Dave Etchells: Olympus' Akira Watanabe said that 12 megapixels was enough for E-system sensors in 2009, but does this change any, now that Panasonic is offering 16 effective megapixels in their GH2? Do you see a demand for higher resolution in Four Thirds and Micro Four Thirds cameras?

Peter Ewen, Digital SLR Product Marketing Director: We still don't. We've seen some point-and-shoots at 14 and 16, but we're thrilled with the 12 on the PEN-series, and our new XZ-1 is 10. We believe that the resolution is very, very high right now, and excellent quality from the current resolutions is right on par with the consumer expectations.

Katie Roseman, Digital SLR Product Manager: And image quality is really a combination of many things. It's not just megapixels. As well as the megapixels, it's the processor, the lens. We have a combination of great technologies there that add to the excellent image quality.

DE: Video is becoming a bigger feature. Will we see full HD video in PEN cameras going forward?

Sally Smith Clemens: Right now, 720p is fine. Yes, there are a few people [talking about 1080], but do you really need it? I mean, do you really see a difference in that? Most of your broadcast television -- network shows -- are broadcast in 720p, if they’re in HD. There are very few that are broadcast in 1080p. If you’ve got digital HD, like Comcast, and you look at the pixel dimensions, very few of them are in 1080p.

DE: So people are saying, “Oh, I have to have 1080,” but you're saying that they don’t realize that they may not really need it?

Smith Clemens: Yeah, absolutely, I think it’s certainly something that Olympus will be looking at. Is it possible to increase the spatial resolution of the HD video capture? In doing that, there are so many other things that have to change to be considered – like the processing power of the device. And that costs a lot to ramp up, and that cost is transferred to the customer. So it’s a balance of finding what’s the best possible combination of features and settings that we can offer today to satisfy the needs of our customers at a price they can afford.

DE: With Micro Four Thirds being such a primary focus of your products now, what's the future of the standard Four Thirds platform? Is the E-5 the last full Four Thirds body, or will we see more evolution on that in the future?

Ewen: The most amazing thing for us has been how incredibly well the E-5 has been received. All the way from our end-users to our in-house people that use the camera in a graphic arts situation, we've seen enlargements from that sensor on large Mac monitors -- it just knocks everybody's socks off. Everybody is thrilled and overjoyed with the quality and the response and the acceptance that the E-5 has had out on the market. As a matter of fact, we're selling it at a faster rate than we had anticipated. So we've got a great, loyal following with Olympus shooters. They've had nothing but praise for the E-5. As you know, we're also working with a lot of the PEN product, which has an adapter -- the MMF-2 -- which lets you use all the existing Four Thirds lenses. So, although I'm not privy to the future models or plans for the Four Thirds product, I can tell you that we're offering in the market right now an unbelievable product in the E-5 that I think took everybody by surprise, and pleasantly so, including its HD capability. Also, to address the other question about HD video, I do want to point out that we were fortunate to have the PEN used in the filming of a Disney movie, "Secretariat," this past year. It was at 720p, and the producers of the movie actually had to crop and add some film grain effect to our end images, to match what was being used for the rest of the shoot.

DE: So they had to degrade the quality of the PEN video to match what the film looked like?

Ewen: Right. So that was quite a thrill, to see and hear about that.

DE: So it sounds like on the standard Four Thirds platform, that you're seeing such a strong response with the E-5 that it's probably a safe bet that that line will continue? Manufacturers respond to what the market's asking for, and it seems like the market's asking for continued evolution on that platform?

Ewen: I agree with that statement, 100 percent.

DE: On a related front, mirrorless cameras have been hugely popular in Japan, it seems like less so in Europe and much less so in this country. Do you see that changing? How do you see that evolving with the U.S. consumer in the mirrorless, interchangeable cameras like the PENs?

Ewen: Well, while in the U.S. we're at a high single-digit market share, in Japan, I've seen NPD numbers that apply a 40 percent market share.

DE: Wow.

