3 min read

Microsoft enters the Webcam market

Software giant eyes the growing market for quality video communications devices

Microsoft Canada admits that the Webcam market has been growing every year without it.

But the real reason for the Redmond, Wash.-based powerhouse is entering the market is not to take away marketshare from Webcam vendors such as Logitech, Linksys, D-Link and Creative Labs. Instead it says it wants to improve the user’s experience.

Elana Zur, marketing manager for Microsoft Canada, said the company surveyed Webcam users both here and in the U.S. and found there are three issues that need to be addressed.

“Webcam users were general not happy with current Webcam products. Microsoft thought it could fix all of those problems,” Zur said.

The problems are poor audio quality, fuzzy video and difficult of use.

Zur said the users polled believed the audio was similar to speaking into a tin can. In some cases Webcams did not come with any audio capabilities.

As for video quality, Zur said some Webcams produced poor video feeds in either low light or in bright light.

Users surveyed also said they were unable to maximize Webcam features such as zoom or face matching.

Microsoft’s first Webcam offering will include audio capabilities and a microphone, even in its entry-level $39 device, Zur said.

“The audio (capture device inside the Webcam) is suspended in an air chamber. So it does not touch anything but air. This allows the sound to travel through vibration so there is no distortion because there is only air,” Zur said.

The products will also come with noise cancellation microphones so a PC’s fan will not be heard in the background.

Darrel Ryce, director of technology and entertainment at Toronto-based research firm NPD Group, does not know what to make of Microsoft entering the Webcam market.

He said he needs at least three months of data before he could give a knowledgeable assessment.

However, he did say the market is experiencing some awesome growth at 37 per cent this year in Canada alone.

Up to July of this year, NPD reported that unit sales reached nearly 410,000 units. From a revenue point of view the market is up 29 per cent from January to July and has generated $23 million, Ryce said.

“The use of the Internet along with stable and more online activity means the camera becomes an important part of the experience,” he said. “The quality of the products has gotten better than ever before. The contrast in picture quality is much better than in the past.”

Leading the way in sales is Logitech of Fremont, Calif. with its RightLight 2 technology, which intelligently adapts the camera’s video settings based on the environment in which the camera is used.

According to the company, this enables users to send and receive video calls in difficult conditions such as low lighting, or intense back or side lighting.

“Logitech is the leader in this market,” Ryce added. “They are the brand leader of this category and they represent 60 per cent of all Webcam sales in 2006. The products they bring out set the standard in a lot of cases,” he said.Ryce said he was not surprised to see Microsoft come into this market. “They took a look at the growth and saw a viable industry and some good money to be made in this market. It will probably grow to $50 million in Canada for the full calendar year. Remember December is a very important buying period and it fits together into its product focus for Microsoft,” Ryce said.

Zur said that MSN Messenger is going through its own rebranding exercise and will be called Windows Live Messenger. “Video calling will be big for this and will help us develop our Webcam (business),” she said.

Microsoft Webcams have instant-on buttons for video calls. There will also be an instant-on button on its Windows Laser Desktop 6000 series keyboards.

Users will also be able to jazz up their video calls by inserting special effects such as thought bubbles. A sharing folders feature enables users to collaborate. For example, a user can send a file to a supplier through Windows Live for making changing to a PowerPoint presentation, while on a video call. You can also shoot photos and post them to a blog with the push of a button though one-touch blogging on Windows Live space through MSN Messenger, Zur said.

Prices start at $69 for a mid-tier Webcam up to $129 for a notebook camera.

The 6000 model with 1.3 megapixel video, wide-angle lens, 3x digital zoom is available today, while in October Microsoft will release the NX 6000, with 2.0 megapixel video, a retractable lens, two-foot cord, carrying case and a camera that can snap 7.6 megapixel still images.

Ryce said the Webcam market has been very good at maintaining price points, unlike other CE categories. Year-over-year there have only been slight declines. For example, this year he expects the Webcam price decline to drop by five per cent, which will translate into a $3 reduction.

“Webcams deliver basic video conferencing, and with higher quality products hitting the market I think we are experiencing that now,” he said. “I see trends through this year where more small businesses start shopping for Webcams and other products at retail. This is another category that retailers can benefit from as they use Webcams as an alternative to video conferencing products.”