If Fuji's Instax Is the Cash Cow, Should It Produce Digital Cameras?

Fuji's Instax line of products — the legacy of its film heyday — is successful. They've sold more than 50 million cameras, with 10 million alone in the 2019 business year. However, more than that, it's the financial powerhouse for its Imaging division, turning over twice as much money as its digital counterpart. It's strange to think that film is where the money is, but for Fuji, that is the case. So, why is it making digital cameras?

As a photographer, Fuji's modern lineup of digital cameras is legendary. It wasn't the first or even the second to market with a mirrorless camera. In fact, it was arguably late on that score, with Olympus, Panasonic, Sony, Canon, Nikon, and Pentax all beating it to market, with only the more cautious Leica behind. However, the seeds of its move to the X Series were sown much earlier. Fuji's financial success had always been predicated on film, but it knew the writing was on the wall even as worldwide sales peaked in 2001. It had long been a digital innovator, with the DS-1P being notable as the first fully digital camera. This led to their primary strategy of selling a wide range of compact and bridge cameras to an ever-gorging public that pushed digital camera sales to a global peak of 120 million by 2010. This went hand-in-hand with the low-key S-Pro range of Nikon-bodied DSLRs. Behind the scenes, though, the 2000s saw Fuji launch VISION75, a medium-term management plan that saw extensive restructuring and a refocusing around healthcare and pharmaceuticals, whilst also expanding its R&D. In this respect, it was hugely successful: Imaging Solutions registered 54% of income in 2001, which dropped to 14% by 2019, while Healthcare accounted for 44%.

Fuji's X Series

The X Series is possibly a byproduct of this "bonfire of R&D," but either way, it represents Fuji's post-film response to the global camera market, and in that sense, while it was later than other manufacturers, perhaps it was more considered. It certainly combined together features that perhaps were out of sync with its competitors: the X Series was retro-styled at a premium price point, at a time when vast numbers of budget models were being sold. These were desirable, highly functional cameras made to a high specification  — yet portable and intended to be both beautiful to look at and enjoyable to use. Fuji also took the unusual decision to use its own X-Trans APS-C sensor inside.

Fuji's design decisions paid off and have undoubtedly resonated with many consumers, making the cameras financially successful. Their "kaizen" approach to firmware updates leads to incremental improvements that are often rolled out to older models. This is in stark contrast to the likes of Nikon and Sony, who irregularly release updates and even then mostly for major faults or lens compatibility.

The use of an APS-C sensor certainly surprised some users; however, Fuji has used this to its advantage by making its cameras portable. They then launched the medium format GFX Series, entirely eschewing a full frame strategy. The X Series (and GFX) have undoubtedly been successful on a technical level with consumers and in sales. Quite how successful is difficult to ascertain, as Fuji is largely opaque on camera sales (other than Instax). While Fuji doesn't rank in BCN's top three MILC manufacturers, this only considers the Japanese market, and Fuji's reach is much wider, with considerable sales in Europe and North America. A Nikkei report on the 2019 camera sector showed Fuji in third place behind Sony and Canon, with sales of 500,000. That represents a strong performance in a sector that is increasingly becoming specialists.

Fuji's Instax Journey

It might be a surprise, but Fuji's Instax offerings date all the way back to 1998 with the release of the Instax Mini 10; Wide arrived the following year, before the long wait to the 2017 release of Square. It exposes the film through the photo rear and reverses the dye layer order, all of which means a reflex mirror is not needed in the camera for image reversal. By putting the pressure plate and batteries in the cameras, Fuji managed to produce a small, economical, consumer-oriented instant film camera right at the end of the film era.

This budget-conscious background is evident in its current product lineup: the Mini 11 comes in at a svelte $70, while the top end Square SQ1 is hardly wallet-busting at $163. By 2002, Fuji sold one million cameras, very solid figures when you consider digital camera shipments stood at 24 million. Even in comparison to the film camera market (which peaked in 1997 at 36 million units) with 23 million units, that is still a solid performance. What this hides is that film camera shipments imploded in 2003, and this is reflected in the sales of only 100,000 Instax cameras in 2004.

The Instax revival and X Series development came after Fuji's restructuring in the 2000s. And what a success story Instax has been for the Imaging Solutions division. Those 100,000 cameras in 2004 translated into 5 million cameras by 2016 and 10 million cameras by 2019. Yes, you read that right: in 2019 Fuji sold more Instax cameras than the entire digital camera segment last year! This harkens back to the "pile it high, sell it cheap" mentality of the early 2000s; however, this simply reflects what consumers want to buy. And they want to buy instant cameras, which is also the reason for the revival of Polaroid through the Impossible Project, which is now Polaroid again. The success, besides 10 million cameras selling around the $100 mark, is through film sales, which come in at around 65 cents a print. It's all refreshingly analog and simple.

However, the success isn't only in terms of the number of units shipped. It's worth remembering that 14% of Fuji's income comes from Imaging Solutions. Of this, 10% is from photo imaging (aka Instax), with only 4% from electronic imaging. Yes, Instax turns over twice as much as digital. As much as we might love the X Series, the division's financial success is largely based on film, which seems somewhat ironic given the current direction of development.

The Future?

Fuji is in the unusual position of having a successful Imaging Solutions division, but more than that, it is making money. Unusually, that profit appears to be based on film cameras and film sales. Looking at the range of Instax cameras available, I imagine that research and development costs are fairly low! The same can't be said for their digital cameras, and it is, therefore, possible that Instax is cross-subsidizing electronic imaging. Fuji has remained committed to its mirrorless cameras, and its roadmap continues to expand the lens lineups while innovating on the bodies. Yet, it raises the question as to whether this is a sound investment. Their digital cameras are likely loss-making a result of relatively low sales (compared to film) and high research and development costs. This is now being compounded by falling camera sales and fierce competition from Sony, Nikon, and Canon as they expand their ranges, while Olympus and Panasonic also remain active and successful in this segment. It's not an easy sector to be in, and the traditional markets that Nikon and Canon have relied upon are rapidly changing. Cameras are undoubtedly luxury and professional items now, so the APS-C and medium format strategy may well turn out to be the right one. Or is full frame the way to go as the economies of scale, sensor technical innovation, and lens improvements make the difference compared to medium format negligible? Will medium format become an expensive albatross around Fuji's neck? Should Fuji retain its digital cameras?

Body image courtesy Bru-nO via Pixabay used under Creative Commons.

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