[Editorial] Can Sony’s Digital Imaging Division Restore Profits?
As many of you have probably already read, Sony Corp announced that it is cutting 10,000 jobs, which translates to 6% of its global workforce. Sony has been struggling with negative profits for four straight years, mainly due to its floundering television division. But what does this mean for Sony’s camera division? With the television sector likely getting the main force of the cuts, will Sony rely on growth in their digital imaging division to make up for the numbers?
Sony lost a lot of money in televisions last year. Their sales and operating revenue (to external customers) was down to 238,194 million yen from 416,914 yen last year, a staggering 42.9% loss over 12 months. Though Sony will likely cut jobs from across the company, I am willing to bet a majority of those jobs will be in the televisions division. Those folks just don’t seem to be able to develop the kind of technology they need to compete at a cost effective price point. If they could, Sony wouldn’t be in this mess right now.
But as camera folks, what happens in to their television division is not really the concern for us. Let’s instead focus on what Sony is touting to be a big winner: their camera division.
Sony was particularly proud of the successful expansion into the mirrorless camera market with the Alpha NEX series. In their 2011 annual report, they bragged about their now 15% share in the global market for interchangeable lens digital cameras, up 5% from fiscal year 2009. They then make the promise to “increase their lineup of interchangeable lens digital cameras and take decisive steps aimed at cultivating this new market category.” They even highlight the NEX series as a major point in their “Focus Areas For Growth” segment of their Annual Report.
Sony’s choice to cultivate the expansion of their non-reflex cameras is not just based on their sales. According to the Camera and Imaging Products Association, 2011 saw “non-reflex” cameras take a 23.2% share of the total interchangeable lens camera market. That’s huge, as this means mirrorless cameras have jumped yet another 10% in market share since 2010. However, about 37% of the total global market for these cameras was sold in Japan. Sure, success in Japan is great, but a product requires steady and even global distribution to hold on to success. With such a large chunk of share based solely in Japan, the question can be asked: “Do mirrorless cameras have a future?”
In Sony’s case, they are banking on it. Their DSLR sales haven’t been able to compete with Nikon or Canon. In fact, I just checked Amazon.com, and the only Sony product to make their Top 50 Digital SLR Cameras clocks in at a resounding 41st place. Almost sad really. That means the core of their sales business has to come from their Cyber-Shot series, their Alpha NEX series, and their video camera division. Their cyber-shot business seems to be doing moderately well, shipping 24 million units in 2011, which is up 3 million units from the previous fiscal year. Their video camera division holds a strong 43% market share, with 5.2 million units sold worldwide. They plan to expand their Handycam line and introduce 3D models that, they promise, will deliver better picture and sound quality as well as introduce a model featuring a built-in projector function.
That’s all well and good, but we need to look at the hard facts: The second most losing area of Sony’s consumer products division (and their second most losing overall) behind Televisions, was their Digital Imaging division. They only sold 120,179 million yen worth of digital cameras, down from 188,477 million yen from the previous year. That’s a 36.2% drop, which is not far from their struggling televisions division. Oh, did I mention that for as many years as televisions have been struggling, so to has the Digital Imaging division? Ouch.
To lose that much money, yet still claim success and growth in both Cyber Shots and video cameras leads me to believe their biggest losses were in mirrorless and DSLRs. If Sony is going to try and make a real run in this area, they’re going to have to do better. Obviously a 15% market share in mirrorless cameras isn’t enough to make up for their feeble DSLR share (which, I might add, remained conspicuously absent from their 2011 annual report).
Of course, Sony is also relying on their tablet sales (which I can tell you right now are nothing like Apple’s iPad sales) and phone sales. However, you can’t deny the size of the Digital Imaging division. It’s the second largest piece of Consumer Products, the largest segment of their company. They have to be relying on future camera success.
What do you think? Can Sony turn things around through their Digital Imaging division? Let us know your thoughts on Sony in the comments below.