The Brutal Quarter

Now that everyone has reported their detailed financial information we can see just how bad the January through March numbers were. Here are the overall sales (dollars) reported for the quarter compared to the same quarter last year:

  • Canon down 23%
  • Sony down 7%
  • Nikon down 21%
  • Fujifilm down 3% 
  • Olympus down 24%
  • Ricoh (Pentax) up 4%
  • Overall camera shipments (CIPA) were down 25% in dollars
  • Overall lens shipments (CIPA) were down 13% in dollars

That's pretty grim, overall. All total, the published financials we can track—Panasonic doesn't provide numbers that we can use—were down 16.7% overall in terms of dollars, year-to-year (e.g. first quarter 2018 compared to first quarter 2019). 

I'm pretty sure that set of numbers has set off panic in Tokyo. It wouldn't matter whether you're one of the ones with only modest drops or one of those with big drops, because the net net is that the overall market shrank big time. 

I don't yet have a complete set of numbers broken out in sub-categories where I could absolutely determine what happened, but the numbers I do have seem to suggest that the higher end (particularly full frame, and particularly mirrorless) is holding serve better than the lower end (particularly crop sensor consumer DSLRs). 

The question that comes to my mind is whether or not smartphones are having a different impact now on dedicated cameras: taking up a cost point. The current generation of smartphone releases is all about the zoom. We're getting better low light results and some ability to go from wide angle to modest telephoto. But the pricing of those cameras, uh, I mean smartphones, is up in the US$1000 range. Are you going to buy a new smartphone or a new camera in that range?

The camera makers have still not bridged the social media use of imaging, nor have they made it a snap (see what I did there Nikon? ;~). While the high-end enthusiast and pro markets are less enamored about such a possibility and are willing to torture themselves with workflow to extract a minutia of performance, the consumer market is now completely driven by the sharing of images. No sharing, no sell (seems like a Bob Marley song ;~). Particularly when the smartphone makers are offering more lens options that are starting to overlap all those dreadful consumer zooms the camera makers made. (Okay, a couple of them were actually quite good.)

There's a reason why the Coolpix P1000 is about the only thing that's moving in Nikon's compact camera line (no smartphone can come close to 300mm, let alone 3000mm). You want an all-in-one camera? Don't buy a DSLR and a terrible superzoom. Maybe buy one of the new smartphones that are starting to appear (we're currently at the 16-125mm equivalent). Talk about not having an answer.

Most of us can remember a time when having your first child provoked buying your first interchangeable lens camera. The whole thing then was a bit of the old Kodak fear mechanism at its height: you need to preserve your most precious memories with the best possible choice of camera and film before they pass you by.

The camera makers seem to have missed that things changed. Now if you're having your first child the driving force is how fast you can share images with your family and friends, not how high quality they are. Moreover, the automation that's gone into both cameras and smartphones means that people don't tend to make grievous mistakes that render them with no usable image any more, too. They get a perfectly usable image for purpose. The purpose being to share that image.

I'm starting to wonder whether the whole <US$1000 camera market is now about to die off. The die off started with <US$500 compacts, but the death trend has continued to nibble upwards. 

Since I'm a high-end practitioner, when I look to my own desires/needs do I want a US$600 shirt pocket camera? No, I want a shirt pocket camera that's as high-end as it could possibly be, otherwise I'll just use my iPhone, thank you. I'll pay (Sony) US$1000 for the ability to torture myself with workflow, maybe more, but my own personal dictum is going to be how good the product is, not how much it costs. 

And I don't think I'm alone here. There's a trend that's starting to come into focus more and more: group A demands convenience, including sharing of images, while group B demands absolute best-possible-performance and will gladly suffer workflow hell to get it. 

The camera makers used to live off of both groups. Then smartphones put a dent in group A. Now the smartphones are taking over group A. That leaves only group B for the camera makers. It's why you see them all scrambling upwards as fast as they can go. 

But that also means that the camera makers are writing their own obituary. "High end" is probably a total market of less than half the current size of ILC (10m units/year). If you completely abandon the lower end and don't defend it, then you're essentially saying that you're happy with living in a world where you don't sell many products. I don't think the folks in Tokyo are at all happy living in a world where they don't sell many products (regardless of the price of what remains), but they simply don't see a way out. 

I'm not sure I do, either. When Nikon cancelled the DLs, that took my breath away. That was the first clear sign that Nikon was punting. On third down. The cancellation of the never announced initial DX mirrorless prototypes was another punt. I keep seeing Nikon punt. Hope they have a really good punter and a really good defense.

Since I seem to have slipped into a football metaphor for some reason, Canon is the company that keeps trying the running play off tackle (go Rebels!), even though it stopped working awhile ago and is now backing them up. Olympus, meanwhile, decided to sign the largest fullback in the history of the game when their real game has always been run to the outside, quick slants, be fast and agile. Pentax doesn't show up to games at all; they're now 0-10 simply on defaults. Panasonic spent time playing in a different kind of football league (video).

My takeaway from all these overwrought football metaphors—though they all describe some truth—is that the coaches don't know what to do. The last Japanese camera company executive I talked to seemed resigned to a future that would be far smaller than before. He didn't say these words exactly, but I took them to mean "we're going to try to own a small space." 

And yet I look around and I don't see any lower need for quality imagery today than before. Just the opposite, actually. I do see a need for more portable and communicating products, but I really only see the camera companies having picked up on that first thing, not the second. 

Finally, there's the elephant in the room: aging. Photography as a hobby is practiced mostly by a group of enthusiasts that are aging into retirement. If I weren't still engaged in professional activity, would I actually need anything beyond the D850 and a handful of lenses I already have? Not likely. And it's becoming less likely for the others I see around me, too. 

So we've got another squeeze going on: smartphones continue to gobble up the lower market, age is making the high-end enthusiast market effectively a non-growth market (maybe even a negative growth market). 

Here's what I learned in Silicon Valley over my decades creating products: find a set of potential customers, figure out what their biggest user problem is, and solve it. I'm very much on record as saying that I believe that you should be able to sell cameras. There's a broad customer base that consists of just graduated from college up through upper middle age that absolutely has imaging needs that aren't being met. (hint: if they were being met, the smartphone makers couldn't point to camera upgrades as a primary reason to upgrade your smartphone ;~). 

My question is this: just exactly how are the Japanese camera companies identifying those potential customers and finding out what their unmet needs are? Right. They basically aren't. Which is why the coaches don't know what to do. 

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