Can Lens Sales Bring Salvation to a Desperate Camera Market and Help Save Nikon?

Can Lens Sales Bring Salvation to a Desperate Camera Market and Help Save Nikon?

The news headlines have been rampant for the last 10 years: the camera industry is in free fall, spiraling into its death as a consumer electronics niche, no longer the doyen of conspicuous spenders around the globe. The numbers speak for themselves, peaking at camera sales of 120M units in 2010 before imploding to a grisly 15M in 2019. And that was before the definitive stab wound to the heart of COVID-19. Could it be that the humble interchangeable lens is the industry's salvation?

Camera Market

To understand the situation that camera manufacturers now find themselves in we need to recap where the digital camera has come from. CIPA shipment data is invaluable as it goes back to 1999, when digital camera production really ramped up. The graphic below is the one we are used to seeing, plotting millions of cameras shipped by manufacturers. Production peaked in 2010 at 120M units and has been in free fall since reaching a low in 2019 at 14.9M which is only higher than 1999 and 2000.

It's understandable why manufacturers are struggling when they are making and selling dramatically fewer cameras. However the picture is a little more nuanced than this. If we add in the value of shipments in Billion Yen (roughly 100 Yen to the U.S. dollar) we see a similar picture, although bear in mind these figures are not adjusted for inflation. Note that the monetary value of shipments peaked in 2008 and then rapidly declined suggesting that the bulk of cameras were both low in value and had low margins. It seems we are now back to a position of lower volume sales of higher value and margin. It would also seem that when manufacturers developed the plethora of new mirrorless models from 2010 onwards, they knew income was rapidly declining but probably not how bad it would get.

Lens Market

However the photography market is much more than just cameras, with camera manufacturers invested in producing both bodies and lenses. In fact, for every one ILC, multiple lenses will be purchased which makes repeat sales potentially very valuable, whilst the specialist nature of development and production also means that there is scope for high end positioning and good margins. It's this sector that Zeiss and Leica have occupied, and the likes of Canon, Nikon, and Sony are trying to push in to. However we also see Sigma and Tamron rapidly innovating in this space. Understanding the scope of the sector is crucial to appreciating its importance and this is something that CIPA also report upon. The chart below adds shipments and value for lenses indicating that no where near as many units ship (compared to cameras) and they aren't worth as much.

That said there are some critical points to take away from this picture. Firstly, as camera shipments rose rapidly, lens shipments only gradually increased. This reflects the dramatic increase in compact camera sales. Secondly, production peaked in 2013 and has declined since then, but nowhere near is rapidly as cameras. Whilst the latter has seen an average 22% annual drop in shipments since 2012, average annual lens shipments have only dropped 7%. Thirdly, the relative value of lens shipments to the combined camera-lens market has increased from a low point of 6% in 2003 to 34% in 2019. In short, lenses are a critical source of income and profit.

In fact we can get a further glimpse in to the lens market as Nikon reports on both cameras and lens shipments. They estimate a market size at some 17M units in 2019, in to which they shipped 3.2M representing a 19% share, slightly lower than their 20% camera share. That total figure doesn't quite square up with CIPAs 14M units, until you realize that  members reporting to CIPA are made up of Olympus, Zeiss, Canon, Nikon, Tokina, Tamron, Sigma, Sony, Panasonic, Cosina, Fuji, and Ricoh. That list misses out a large segment of Chinese and South Korean manufacturers, such as Viltrox and Samyang, which suggests they make up nearly 20% of sales... and growing.

The Future?

The importance of lens sales goes further than is at first apparent when you realize that in 2019 some 17M lenses were shipped on the back of 8.2M ILC sales, a ratio of two lenses for every one camera body. With the severe impact of COVID-19 on manufacturers' bottom line, it's interesting to see they are faring slightly better: camera shipments declined 51% whilst lens shipments dropped 46%.

It should be apparent from the above that lens sales are now making up a significant proportion of camera manufacturers' income and so are an important source of revenue. The graph above also shows how relatively insensitive to the camera market lens shipments are; the curve is relatively flat. This highlights a key property of lens sales: customers regularly buy lenses. So whilst lenses are long-lived, with photographers replacing older camera bodies, they also like to build lens collections.

The current shift to mirrorless is an historically strange moment in the industry. We have long-serving camera mounts which manufacturers have stayed loyal to — F, EF, and K mounts are all good examples — and some of these are potentially in the process of being retired by their proponents. The introduction of mirrorless from 2009 saw new mounts introduced in parallel with those on DSLRs; they were never meant to replace them. The pivot to mirrorless by Sony, Nikon, and Canon represents a watershed moment where the DSLR has wholesale been relegated to a has-been. The speed with which Nikon and Canon have had to act is unprecedented, requiring the development of a new mount and then the ground up design and production of new camera bodies. The most complex aspect has been rebuilding and scaling the production of their lens lineups.

This doesn't mean the DSLR is dead, but 2020 could be the year that MILCs outsell them. I would expect to see DSLR offerings to become vanishingly small in the coming years. In the same way that Nikon still offers the film F6, maybe we will see a revised lineup of only the D850 and D6. The legacy of DSLR users means matching lenses will sell in significant quantities but development could stop, with the technical innovation shifting to mirrorless. In fact, this is something we are already seeing from all the main players. Quite where Pentax fits in to this new landscape remains to be seen given their stated ambition of remaining — err — mirrorless-less!