Ewen: Yeah, amazing. Less than that, but still a high number in Europe. We've always seen the European and the Asian numbers higher and ahead of the U.S. market. The challenge is that the U.S. is a big country, and it's very hard to do a nationally broadcast campaign on what the PEN products are about. As you know, we ran a television commercial in the May-June timeframe. The cool thing about the commercial -- and the punchline -- was that the commercial was "filmed and shot with the PEN." We then followed it up with our presence at the U.S. Open in August. At the U.S. Open, we were all pleasantly surprised to be milling around the Olympus booth, and to hear people come into the booth saying, "Do you have the camera that shot that TV commercial?"

So, people are getting it. It's just a lot of ad money to get a lot of people to get it. But we're working at a steady drumbeat of progress towards nationally exposing the product. To that point, the more the merrier -- bring 'em on in. We've got Samsung, we've got Sony, we've got other players -- Panasonic -- in this space that's smaller than a traditional SLR, but with higher image quality than a standard point-and-shoot, and a lot of people want that. They just don't know -- or are not as aware of it -- as they could be. We have national accounts under the same challenge; I'll use Best Buy as an example. They have a beautiful display set up to highlight the mirrorless product of the Olympus E-PL1 and the Sony NEX-3. So even Best Buy recognizes, "Hey, this is a new category. We'd better help spread the word on what this product is all about."

Roseman: And one of Olympus' goals is to continue to grow that category, to develop tools and materials to further educate.

Ewen: When you have a product that is 40 percent market share in any part of the world, others are looking at that -- including other players; everyone's looking at that saying, "Wow. That's not just four percent, that's 40 percent. Something is up with this category, what's it all about?" And you find your photography aficionados, like the five of us in this room, that say, "I'm on vacation, I'll just take the E-PL1 with the 17mm around my neck. I don't even know I'm carrying a high quality camera." I wouldn't find myself doing that with a camera like an E-5, so it's really bridging areas where we haven't really ever been. Does my mom, does my neighbor know about this product? I think we need to do national advertising, more national exposure on this product.

DE: That’s interesting. What can you do to increase the acceptance? It sounds like it's fundamentally an educational issue.

Roseman: One of the big things that we did from an education standpoint, that we implemented with a lot of our dealers, is we actually went at store-level as well as a lot of material in print or online distribution, where we’re putting displays into stores to demonstrate the system. So, it’s really calling out how different this product is, and what the advantages are of choosing this type of product. It’s been very successful, and we’ve implemented it in almost 400 stores in the United States at this point, not including Best Buy. So we’re going to continue doing that.

Ewen: Yeah, so it’s a display with the camera, a couple of lenses, a couple of the accessories, and sometimes in a store like a 65-store chain like P.C. Richard, we have a Plexiglass dome put over that. It’s kind of like, “Wow, what is that? What’s this all about?”

DE: This gets a little bit to the megapixel race. We’re curious what research you might have in terms of usage of pictures, and what sizes are people printing at? To what extent do consumers print, and what sizes, and how much are they cropping? Do you have any data on that?

Ewen: I was at an NPD event last night, and that was one of the questions. Unfortunately, there’s fewer and fewer people printing -- it’s amazing. And just looking around at my friends in the company, and family, a lot of it’s accepted as output, just by putting them on your Facebook page. So absolutely, printing is an issue. However, there are a lot of these picture books. Certain national accounts have offers where you buy a camera, you get a free picture book. Olympus has just gotten involved with a business process called "[ib on the net]", and that’s all about uploading your pictures and places to store and make output, make the photo books. The photo books are a really cool idea.

DE: Can you expand a bit on what you mentioned; that a lot of things are just going up on Facebook. That kind of answers my next question, maybe, which was, what are you seeing in terms of picture usage trends, and how might that influence your camera designs going forward?

Roseman: One of the things that we see is something that I actually do very much now, because I will admit, I am not of the printing generation. I selective print; I do do some books, and things like that, but it's very selective and it's usually some gift-giving thing; it's not like an everyday printing thing for me. One of the things that's really cool is the in-camera slideshow, so when using the PEN, for example, HDMI output, plug it into your TV, and put the camera in slideshow mode. I'm showing my mom and dad, who normally forget their reading glasses or do like this: [squints] with my pictures; they can see it on my 52" flatscreen and I can fade in and fade out, I can play them clips, I can play clips of movies, and they're watching my vacation in the living room right there.

