A revolution within a revolution: Pixology CEO shares thoughts on printing from cameraphone images.

Pixology plc, Guildford, Surrey, United Kingdom (www.pixology.com), made its first foray into digital imaging in 1995, and has spent the past 10 years trying to stay one step ahead of an industry moving at lightning speed. Yuval Yashiv, CEO of Pixology, recently shared his insights on printing from cameraphones with a PMA 2005 audience.

"In the beginning, we were a bit of a lone voice; now, of course, the digital photography industry has gained momentum and digital cameras have replaced film cameras as the photographic device of choice. So we are joined by many on our bandwagon," Yashiv said. "Just as we are getting to grips with digital cameras, another revolution is taking place. Cameraphone sales are dwarfing digital camera sales; and we, as an industry, have to deal with that potentially huge change in consumer behavior."

Last year, Pixology launched the first service allowing consumers to print directly from their mobile cameraphones to a retailer.

"That is not via the PC or Bluetooth, but a service that will allow you or me to send an image directly--with the push of a button--to a retail store of your choice," Yashiv said.

The PhonePrint service was launched with retailers Duane Reade Inc., New York, N.Y. (www.duanereade.com), and Jessops, Leicester, United Kingdom (www.jessops.com). In both cases, the PhonePrint software was available as a download from the retailer's website. Pixology also recently launched a preloaded service on Nokia handsets with Boots Group PLC, Nottingham, (www.boots-plc.com), the largest pharmacy chain in the United Kingdom.

The state of the cameraphone phenomenon

Yashiv shared a few statistics about cameraphones from InfoTrends and Future Image:

* 178 million cameraphones were sold in 2004; it is projected that 860 million will be sold by 2008.

* By 2009, cameraphones are expected to account for 89 percent of all mobile phone handset shipments.

* The forecast is that 79 billion images will be captured by cameraphones in 2005 (compared with 8.7 billion digital camera images).

* By 2006, four of every five new digital image capture devices sold worldwide will be a cameraphone; nine of every 10 pictures taken will be captured with a cameraphone.

* 1-megapixel phones were introduced in April 2003, today, 5-megapixel phones are available in South Korea; and 6- to 7-megapixel cameraphones are projected to be launched this year.

"What is fuelling this phenomenal growth?" Yashiv asked. "It's simple. The quality of the product is improving with every new release. Image sensors, zoom, and auto-focus are all being introduced and will shortly be considered as standard for consumers."

The digital still camera market took six years to get to the same megapixel quality cameraphones have reached in two years, he noted.

"Most important, cameraphones are getting cheaper and more affordable," Yashiv said. "The higher-speed wireless bandwidth means downloading or uploading images is getting quicker, and the handsets are easier to use. So we now have easy-to-use services on affordable and really fantastically designed handsets--a definite recipe for growth and excitement among consumers."

What is most exciting, however, is the United States and European markets have only just begun to scratch the surface of this opportunity, he explained.

"Cameraphone penetration worldwide is 21 percent; and by 2008, it should reach 70 percent. The trick for us all is to be a part of that growth, and to understand consumer behavior patterns," he said. "If you have lived in Europe and witnessed the huge phenomenon of 'texting,' which completely took the industry by surprise, then you will be wise to respect the unpredictability of consumer behavior."

[GRAPHIC OMITTED]

The print solution

"For the consumer, there are numerous reasons why a print solution is needed. One of the most compelling I have seen recently is from a U.S. psychologist, who said children will be emotionally deprived without the ability to touch and feel images of themselves--it is vital for their emotional well-being," he said. "As a dad of twin boys, I feel this is reason enough to be a print evangelist.

"For the industry and retailers, it's a little less altruistic," Yashiv continued. "There are going to be 63 billion images stored on cameraphones in 2005. If the cameraphone becomes the primary image capture tool and the bulk of pictures will be stored on cameraphones instead of digital still cameras, then photofinishers must embrace this market. Otherwise, they will see their revenue streams virtually disappear."

This will be the film-to-digital headache all over again, he said. "The difference [is], the film-digital revolution took 50 years. This will take fewer than three--and that is a turnaround that will test even the fastest-moving and most nimblest organizations," Yashiv noted.

For retailers, though, the growth may be worth the pain it causes, as they attract their share of the 860 million potential cameraphone users.

Barriers to printing

Today, though, the cameraphone print market is practically nonexistent. This is the case for several reasons, Yashiv said.

"First, the consumer experience in 2004 was still poor. Most cameras in the market are submegapixel; thus, the print quality did not meet expectations," he stated. "The availability and awareness of solutions means low take up. Bear in mind, in some markets, including the United Kingdom, the marketing drive for printing from digital cameras only started in earnest this past Christmas. The next leap to mass use of printing from cameraphones is a little way off.

"Similarly, the ease of use for the majority of cameraphone users is, at this moment in time, not particularly easy," he added. "But this will change dramatically in the next 12 to 24 months."

None of these obstacles is insurmountable if retailers manage to tell and show their customers what is possible. Removing as many steps as possible from the process is also key, Yashiv said.

"Instead of manually downloading the application onto your phone, preloaded solutions are one step closer to the consumer. The fewer technical steps for the consumer, the better," he explained. "We believe, once preloaded print facilities are standard on cameraphones, then the industry will reach the crucial tipping point, where consumers will become familiar with the service and ultimately increase usage."

Incompatibility between the handset and the service provider is a major barrier.

"Handset and operator incompatibility severely limits the distribution and availability of solutions and just makes the usability of the service frustrating for the consumer," Yashiv said. "There are huge differences across network operators, and this ultimately makes it difficult for the consumer as well. There's no denying technology print providers can further simplify the process for the consumer, but there are some significant compatibility hurdles among the mobile phone networks to overcome before services can become entirely ubiquitous."

Another problem is retailers selling products they don't know much about, he stated. "You have photofinishing experts having to become experts in mobile phone retailing. Considering most are just getting their heads around the move from film to digital, this is another mighty leap. And on the other side of the coin, when have you met a mobile phone salesman who knows anything about photofinishing?"

Channel confusion urgently needs to be addressed, he said.

"For the traditional photofinishers, this is a big wake-up call. With the prevalence of specialist mobile phone retailers, who is to say the mobile phone consumer doesn't feel more comfortable entering a 'techno-savvy' mobile phone store for their print requirements rather than the traditional photography store?" Yashiv noted.

Marketing will be critical to photo retailers.

"No matter how ground-breaking your technology is, if your customers do not know it is available or how it works, then it is useless," he said. "The race has already begun. The big opportunity is for those who can stay ahead of the market, anticipate consumer behavior, and let the consumer know what they have to offer."

PMA 2005

Current camera phone penetration

Worldwide Camera Phone Penetration

              2004 *       2008 **

Worldwide      21%         70%
Europe         20%
USA             5%
Japan          64%         95% ([dagger])

Source: * AT Kearney, ** Garner

([dagger]) 85% of all new phones in 2004 where camera enabled with
50% > IMP resolution

PMA 2005

Why do print solutions work for the retailer?

* Incremental revenue--core revenue, one day?

* Foot traffic, Incremental sales, upselling

* Opportunity to sell handsets

* Connect with younger customer demographic

* Marketing opportunities with carriers--they have the money!...

* Increase output of existing photofinishing equipment--better utilisation of assets

PMA 2005

* Application that sits on the handset that can push an order directly from the handset to the retail store via a menu of stores

* Launched with Jessops and Boots in the UK in conjunction with Nokia Europe, as well as Duane Reade (NYC)