What's With All the Mirrorless Cameras?

On my other Web site, I recently wrote an article about the problematic trend in camera sales at the end of 2011, and how different companies are attacking the problem. But it's really far simpler than that.

The Japanese companies are predictable. They monitor each other's products much like the American car companies once did (complete with product tear downs), and any time they see someone has discovered product margin gains (either by cost reduction or by price increase, or due to hot new product categories), they quickly go into imitation mode. The funny thing is that after more than 50 years of this, they all seem to expect a different outcome in the end, but there never is. That's because they haven't solved a couple of other problems, specifically true product innovation and great customer support (which includes better marketing). Plus, of course, they suck at software outside the camera, and that's sort of a necessary piece of the camera puzzle.

The first digital rush was compact cameras, pioneered by Sony's proof that there was a market there. That market completely saturated with more than 60 players in less than 15 years. Only three or four ever hit more than 10% market share in the late 90's and 00's. Some had market shares measured in small fractions of a percent. The second digital rush was DSLRs, mostly pioneered by Nikon's bold step with the D1. Once again we got a rush of players, as it was easily seen that the margins in DSLRs were higher than in compacts and that this was a new growth market. I predicted very early on that this market would peak by 2010. I was dead on. We currently only have four viable DSLR players left (down from more than 10 who tried), but the game is dominated by two. And market growth is near zero or negative.

Lately, the only growth in the camera market has been mirrorless cameras, a third digital rush led this time by Olympus/Panasonic with the original m4/3 cameras. Many of these cameras are almost as cheap to produce as compact cameras, but command DSLR-type prices. Yep, everyone sees the growth and product margin, so once again we have waves of everyone wanting to get in the game. We're already up to ten players again (and more if you count large-sensor compacts like the Sigmas and the new Canon G1X), with more coming. 

The question is this: how long will this growth last, and who will still be standing when the dust clears? The answers are almost certainly "not long," and "the same as before." Mirrorless growth will likely continue for a few years, but it's more and more coming at the expense of low-end DSLR sales. Thus, it isn't really growth, it's a transfer. To that end, Nikon can't afford to lose, as they're the only nearly pure camera company left (two-thirds of their sales, as opposed to no one else having more than even 25% of their overall sales due to cameras and lenses). Canon really can't afford to back away, nor can Sony. Cameras are highly profitable for Canon. Cameras are a core technology to Sony, right down to the sensor. Those three will do everything they can to stay on top of the standalone camera race, no matter in what form it is played.

Fujifilm and Leica are relatively safe, as they've chosen lower-volume niche approaches. Samsung has no traction in the mirrorless market at the moment. Olympus and Panasonic are struggling to stay on top, but they're both price cutting to do so (and they've overproduced inventory to demand, which further pushes prices down). Both need to up their games both in product and marketing. Ricoh/Pentax is starting from a hole, and it'll take something big to dig out. 

What would that "something big" be? Communicating, Programmable, Modular supported by the cloud and an external software ecosystem. Think iPhone plus iPhoto/Aperture plus iCloud, but with a different camera front end. Unfortunately, the company most likely to produce that isn't a Japanese company, it's still Apple. Imagine an iPhone/iPad camera module add-on and how that would further disrupt the compact camera and small system market. Imagine keeping your iPhone in your pocket, but holding a camera module that communicates fully with it. That will be the small camera of the future, almost certainly. Communicating, Programmable, Modular. 

Now, Olympus and Panasonic fan boys are going to read what I've written so far and scream "Thom's predicting the demise of m4/3." Fan boys typically don't know how to reason or follow logic, let alone read between the lines. So let me fill in some blanks for them. No, I'm not predicting the demise of m4/3. I'm predicting that it will not stay atop the mirrorless market in terms of overall market share for very long. Olympus and Panasonic will iterate like mad to try to "fix" their problem, and they won't abandon the mirrorless market short of abandoning cameras overall, which ain't going to happen without some sort of other major corporate failure. But their expectations of being a top-three camera producer aren't likely to be met. It's clearly Canon, Sony, and Nikon for overall camera market share today, and it's likely to remain amongst those three (though perhaps with some changes of order), and mirrorless will almost certainly tilt their way, too. 

It's not a matter of product. It's a matter of distribution, marketing, and sales organizations. One thing that people forget about Apple's success is that they are superb at marketing and sales, not just products.

All that said, we're living in the prime of mirrorless right now, and will be for the next two or three years. We've got a wide range of products to choose from and will continue to have that until the mirrorless bubble as we know it pops in a few years. And whatever replaces it will likely be chased by the same players, the same way, for the same reasons, with likely the same results.   

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