Today Cisco announced that it will shut down its Flip Video division, essentially writing off a $600 million investment into the consumer video market that never really panned out.  While Cisco’s execution in the consumer electronics space was certainly flawed, it’s hard to blame the networking giant for Flip Video’s demise.

Back in March 2009 when Cisco acquired Flip Video maker Pure Video Technologies, Flip Video cameras filled a huge gap in the low end of the consumer video market.  With prices in the sub $200 range, decent video quality and easy downloading through a convenient USB dongle, Flip Video cameras were much less expensive than traditional consumer camcorders, and much easier to use.

But that all changed in September of 2009, when Apple released the iPhone 3GS, the first iPhone with the ability to record video.  Over one million iPhone 3GSes were sold in the first weekend that the device was released.  While neither Cisco nor Pure Video Technologies released official sales figures for the Flip Video camera, it’s likely that the installed base of the iPhone 3GS eclipsed the installed base of Flip Video cameras within a few months of its release.

More importantly, the iPhone 3GS filled the void in the consumer video market that Flip Video filled so nicely.  The iPhone 3GS made it easy to not only record video and download video onto a PC, it also made it easy to email video or post videos online.  In short, the iPhone 3GS made the Flip Video obsolete, eclipsing the compact video camera in terms of convenience and connectivity.

Cisco did release a higher quality version of its Mino Flip Video camera in 2010, but this was far too little, to late.  Cisco also failed to add wireless capabilities to its Flip Video line, giving the iPhone 3GS and iPhone 4 a huge advantage in terms of video connectivity.

It appears that Flip Video was already doomed when Cisco acquired Pure Video Technologies in 2009.  Flip Video was a stop gap solution for the low end of the consumer video camera market – and this stop gap solution became obsolete once video cameras became a common feature on smartphones.

This reminds me of another market that Apple killed:  netbooks.  Like Flip Video cameras, netbooks filled a void at the low end of the consumer notebook market.  But with the release of the Apple iPad, the need for a low-end notebook deteriorated quickly, and there’s no question that the netbook market has declined substantially from its heyday a year or so before the launch of the iPad.

So what’s the next market that will likely be threatened by the quickly improving capabilities of smartphones such as Apple’s iPhone?  The digital point and shoot camera market seems like another possible victim of the ever expanding capabilities of smartphones.  Many smartphones released in the past year have high resolution cameras with LED flashes that can take decent, if not spectacular pictures.  Perhaps more importantly, smartphone cameras make it easy to post pictures to Facebook or send pictures via email, a feature that digital camera manufacturers have struggled to implement with much success.

With a new crop of smartphones with 8 megapixel cameras, some of which have 3D picture taking capabilities, being released soon, it seems like the low end point and shoot digital camera will have a hard time sustaining market share.  While there’s no question that DSLRs and micro 4/3 cameras have found a space at the higher end of the consumer photography market, I wouldn’t be surprised if growth in the low end of the consumer digital camera market slows to a crawl over the next few years.

We all know the moral of the story here:  consumers will sacrifice quality for convenience.  It’s more convenient to use an iPhone as a video camera, particularly since the iPhone makes it more convenient to send video to others.  Tablets are a more convenient answer to the low end PC market, as well – the absence of long boot times and Windows 7 running on a slow Intel Atom processor is a big plus.  And we all know that many consumers will trade off a bit of quality for one less device to carry, a key threat to point and shoot digital cameras.

While Apple may not always be the grim reaper for stop gap technologies – Android phones and tablets are equally, if not more capable of replacing redundant devices – it seems clear that demand for niche, lower end devices will be increasingly filled by the ever increasing capabilities of smartphones and tablets.