The picture at right is the first digital camera, from Kodak (circa 1975). The first mass-produced and commercially viable digital cameras started showing up in the early 1990s and destroyed the film-camera business very rapidly -- in just a few years.
The digital camera market itself is now similarly under threat and may face the same fate as its film camera-predecessor. Digital photography won't die or be marginialized, just digital cameras.
We realized last night that my 11 year old daughter owns four digital cameras, three of which shoot video as well:
Among the four, which is the camera she uses the least? You guessed it: the actual camera.
The chief and relatively obvious cause of the demise of digital point-and-shoot cameras is smartphones. This is no revelation. And as smartphones grow to 40% and 50% of the market digital cameras will see a corresponding flattening or decline in their market. The only way for mass-produced digital cameras to survive is to become cheaper and add capabilities. Regardless their market will be shrinking and probably disappearing over time.
Smartphones now include rapidly improving cameras, exemplified by the newest devices from Nokia at least two of which have 10 megapixel cameras -- with a 12 megapixel on the way. And it's not just megapixels, smartphone cameras are gaining a wide range of upgrades to improve image quality.
You're always going to have your smartphone but your camera will be in a drawer at home. So as smartphone cameras improve and more smartphones are bought people will have a diminishing need bring along their digital cameras, though professionals and (the unfortunately named) "prosumers" will still use them. The bulk of the consumer market, however, will use smartphones as their primary cameras going forward.
CNet disagrees with me. But when you get into their argument it's all about features. Accordingly, as I said, as smartphone camera features and quality improve -- as they will in a hyper-competitive hardware market -- the people who will want a point and shoot digital camera will dramatically decline.