The Canon/Nikon Problem

(commentary)

Many have commented about the inability of Canon and Nikon to dominate mirrorless cameras. But it’s not an inability, it’s a dilemma. Anyone that thinks that Canon and Nikon can't build an X-T1 or E-M1 or GH4 competitor is not being logical. Both companies have the resources and ability to do that. And more. Much more. The questions have always been: should they? will they? when?

My point has always been this: at some point they will. We may be near to reaching that point now. But first let me describe the dilemma.

In interchangeable lens camera sales, Canon and Nikon have held a 65% or greater share for some time now. Some believe that it’s been above 70% at the retail level, and that’s absolutely true in some countries. Most of that share is held by consumer DSLR sales. Overall, mirrorless has only been 20-25% of the interchangeable camera shipments from camera makers in the past two years, though this number is rising. And there’s the problem: With Canon and Nikon absolutely dominating the other 75%, producing great mirrorless cameras really only would move those sales from being DSLRs to mirrorless, not increase sales. 

Both Canon and Nikon looked at mirrorless early on as a possible increase in sales. Neither seems to have foreseen what I long ago predicted: the overall decline of all interchangeable lens camera sales. Thus their initial mirrorless strategies were focused mostly on trying to find incremental sales to their DSLR sales. 

Unfortunately, that’s not what was driving much of the mirrorless market. In essence, virtually all mirrorless sales to date have been one of two things: buying a low end mirrorless camera in place of a compact camera, or buying a high end mirrorless camera in place of a DSLR. Trading up or trading down, basically. But who are the two companies that dominate the markets people were trading up or down from? You guessed it: Canon and Nikon. Those two companies are the leaders in compact cameras, and they’re the leaders in DSLR sales. 

Notice that both Canon and Nikon have mostly attempted to position their mirrorless cameras to date as upgrades for compact users. And not very clearly, either. Canon’s EOS M has as its internal competition such cameras as the G15 and G1x. Meanwhile, Nikon has the J1, J2, J3, J4, S1, and S2 all pretty much defined as compact cameras with a larger sensor and interchangeable lens, but at DSLR prices. Why either company thought their strategy would work, I don’t know. They spend considerable sums of money producing extra products that are highly likely to become lost in the squeeze. 

Lest you think this is all good news for Fujifilm, Olympus, and Panasonic, their problem is this: their prices are too high when compared to DSLRs (Canon is currently selling some DSLRs for as little as US$300 with lens here in the US). With mirrorless you’re paying both a small performance penalty but you’re also paying more money for smaller size and weight. Canon and Nikon really needed to put the consumer DSLRs on a diet, and then the problem would have been even more complicated for the mirrorless camera producers. Only Canon tried this with the SL1, but that seemed a half-hearted attempt: why it didn’t completely replace a model in their lineup at the right price point seems strange; it appears Canon wanted to just continue selling existing Rebels and again thought of the SL1 as incremental or supplemental sales (e.g. you might pay more to get a smaller/lighter camera). 

You’ll notice that I haven’t mentioned Sony so far. That’s because they seem to have gone pretty much all in with removing mechanical complexity from DSLRs and creating mirrorless cameras with low parts and manufacturing costs. The A7 models, for example, are clear indicators of where we’re going in the future: DSLR-like, mirrorless, highly parts/cost reduced, high image quality. 

Sony, unlike Canon and Nikon, did decide to compete with themselves and let DSLR sales fall where they may (though I suspect even they thought DSLRs would still do better than they did). The net result of the past 10 years of Sony interchangeable lens camera sales is this: they have basically the same market share as they have had historically, but the bulk of the sales shifted from complex, hard to produce DSLRs to simpler, easier to produce mirrorless cameras. Sony’s failure to take significant market share away from the duopoly has prolonged Canon and Nikon from making such a transition themselves. 

But make no mistake, Canon and Nikon will make that transition some day. They’re likely to do so when they think that they have either equalled or surpassed their DSLR camera performance, or have a new disruptive technology that the others will have a hard time matching. 

That said, high-end DSLRs won’t go away, just as medium format cameras don’t really go away. There are still benefits to be gained from the optical-oriented viewfinder and changes to the way the focus system works with the mirror. If you look really, really hard, you’ll find the patent that I think might presage Nikon’s D5 technology in 2015.

But I’m not sure that technology will trickle down to the consumer DSLRs this time. I suspect that the consumer DSLRs will move to at least a hybrid system, if not completely mirrorless in the next major generation. 

Here are the primary reasons why:

  • The current mirrorless system providers are nibbling at more and more interchangeable lens camera market share.
  • The overall interchangeable lens camera market size will continue to shrink, making that first factor even more significant.
  • Canon and Nikon need to get significant parts and cost reductions into their consumer interchangeable lens cameras to maintain profit margins. In high tech, consolidation of electronic components is inevitable. What you did with dozens of chips in a previous generation gets done by one in a future one. Electronic components are cheaper than mechanical components long term, and easier to manufacture.

I don’t think 2014 will be the year for this, though. I suspect that the target for a Canon or Nikon DSLR-to-mirrorless transition product is CES in early 2015. Let’s hope that’s true and that they get it right. Competition is good for all players.   

 

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