The Silence From Nikon

Given Nikon's silence on new camera products for almost a year now, look what's happening with this spring's camera buying. NikonUSA really only has two cameras that are generating any big dollars for the company, and for opposite reasons: the inexpensive and always on sale D3400 and the can't build enough D850. In the UK and Europe, Nikon raised the price of a number of products only to immediately offer cash back sales, which makes it look like they're on sale.

A number of you objected when I earlier wrote that Nikon needed to put out a D500s (and a D5s and D5x; but let's just focus on the more affordable D500 here). Your arguments tended to be that we didn't need another "lightweight" update. 

First, would it have really been all that lightweight? Add the D7500's better touch capabilities to be best in class in handling. Add the D850's focus shift and silent photography features to be best in class in feature set. Pioneer one new thing—I'd suggest adding C1, C2, and C3 to the Exposure Mode settings—and you'd have more than enough to issue the press release that says "the best APS-C camera on the planet just got better and retains its lead over the others. More useful features, and now handles better than ever." 

Add in Dynamic 9-point and the other two group AF settings from the D5, and the D500s would still be the mini-D5 anyone can afford and well ahead of the competition. I'm betting that the R&D costs of doing all those things I just mentioned would have been minimal. They require virtually no changes to the camera body or manufacturing process, and there's probably no significant internal changes, either. It's all firmware—and maybe some more internal memory to store that—for the most part. How much would such an effort really cost?

Instead, we have a fairly lame "get a battery pack and a slight discount" deal going on instead of a renewal of product leadership (see this companion article). And, of course, the UK higher-price-but-on-sale thing. When I look at retail sales numbers for the D500, what I see is that it has been slowly sliding lower and lower into irrelevance. The excitement is gone. And with that, the dollars. 

Note also that the product upsell in the DX line is also damaged. While everyone complained about the features that were taken out of the D7500, the D7500 still has a better touchscreen implementation than the D500 (plus it has C1, C2, and C3). It comes close to matching the D500 in key features and matches it in image quality. Which means that you need to push the D500 a little further upscale to justify the price differential, not reduce its price so that it's closer to the D7500 in price. 

Now I know that this is just me voicing lessons learned over a long career in Silicon Valley versus a whole building in Tokyo full of accountants, analysts, and Japanese CES-trained staffers. Yet I'm pretty sure I'm right and they're wrong. They'll argue that they're "optimizing the net ROI across a product line." I'll argue that you have to be careful what you measure if you measure narrowly, because that's what you'll achieve. When everything becomes an ROI cost decision, you're also making an assumption the public won't notice and it won't affect anything else in the buying cycle. I'm telling you—and I'm 100% confident in this assessment—that public perception has turned against Nikon. Thus, each new cost reduction or missing product update becomes a negative on overall ROI as people don't update or worse, sample or move to other brands.

Underlying Nikon's decision not to create a D500s is probably this: the D500 didn't sell as well as they thought. Oh, initially it lit a fire. That first 25k units flew out the door. After that, things got much more difficult. But that, too, is Nikon's own fault. Beyond cutting back on marketing and advertising in that period after the D500 got its foot established, we have the issue of lenses. The D500 became popular with sports and wildlife shooters on a budget, and those folks just used existing lenses. Indeed, the budget go-to is the D500 with the 200-500mm f/5.6. Unfortunately, sports and wildlife shooters are just a subset of the full range of shooters. The rest of the bunch? Hmm. No real lens set to match the camera (buzz, buzz). 

Worse still, the D850 effectively rendered the D500 irrelevant other than price. In essence, shooting DX on a D850 is the same as shooting DX on a D500 in pretty much every aspect. There's nothing unique about the D500 any more other than price.

The word I get out of Tokyo is that top management is effectively now saying "no" to most anything the Imaging Business prototypes or suggests. They want to see immediate and clear ROI on anything, and there are just too many open variables with clear costs in the path of virtually anything Nikon's camera group might want to put out.

The DL cancellation was the first clear indication of top management saying no. DLs weren't cancelled by imaging management. They were cancelled because soft sales projections and high known costs didn't square with top management. Let me remind you: the topmost management at Nikon currently consists of: 2 managers mostly with semiconductor equipment experience, 7 banker, life insurance, and financial side managers, and 2 former imaging group managers. And for those two former imaging group managers: one went on to run the healthcare side of the business, while the other spent the last decade in corporate planning. For a company where 50%+ of their sales still come from the fast-moving camera business, this seems like an incorrect balance of management, to say the least.

You may remember me writing about Nikon's approach to mirrorless and possible models to launch late last year or early this year. That, too, apparently is undergoing the same tight scrutiny for potential ROI that the DLs got. I've heard at least two stories now where the directors pushed back on the Imaging group, and mostly because of costs. There won't likely be any new ILC camera introduced before fall, and even come Photokina there are still indications that nothing is set in concrete. This isn't because things haven't been designed and prototyped. I believe it is because product plans aren't getting past top management.

Nikon is doing the opposite of what I learned to do. First, generate the excitement and volume. Then make sure you can drive costs out to produce the profits. Nikon is currently in a "first cut costs out of everything and then see what product you can still make" mode.

  • That resulted in a lame D3400 update.
  • That resulted in a lame D5600 update.
  • That resulted in what many perceive (mostly incorrectly) to be a lame D7500 update. 
  • That hasn't resulted in an update to the D610.
  • That hasn't resulted in an update to the D750.
  • That didn't result in an update to the D500.
  • That didn't result in an update to the D5.
  • That has resulted in mirrorless products that have yet to appear.
  • That resulted in the DL line to be cut before production started.

Nikon has been in a downward spin for the last five years. What Nikon management has done is decide to just control the spin. That doesn't help you stop going downward ;~). 

Something's got to give, and the time for that to happen is getting shorter and shorter. 

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