moving their consumers from portable players to multimedia phones, such as the iPhone. In its most recent quarter, Apple's iPod revenue declined 16%, while its iPhone sales increased fivefold.
More and more consumers are turning to the re-built market for high-end electronics like desktop and laptop computers. Refurbished Apple laptops are very popular, along with refurbished Sony laptops.
SanDisk is pushing "slotMusic" memory cards that come pre-loaded with music. Consumers can insert the cards into several multimedia phones, instantly accessing the tunes on their devices.
"We've seen the clouds gathering for a while now," says Daniel Schreiber, a SanDisk senior vice president and general manager. "The entertainment device of the future is the phone."
Waiting to Upgrade
The higher-end cameras and phones are whetting the appetites of some consumers -- but many remain reluctant to buy. Liz Abinante in Davis, Calif., has owned her Samsung Electronics Co. point-and-shoot digital camera for three years. While she covets a more expensive digital SLR camera, the 24-year-old freelance writer isn't opening her pocketbook because she's waiting to see if her landlord raises her rent in the down economy.
"If I weren't in such an 'I don't know what's going to happen in my life,' I definitely would've purchased [a new camera] already," says Ms. Abinante, who recently started attending graduate school. Now, "I would rather wait until I have more money."
