Update: Panasonic issued a brief statement about the Nikkei report I refer to below: the company now indicates a change in internal organizational structure, essentially moving consumer cameras into the Panasonic Appliances Company to "further deepen our relationships with customers." The only aspect of the Nikkei article that Panasonic seems to object to though is the use of the word "dismantling." I'm still pretty sure that we'll see the digital camera group scaled back in some fashion when the actual reorganization is announced in April. Further reports out of Japan say that everything Lumix will be moved to the Appliances group, while all the Varicam and broadcast gear will stay in a renamed group.
We need to talk about the elephant in the room. Especially since we keep getting more elephants in the same sized room.
Panasonic began telling Japanese business press late last week about their plans to continue restructuring their businesses. A few years back I noted that Panasonic's CEO issued an ultimatum for all the sub-businesses in the sprawling conglomerate: hit a minimum 5% ROI or risk elimination. Digital cameras was one of those businesses he targeted.
The Nikkei Asian Review is now reporting that Panasonic's camera business will be scaled back. Actually, they use the term "dismantled," which seems more draconian.
While no numbers were broken out for digital cameras, cameras were lumped together with five other Panasonic businesses that in total lost 46 billion yen on 380 billion yen of sales. That's not good. 5% ROI is not even on the horizon for those folk, it's a long trek across parched territory before they can even see it, let alone reach it.
This information is coming out just as Panasonic works on wrapping up their accounting for their full fiscal year that ends this week. Panasonic will likely report full restructuring plans along with their fiscal year results in the last week of April.
Does this mean that Panasonic is getting out of the camera business? No. I had to struggle with working through a couple of Japanese-language documents for more information, but it appears that digital cameras will have a headcount reduction, a management/operations realignment, and future product plans will be more focused and modest.
Frankly, I'm still a little puzzled. Cameras like the ones we discuss on this site were brought within the Visual and Imaging group at the last Panasonic reorganization, which puts them in with broadcast video gear. In the information we have so far, it's not clear whether Tsuga-san, the CEO, means that this entire group is floundering, or just the still cameras within the group. The latter is my guess, but then it seems strange to suggest that they'll move digital cameras to "other operations," as there really isn't a better fit within Panasonic, and products such as the GH5 are a strong cross-over between the consumer and professional gear.
So what's this mean in terms of future Panasonic m4/3 products? Good question. But we've already gone through a couple of cycles with apparently the same result. Panasonic had one of the largest model spreads and fastest iteration processes in mirrorless. They've produced 26 different m4/3 models since 2008 (Olympus had 19, Sony had 23).
If you look at the period after Tsuga-san's original ultimatum, you see a distinct slowdown in Panasonic model proliferation that peaked—or is that plunged?—in 2014, but then started to pick up again in 2015/2016. I think we're going to go back to a slowdown. Panasonic's going to need to pick the products it thinks will carry the day for them in any downsizing. The GH5 certainly is one of those, but what are the others?
Looking at B&H, I see 15 current Panasonic cameras:
- Small sensor Compacts: FZ80, FZ300, TS30, ZS50, ZS60
- 1" Compacts: FZ1000, FZ2500, LX10, ZS100
- m4/3: GH5, G85, G85, GX850, GX8, LX100
Panasonic's own site also lists the GH4 and G7. (Aside: did you know that Panasonic offers a 10% discount to students?)
If I had to guess, that first bullet line will likely completely disappear. The question that's unanswered is how many of the others would join them? The problem really has to do with dealers and selling products to consumers. If you look at the authorized dealer list, you see an awful lot of big retail/internet sources (and ironically, some photo stores that have closed, such as Keeble & Schucat and Showcase Photo). Those big retailers aren't going to be selling GH5's. And if you take Best Buy, BJ's, Costco, et.al. out of the list, you don't have a very deep dealer set here in the US.
So let's talk about the elephants and the room.
The overall ILC room is getting smaller. The mirrorless sub-room has been relatively the same size for awhile now; it's the DSLR sub-room that's shrinking.
Within the mirrorless sub-room, we have the following that has happened:
- Canon has wandered into the room with a credible small DSLR type product.
- Fujifilm has been taking up more and more space in the room with its onslaught of products (they had four new models in 2016, more than anyone else, and have the biggest camera in the room).
- Nikon seems to be over in the corner contemplating their navel.
- Olympus, despite all their product churn, still sells about the same number of product as they did before.
- Samsung left the room.
- Sony did a massive amount of churning until 2015 and was a fast-growing elephant in the room, but then hit the brakes and went further upscale in 2015 and 2016 instead of trying to grow.
Panasonic's best-known product in the room is mostly valued as a video camera (GH4/GH5). Other than that they're worse off than Olympus (e.g. Panasonic is losing market share).
Look at the DSLR sub-room. It really has two players left in it: Canon and Nikon. And we seem to be returning there to the world of the 90's when Canon was outselling Nikon nearly 2:1. So call that room 60%/30%.
I think that long-term the mirrorless sub-room is likely to see something similar happen, with only two or three players dominating. Right now we have Sony, m4/3, and Canon having the biggest market shares in that room. But: Sony and Olympus are flat, Panasonic is down, Canon is surging, and we also have a surging Fujifilm, though they started late and from zero. Nikon can't ignore this room, so they'll be back.
More so than any other any other part of the camera business, mirrorless is the room that's going to be fought over. That's good news in one respect: we're getting more and faster iteration and innovation in mirrorless than in DSLRs or compacts. We're getting more choice. But I suspect these things are going to both change for the worse. Sooner rather than later. As Panasonic is showing, continuing to try to grab a room when you're losing money probably means you're not the dominant elephant. Time to find a corner you can do well in and let the big Matriarchs battle it out for the rest of the room.
The elephants to watch most closely are Canon and Sony. The two scariest elephants in the room are Fujifilm and Nikon, one because of its rapid growth and excellent word of mouth, the other because it will likely storm back into the room very aggressively.
Looked at a different way, Fujifilm and Sony are the two elephants that have decided this is their room and walk around as if they own it. A small Canon elephant wandered in and decided that they liked it, and may soon bring more of the herd with them. Nikon sent a tiny, under-sized elephant into the room, it pranced around for awhile, but everyone mostly ignored it. Olympus and Panasonic are scratching their heads saying "wait, we invented this room."
Next on the National Geographic Channel, The Battle of the Mirrorless Elephants.
The mirrorless elephant, photography's most charismatic and intriguing product, today faces market forces driving its value ever downward. This groundbreaking National Geographic special goes undercover to expose the photographers that are buying or not buying these devices. It also demonstrates how the mirrorless elephant is far more complex than ever imagined.
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