Nervous Speculation

(commentary)

If you filter out the fan boy type responses and just look for the more general attitude, I think you find an overall nervousness about mirrorless. It’s expressed in various ways, but it typically manifests itself as a question about the future viability of a sensor size, a camera design, or a brand.

For example, the Nikon 1 will die because it uses too small a sensor. Or the Pen designs will go away because they didn’t sell well. Or Olympus will leave cameras completely and m4/3 will die.

First, let’s get one thing straight: interchangeable lens camera sales peaked in 2012. This year it’s looking like they’ll be only 73% of 2012’s shipments from the Japanese companies. Many see that mirrorless camera shipments are holding relatively flat from last year and get excited by the fact that this year’s decline is mostly attributable to DSLR shipment decline.

The truth of the matter is this: flat is not good. With the possible exception of Sony—and it’s only possible because Sony doesn’t break out mirrorless sales, so we have to give them the benefit of the doubt—none of the mirrorless camera makers appear to derive profit from their products. So flat means continued losses. And the declining overall interchangeable lens marketplace means that future prospects don’t look exactly rosy, even if they could take share away from DSLRs.

Many of the mirrorless camera makers have had camera groups in decline andunprofitability for many years running, so they’re overstaffed and have too much infrastructure for their current and future camera sales. It’s possible that employment reforms will take hold in Japan soon, allowing these companies to downsize (actually: rightsize), but that still doesn’t fully address the issues.

Am I nervous about mirrorless camera prospects? Not really. It seems clear to me that DSLRs will morph into hybrids and eventually truly mirrorless. DSLRs need to shed parts costs and manufacturing complexity. The Sony A7 models are exactly what the future of DSLRs look like, only with higher focus and frame rate performance. Sony has a small window of opportunity with the A7’s before Canon and Nikon do something similar. Whether they manage to take hold of it or not is another story. Given the slow frame rates coupled with 11-bit compressed raw data, I’d say that they’re setting themselves up for a future problem if they don’t fix those things fast. Plus focus performance needs to be better and more under user control.

Am I nervous about m4/3’s prospects? Not really. Yes, an m4/3 sensor has an image quality disadvantage to an APS sensor, especially if we think that sensors need to be 24mp+. But it’s not a large disadvantage, and the smaller lens sizes of m4/3 are an advantage. In my view, m4/3 is “sellable” against APS. However, that also means you have to be good at marketing. I’m a little disturbed by steps backward here in the US by both Olympus and Panasonic in terms of the marketing and sales of their m4/3 products. That needs to be reversed, I think.

The products I’m most nervous about in mirrorless are the Canon and Nikon ones, actually. Both seem to be more test shots and placeholders than the type of product they likely need long term. That suggests that there could be major changes down the line for those systems. Or perhaps in the case of the Nikon 1, it might mean that a DX-type of mirrorless camera introduction by Nikon would more strongly push the Nikon 1 towards consumer focus.

The problem is the declining interchangeable lens camera market, though. How long and how far that decline goes will have a large factor on what happens next. Note that we have about nine major players chasing 14m unit sales right now. What happens if those unit sales hit 10m? Or 8m? Or even lower? The pond is currently getting smaller, and the big fish are going to get more active as they get hungrier. Curiously, no one seems to want to get out of the pond.

Personally, I think the near future for mirrorless is more of the same, with a slightly lower iteration rate until Canon and Nikon clear up their intentions of how they’ll shift from DSLRs to hybrid or mirrorless. So by maker, here’s my sense of things:

  • Fujifilm — Will continue to iterate in APS, and more at the higher end than the lower end. So more pixels, a better X-Pro1, maybe an X-T1 simpler brother, more lenses. The X-A1/X-M1 didn’t really sell to expectations, so I’d expect consolidation there.
  • Leica — Already made their big move with the T. Now it’s about more lenses for the mount. Also, the M is due for another refresh and more modernization.
  • Olympus — Pens will get downplayed and mostly focused on Asian markets, I think. But we’ll continue to see OM-D iterations as they try to find the right combination to create true sales volume for them. The problem for them and a number of other mirrorless companies is that US$1400 is a price too high, so you have to figure out how to get into the right price range. The E-M10 was a first attempt at this, but I don’t think they’ll stop there.
  • Panasonic — Panasonic has gone niche. Only the GM1 and GH4 seem to be getting their full attention, and those are cameras that cater to very specific groups. I don’t see Panasonic returning to more generalized mainstream products any time soon, if ever. They appear to want the cameras they produce to be unique. That doesn’t bode well for the G, GX, and GF cameras. I think they’re gone.
  • Pentax — Talk about your hobby businesses. At this point I’m not sure why Ricoh bought Pentax. Here’s what to look for: what’s Ricoh’s message at Photokina in September? Nothing really new? Then Pentax is still at the margins and not likely to ever break into the mainstream choices again. A dramatic and clear vision of the future? Then welcome back, Pentax. I’m betting on the former, not the latter.
  • Samsung — Having more success than you think (their numbers don’t show up in CIPA statistics, so you need to have access to retail sales numbers to see that they’ve done better than expected). They’ve already pretty much announced their next target: high end, more pro like. And they’ve already started leaking their next generation APS cameras, too. They’re iterating cautiously, but consistently. I don’t expect any big surprises from them, but I also don’t expect them to pull back in any way.
  • Sony — Has probably the broadest approach given that they’re supporting two mounts and two lines of cameras (APS and full frame). The thing that impresses me most isn’t the performance of the cameras, but that Sony has gotten the manufacturing and parts simplicity right. They very well may have some pricing advantage because of that. They certainly do with the A7’s versus other full frame cameras (e.g. DSLRs). They continue to be aggressive on iteration, and I don’t see that changing in the near term. However, at some point, all this has to add up to real profit and ROI; the overall Sony company is right now one where movies, music, and insurance are propping up consumer electronics. That can’t go on forever, and Sony realizes it. They desparately need more lenses and far better marketing. And they need those beforeCanon and Nikon make any bigger move in mirrorless.
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