The Economics Problem

(commentary)

Mirrorless continues to be relatively flat in shipments for the first 10 months of this year over the past two years:

bythom cipaoct14 2

Since a few folk have a short memory, I’ll repeat: these numbers are from CIPA and represent all Japanese camera shipments worldwide, in units. From time to time, I analyze other aspects of the CIPA data (e.g. average selling price). But the primary trend that’s impacting the camera market is in volume of sales (units). Shipments are not sales, but you can’t sell what you don’t ship, either ;~). 


That graph is actually good news given the decline in shipments of almost every other category of camera. 

Still, mirrorless is struggling to knock off DSLRs. My recent review of the Sony A6000 was a good example of why: to really get all the performance you can out of the A6000 you need to move beyond the kit lens. And that brings us to the economic dilemma: A6000+16-70mm f/4 is US$1446, while a D7100 with the 18-105mm f/3.5-5.6 is US$997, or 31% less expensive. 

Okay, I can see all of you Sony fans putting your hands on the keyboard getting ready to fire off the latest “Thom is an idiot” missive on some forum. So I’d better do some explaining. Yes, the A6000 with the 16-50mm kit lens is only US$598, which looks like a 40% discount to the D7100 combo. My problem, and I think that it’s a problem that repeats itself across the mirrorless world with a number of products at the moment, is that the 16-50mm is an underperforming lens for the sensor it sits in front of. The Nikkor 18-105mm is no such slouch on the 24mp DX sensors. If I’m buying a camera for performance, which is why I’d buy an A6000, I’d be buying a different lens than the kit lens. That’s not to say that the 16-50mm kit lens isn’t good. Overall it’s good, but not very good or excellent. Frankly, it’s a bargain at the implied price, but a sophisticated buyer will also quickly figure out that they can get better results out of the camera with a different lens. And thus they start comparing the “fully burdened” price of an all-in Sony to a DSLR. 

Funny thing is, I’ve already gotten numerous emails after my A6000 review stating just that: when they consider the price of the lens that they’d really want on that camera, the economics start to skew on them away from mirrorless and back towards the DSLR. That’s despite Nikon doing a terrible job building the DX lenses that these people really want.

We buy interchangeable lens cameras (ILC) because we can use different lenses on them. In general, the ILC customer is buying on the idea of “best possible quality” and not “good enough quality.” Yet at the same time these folk are a bit confused. One thing that is tough to understand is why the low-end mirrorless cameras all pretty much failed to gain any momentum (e.g. Fujifilm X-A/M, Nikon J series, Olympus E-PL/M series, Panasonic GF series, Sony NEX-3). Technically, these were price/performance bargains, especially at sale prices. They clearly performed better than compact cameras, plus they could use lenses other than the ones that came with them. Yet they failed in the market. Probably because the ILC buyer thinks they need to buy “best” over “good enough.” 

You see variations of that all over the ILC realm. The Nikon consumer DSLRs do pretty well, for example, because they’re all 24mp. 24mp is perceived as “best” in consumer cameras at the moment. I get people asking me all the time whether the 16mp in the Fujifilm, Olympus, and Panasonic cameras is “enough.” Sure it is, but it isn’t 24, and 24 sure looks like it’s 50% better, doesn’t it? (It’s not even close, but that’s another story for another day.)

In other words, what’s happening is a combination of knowledge and naiveté. It’s the old adage: customers are just smart enough to be dangerous. That makes them susceptible to faux assertions (24mp is better than 16mp) and more likely to support the status quo solution (DSLRs).

No matter how I cut it, though, I keep coming back to this: to get a seriously good, high performance mirrorless solution, I’m paying well into the middle of the DSLR cost realm. I happen to like the Fujifilm X-T1, the Olympus E-M1, the Sony A6000/A7, and so on. They’re seriously good cameras. They’re nearing or equaling prosumer DSLR levels of features and DSLR levels of performance in most, if not all, areas. But economically speaking, if you’ve already put money into DSLRs and lenses for them, to get a new mirrorless system back to parity with what you’re currently using is costly. Sometimes more costly than a really serious DSLR kit or just upgrading your current DSLR kit in some way. So what the mirrorless vendors have left to sell is “smaller/lighter” and maybe “weatherproof.” And they generally don’t have the dealer base in the US (other than Sony) for most of you to be able to easily see and experience that in person.

So mirrorless is in this economic doldrums zone. No one is buying the low end of mirrorless. Those that buy the high end of mirrorless are paying DSLR-like prices when all is said and done. And so we get sales that are stalled. Unfortunately, those sales are stalled at a level lower than the end of the film SLR era in the late 90’s, and with as many players grappling for market share. 

It’s not a “win” for Sony to be #1 in mirrorless and have the DSLR market just collapse so that mirrorless is all that’s left. It’s definitely not good for the mirrorless players if Canon and Nikon figure out a way to continue their DSLR dominance as they transition to new mirrorless systems. 

Back when I started this site three years ago, I thought that mirrorless would grow faster than it has. In one way it has: there are more products and more players stuffed into the mirrorless market than I thought it could support, even with strong growth. But right now the growth isn’t really there. Mirrorless makers that are growing are stealing share from someone else. 

So let’s all hope for an even more exciting and a much better year for mirrorless in 2015.  


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