"Smartphones Shatter Mirrorless Hope"



Bloomberg and Reuters seem like they’re on a conveyor belt, putting out new “the camera market is dying” articles with regularity now. I can usually tell immediately when a new one appears because my In Box suddenly clogs up and the various photography forums I visit all go into hyper fan boy mode. This time, it’s Reuters with a dying article, which got reprinted in the New York Times.

The line that’s provoking all the fury amongst fora folk this time is the quote from a Credit Suisse analyst: "Only those who have a strong brand and are competitive on price will last - and only Canon, Nikon and Sony fulfil that criteria.” 

First, let’s deal with the dismissal many usually use to attack a message they don’t like. In this case, it’s the usual “all analysts are wrong” dismissal I see a lot of. Analysts are not always wrong. They’re actually paid to research and report on specific industries. To dismiss their comments without good support for doing so is incorrect: I talk with many of these analysts from time to time, and they have sources of information that neither you nor I do. What they decide to conclude from that information does often tend towards exaggeration (or they’d never get quoted in a story ;~), but it’s not necessarily always wrong. In general, their batting average is significantly higher than the average fan boy ;~). 

Moreover, the facts are the facts. Canon, Nikon, and Sony do sell well more than half the cameras made today. The oligopoly already exists, has existed for some time, and it’s getting stronger as the weaker players contract. It’s actually a logical conclusion that the Credit Suisse came to from the data that’s available: control is consolidated in three players. There’s nothing to indicate that this will change in the near future. All the players outside the oligopoly are losing money in cameras, and that obviously can’t go on forever, at least not under any form of Western corporate due diligence. If analysts, including myself, do get something wrong, it's usually in the form of applying Western standards to Japanese companies. We've had quite a few Japanese consumer electronics companies that are underwater, stay underwater, have no real prospects of surfacing again, yet somehow manage to stay propped up in the lingering form of banking keiretsu that's going on in Tokyo these days.

The article specifically mentions Panasonic’s problems. Panasonic’s CEO has been pretty hard-nosed about turning the company around: businesses without a 5% ROI by a certain deadline will be sold or closed. Businesses that are unprofitable need to show clear turnaround within a short time period. Those groups that are missing those ultimatums are being closed, sold, or merged. Unfortunately, Panasonic’s camera group is going the wrong direction at the moment. They were not one of the bigger players to start with, and their position in the market is eroding, mostly due to compact cameras. 

The implication most people are making in Panasonic’s statements about required business ROI, their declining market share in cameras, their sale of the majority of their image sensor fabs, and a few other data items that have been floating around is that Panasonic would stop making m4/3 cameras. I actually don’t think that to be correct. Much like Sony combined their pro video and still camera groups to better manage (read: hide) the financial aspects of specific products and to better align related groups within the company, I suspect Panasonic will do the same thing: jettison low end cameras as they have smartphones and then combine the high-end stuff with their pro video division.

Still, if you have three companies controlling two-thirds of the market, that leaves slim pickings for the others. You’ll note that almost everyone is running to “high-end niche.” High end because the gross profit margins are higher, niche because they can’t compete in the mainstream sales channels. It’s the traditional retreat methodology in the tech market: circle fewer wagons in an area you think you can protect. The question is whether there’s meaningful profit to be had in doing so. We’ve watched the HiFi, personal computer, and television markets all collapse this way for the Japanese electronics makers; now it's the camera makers turn.

Where the Reuters article falls down is in it’s headline: nowhere does it actually manage to support the actual premise of the headline: smartphones shatter mirrorless hopes. Sure, there’s a shakeout possible, but it’s because most of the camera companies haven’t built and retained enough volume to create sustainable, profitable ventures, period. Smartphones are only making the problem more visible.

There’s actually nothing really new in all this conjecture and market consolidation, either. Canon and Nikon ended up dominating the film camera market. Throw in Minolta (eventually Konica/Minolta, which eventually became Sony) and you have the exact same oligarchy as we face today. The rapid growth of the digital camera market starting at the turn of the century made everyone think that they could change their lot with the rising tide, but frankly, none have actually managed to nibble away any significant chunks of the camera market from the Big Three. So technically, if any of the smaller vendors are thinking that they’re playing the market share game, they’ve already lost, multiple times. On the other hand, if they’re happy with lower volume in a niche and can make that profitable, that’s a whole ‘nother scenario. Of course, at the moment, none of them have been able to make a profit doing that. 

Personally, I don’t think Reuters' latest article actually told us anything new or that wasn’t known, and it doesn’t make very logical connections between the points it does make. As with a lot of articles (and forum posts) these days, everyone thinks they’re a designer (including myself, though unlike most of the rest I’ve actually designed and managed high tech products, including cameras). Still, I’ve already seen it quoted multiple times on a dozen photography fora, I’ve seen it reported with commentary on at least a dozen other photography sites, and I’m sure it will propagate some more over the next few days. Normally I wouldn’t have written anything about it. No new news. No new facts. One quote that seems inflammatory to many but actually represents the situation we’ve had for some time. 

Bottom line: Fujifilm, Olympus, Panasonic, Pentax, and Samsung mirrorless cameras didn’t get worse, didn’t go away, nor did their status in the overall camera market change in the last year. If you’re one of those that are afraid a camera maker is going to go away, well, I’m sure that one or more eventually will, but not necessarily the ones you think or for the reasons you think. Nothing’s changed: if you want a mirrorless camera, there are plenty of great ones out there today from a wide range of vendors. Just buy what fits your needs, desires, and budget. 

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