Smith Clemens: And that's not just on our high-end product, that feature is on our entire product line. Really, starting back in 2009, when we introduced the PEN camera, and then that type of output capability, being able to output to HDMI to flatscreen TVs, or the ability to add sound to slideshows like a multimedia device; that technology had kind of migrated down into some of our consumer products as well. So, when you ask about how the design is influenced by the way consumers use the product, a lot of it has to do with observing how our customers want to use the product, and then adding functionality to accommodate those applications by the users.

Roseman: Another great example of that is our new Spring product line, because you know, 3D TVs are really hot right now. Are you physically going to a store saying, "I have to have a 3D camera?" Not necessarily. But the camera is providing content now, because 3D TVs are out there, and more and more people are buying them. At least now, we are developing product that has that content capability.

Smith Clemens: We have three cameras that we just announced that you can capture 3D images, and display them on a 3D device, whether it's a computer or your new 3D flatscreen.

DE: Talking about usage, and social networking being huge -- what are you doing to help your camera users cross that bridge from the camera up to the social network?

Smith Clemens: We've just announced an accessory for the new E-PL2, called the PENpal, which is a $79.95 Bluetooth transmitter, a very small and inexpensive device, available at the end of January. It slides onto the hot shoe and into the accessory port on the E-PL2, and allows you to send images straight from the camera to your smartphone wirelessly, so you can upload them right away to your blog, your social sites -- Facebook, Flickr -- or email them, whatever you want to do. And that offers the ability to share images now, rather than having to use your phone exclusively for that, I think it's a big advantage for fans.

DE: A question on lenses, now: I don’t know to what extent you can speak on upcoming products, but will be seeing more Micro Four Thirds lenses from Olympus in 2011?

Roseman: Well, one thing that I'd like to talk about from the E-PL2 perspective is the new 14-42mm kit lens. It is the same focal length as the original 14-42mm kit lens that we saw in the E-PL1, but we've integrated new technology in it called MSC, which stands for “Movie & Still Compatible.” The biggest thing about this is not only the auto-focus speed, but the silence of the lens. We saw MSC with the 9-18mm and the 14-150mm, as well as the 40-150mm, but now we're offering this technology in a kit lens as well. And this is key, especially now, because we talk about consumers and matching product to what they're using it for. You know, video is in, that's what they're doing, they want to capture video now. The MSC technology offers what's needed for video so you don't get buzzing noises in your movies.

Ewen: And with that single lens now in our arsenal, we have three additional converters to put on the front of that lens to get macro, fish-eye, or wide-angle. So there are actually four new optics that came out of CES with the E-PL2 product; it's like a four-in-one kind of a thing. Absolutely, to your point -- the drawing board's always up, and we're always trying to carve out, as the market grows, additional lenses.

Roseman: Plus we're identifying with these lenses. Consumers are getting more knowledgeable about things like fish-eye lenses. I mean, an 8mm fish-eye is a sweet lens. I'm sure you've had an opportunity to try it. Now this is an opportunity to take fish-eye and put it in the hands of a customer at a reduced price point, so someone who's stepping into this type of system, they're going to have a chance to do some cool things with some neat glass as well.

Smith Clemens: So, while we have a well-established line of Four Thirds lenses that we've developed for our SLRs, from 14mm to 600mm, we have also established a very strong line of lenses for our Micro Four Thirds product, from 18mm to 600mm. Most recently, with the introduction of five new MSC lenses -- the lenses that are optimized for video -- in just the last year, and then here at the show, three new accessory lenses: the wide-angle, the fish-eye, and the macro auxiliary lenses that will attach to existing lenses. We've been very busy.

DE: 2009 was a tough year, 2010 seems like it's been getting a little better. What do you see happening in 2011, from an economic standpoint? Where’s the economy going?

Ewen: I think inventories at the retail level are a little heavier than anticipated. I think sell-through is a little lower than the manufacturers anticipated. We're all in this together. It's a big economy, and we're all hoping for a little bit of a spark-up. The good thing is, you're seeing a lot of new product at a show like CES, so we're all still gung-ho and pedal-to-the-metal.

Smith Clemens: That, and I think consumer interest is higher than it was last year. So I think we're going to see that have an impact on the existing product sales into 2011.

Roseman: And the economic outlook is seeing an increase in consumer spending, so we're definitely hoping to capitalize on that.