Selling cameras is a tough business and it's only getting tougher. The market for digital cameras is contracting at a dizzying rate, so which camera manufacturer is going to fold next?
In recent years we've seen GoPro cancel its drone program, Samsung shift away from ILCs, Casio shut down camera manufacturing, and Lytro pull out of the consumer market. During the Noughties there were a plethora of brands who changed hands or closed their doors, including Pentax, Minolta, Contax, Kodak, Polaroid, HP, and Bronica to name but a few.
Back then the transition to digital in combination with the mass expansion of compact cameras caught many manufacturers napping or pivoting in the wrong direction. The big winners, at least initially, were the likes of Nikon and Canon who managed to scale production by opening new factories. At their peak, Nikon were selling 30 million units a year — that's more than the entire market shifts today! However what they didn't appreciate was that the seeds of their downfall were sown in the market they had created — namely small cameras, instant photos, and no marginal cost.
Retrospectively, the smartphone can be seen as combining two killer devices — the PC and camera. It's what the general public wanted and, perhaps more than ever, the ability to share photos is possibly the most important feature. As a result phone cameras, and their software, see heavy investment and rapid iteration. Progress is steep. With the likes of multi-billion dollar IT conglomerates such as Apple and Google snapping at their heels, camera manufacturers need to… stay on their toes!
With that in mind, the twenties are perhaps ushering in a second phase of the digital demolition of the camera market. This is something Canon forewarned, anticipating a reduction in the ILC market from what has been a consistent 12M units per year to around 6M. The gradual switch of consumers over to mirrorless will add further complications for lens manufacturers. If the Noughties saw a failure to transition to digital, then the twenties may well be about the inability to pivot to computational processing platforms. There are two challenges facing manufacturers.
Firstly, they are unable to offer significantly better images out of camera and, as a result, can't leverage the lens-sensor benefits to the end user as a matter of course. There needs to be better integration with smartphones — of which there is some progress — and greater investment in in-camera image processing.
Secondly, there's no getting away from the size and convenience of smartphones. A dual-prong approach that also invests in the smartphone sector is needed. You see Leica (with Huawei) and Sony doing this. Samsung saw no benefit in staying in the camera sector, instead focusing it's imaging energies on smartphones. Where are Nikon and Canon in this space? Their silence is deafening.
So what are the prospects of the remaining manufacturers? Sony are probably best placed in the sector ($80B in revenue and 115,000 employees). Their almost exclusive focus upon building a mirrorless ecosystem is now paying dividends after overtaking Nikon to become the second largest manufacturer of digital cameras. In addition, their horizontal and vertical integration across smartphones and sensor manufacture uniquely positions them to offer a degree of convergence not matched by anyone else. The vaulted success of Eye AF demonstrates their commitment to the power of algorithms. Perhaps what is most surprising is that they don't yet offer a smartcamera.
Canon isn't at a small company with sales of $31B and 200,000 employees. It's important to bear in mind that — like all camera manufacturers — cameras aren't Canon's only business (which makes up 25% of revenue) and includes printing and medical imaging. Even so, they remain a dominating force commanding about 40% of all camera sales. What Canon does matters and they aren't going anywhere quickly. That said, their move to mirrorless has been slow at a time when their sales have rapidly contracted. They are now pivoting rapidly, with a firm eye behind them on the fast approaching Sony.
Of the big three, Nikon is in the most worrisome position. It is a camera company through and through and whilst large ($6.5B turnover and 25,000 employees,) with divisions covering medical imaging and precision instruments, what its imaging group does (or fails to do) is important as it accounts for nearly 50% of their income. It's move to mirrorless has been swifter than Canon with it, arguably, matching the offerings from Sony. However Sony is growing largely at the expense of Nikon and so the question is whether the market can sustain three large players.
At the top end, Phase One and Hasselblad specialize in the best possible image quality which increasingly incorporates industrial imaging such as aerial mapping and cultural heritage where the market can bear high margins. Aloof from this group sits Leica, the little red dot generating sales in and of itself. Of the larger active camera manufacturers that leaves Olympus, Ricoh/Pentax, Fuji, and Panasonic. The key questions to ask are: how big is the company, what proportion of earnings does digital imaging comprise (including where video sits), and is this rising or falling.
Ricoh currently employs 98,000 people worldwide and has a turnover of $18B. It is principally a printing/copier business, with the horizontal integration of document management through software-as-a-service (SaaS). Cameras fall in an electrical components division that, as a whole, only accounts for 8% of sales. Ricoh produces a small number of own brand compact cameras — including the desirable GR — having plugged the DSLR gap through the purchase of Pentax. The latter has seen a slow trickle of models with great features and competitive prices, but lagging behind the competition.
Olympus employs over 35,000 people generating a turnover of $7.5B. It has long prided itself on the engineering of its products and championing the MFT sector, however it's the medical instruments (endoscopes) and science divisions that posted the strongest earnings with imaging accounting for 6% of sales. Last year a number of rumors circulated concerning the closure of it's imaging division, however (after a fervent denial) it is business as usual.
Fuji is another big company with 79,000 employees worldwide and a turnover of about $23 billion. Its core business is document management/printing and healthcare. Cameras bring up a distant third place with the imaging section making up only 16% of income —11% from photo imaging and 5% from electronic imaging. In short, digital cameras are small business with Fuji treading a different line to other manufacturers with the dual prong approach of its X-series and medium format cameras.
Panasonic employees 275,000 and with a turnover of $73B is a big company, manufacturing large volumes of consumer electronics focused around display (TV, projector), PCs, DVDs, and cameras, spread across home, avionics, automotive and, industrial markets. Cameras fall within the large Appliances Division which makes up 34% of income, however disaggregating their sales is difficult although in 2018 they were outside the top five manufacturers meaning they had less than 3% market share. That said, they have long promoted the consumer and video oriented micro four thirds format whilst their recent foray in to full frame cameras as part of the L-Mount Alliance marks a new transition.
It's worth remembering that there are a number of manufacturers principally focused on lenses. In addition to their repositioning in the lens market, Sigma's long held niche interest in Foveon sensors has been bolstered by traditional CFA designs since they joined the L-Mount Alliance. Like Sigma, Tokina have transitioned to the pricier end of the market and whilst supporting a range of different mounts might be time consuming, it at least allows them to sell across all brands. Zeiss also occupies this space, but at the very top end of the market where it is able to sell across sectors to other markets that require precision optics. Until 2012 Cosina produced its rangefinder and — having been hitherto nascent — it is set to release the ZX1 shortly which may yet answer the critics of a lack of a computational platform from a traditional manufacturer.
So where does this leave manufacturers now? The big three will continue to manufacture to the same volume targets for the foreseeable future, with Sony closing in rapidly on Canon. It is Nikon that is in the most precarious position as it is both losing market share and relies heavily on camera sales for its income. Is it conceivable that Nikon could pull out? Yes, but the next five years are critical to its future.
Of the remaining manufacturers, Fuji and Olympus have the largest market shares which leaves Ricoh/Pentax and Panasonic. Panasonic are a very large company and heavily invested in video — so as long as they demonstrate an ROI there is no reason not to continue manufacturing. Perhaps then, Ricoh/Pentax are in the weakest position. Will Ricoh stay in the market? Will they continue to develop new models? Or will they exit, in the way Konica sold Minolta, by putting Pentax (or its entire imaging division) up for sale? One things certain, the camera market is no longer a cash cow and it's reached a tipping point. Who will be left in five years time?
Body image courtesy of OpenIcons via Pixabay, used under Creative Commons and copyright Zeiss.