So how might this help Nikon as, like cameras, their lens sales also show a declining market share? This situation isn't simply the result of fierce competition, although that is certainly a factor. Their product lineup is undergoing a transformation as they pivot to mirrorless and this has caused sales to stutter on the DSLR front as they race to release a full mirrorless lineup. This is against a backdrop of the massive decline in compact camera sales, a key source of revenue for them. In short, they need to fill out their mirrorless camera range and, crucially, the range of lenses on offer. Clearly you want to demonstrate the capability of your system and targeting pros is the traditional starting point. However there is a key revenue stream in selling second-tier APS-C models to amateurs, along with a range of lenses to support them. This doesn't happen overnight, but the sooner Nikon is able to to offer a wider range of optics the more resilient it's income will become. People want to buy lenses and sales are less susceptible to market ups-and-downs.

A word of warning: third-party sellers. These have long existed with Tamron and Sigma good examples. Their products have significantly improved to the point that some offerings are now preferred to own-brand models, however there is a reason for this: South Korean and Chinese models are eating away at the bottom of the market. In fact, not just at the bottom but well in to the middle segment. Samyang, for example, started out with well-specified manual focus models but is now shifting into the AF sector. Expect that 20% market share to grow, putting further pressure on Japanese manufacturers.

Lead image a composite courtesy of geralt via Pixabay, used under Creative Commons.

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21 Comments

Grant Schwingle's picture

Do you have a vested interest in Nikon's success one way or another? Mike Smith

Deleted Account's picture

Considering that competition benefits the consumer, it would seem that all consumers should have an interest in the survival of as many competitors as possible.

Grant Schwingle's picture

Good point - I'm talking specifically about Mike and Nikon though....

Deleted Account's picture

No.

The global economy has been absolutely devestated and projected to get worse (with the widespread collpse of small business). People aren't spending money on cameras.

Richard Richard's picture

Another day, another Mike Smith article focusing negatively on Nikon. The obsession is getting unhealthy.

jim hughes's picture

And yet, somehow I feel I'll be dust by the time Nikon releases the Z mount 105mm macro on their fantasy lens "roadmap".

Sam David's picture

Important article. As I have long written and still maintain, "mirrorless" was nothing but a gimmick to try to reinvigorate camera sales, nothing more, nothing less. Whether there are any advantages to mirrorless over DSLRs -- and I have never seen them -- the real competition wasn't between these and other camera bodies, it was between any camera body and the cameras being built into "smartphones" and similar "pocket" devices. As their quality improved, and the convenience of being able to "put it in a pocket" became a consumer "must," the rationale for a camera body and lenses was lost for most of those who responded back in the 1990s to the digital revolution, which really did make a difference in almost all of the important aspects of photography for MOST people. By stimulating a needless debate between mirrorless and DSLR values, Nikon, Canon and the like undermined the overall value in the marketplace of what they are producing. I have no sympathy for the manufacturers who did this to themselves, but I still love each of the many camera bodies and lens sets that I still think produce superior images.

Richard Richard's picture

If you haven't seen ANY benefits of mirrorless over DSLRs you must be blind, trolling or deliberately obtuse.

David Stephen Kalonick's picture

Exactly. I skipped Sony and the R but my R5 paired with any of my RF glass is better than any camera system I've ever used and I've been shooting for 25 years. Sam, wake up dude, mirrorless ins't a gimmick, it's better in every way(thanks to Canon😜).

Grant Schwingle's picture

"Every way" is a stretch, but it certainly has benefits over traditional DSLR.

Mark Beguin's picture

Maybe if Nikon would announce another mirrorless camera, along with some lenses we could get excited. Stop using COVID-19 as an excuse. The pandemic might hinder the release of cameras/lenses, but it has little/no effect on an announcement.'Nikon to announce the Pro camera Z? on October 13, 2020.' (Wow! That was hard.) Who cares if it's a month and a half away, we have something to look forward to. Especially in a year where there is very little to be excited about. Fujifilm just made an announcement on a new release coming in Mid-October. That announcement was around September 21-22ish. It's not a crime to make announcement five weeks before a release.

J Cortes's picture

How do you know ? How many camera companies have you ran ? Do you work at Nikon ? Some of what you say has merit , but do you really know that COVID has had no impact on their operations ? Just curious.

Mark Beguin's picture

I'm sure COVID-19 has had an effect on production, but I believe an announcement date doesn't take that much effort. I've never run a business, If I did I, I wouldn't leave customers in the dark as to when the next camera is coming out. Production slow downs happen, like stated earlier, an announcement a month and a half ahead is better than nothing. It might be too late for Nikon with me. I want to compare the R5 with the Z7s/Z7II and obviously I can't do that with only one camera out. I've been willing to wait, and would wait even more if I knew an announcement was coming on a specific date, however, all I have is speculation. I can't make a decision on speculation, well I can, 'Forget Nikon, I'm getting the R5.'

jim hughes's picture

They just announced the Z5 - I'd call it a yawner.

Mark Beguin's picture

I'd say, "You're correct, in that assessment."

Malcolm Wright's picture

It might be me, but can it really be true that sales in units of cameras that take replaceable lenses out sold the lenses for those cameras by a factor of 6 cameras sold for every lens sold between the years 2007 to 2012.
Either this is true or the figures are suspect.
It appears that only in late 2018 did the number of lenses sold get even close to the number of cameras sold that year.
If the figures are accurate, which I doubt, this could indicate that
- 5 out of evey 6 replaceable lens camera buyers rented their lenses, which I doubt.
- at least 5 out of 6 buyers (probably more) of replaceable lens cameras had so little interest in photography they stuck with a kit lens or didn't use it.
- 5 out of every 6 replaceable lens camera buyers found they had little or no use for the camera they had bought.
- Every lens buyer bought 6 camera bodies to fit their only lens to.
Why dies no one think through published figures and raise even the most simple questions?

Either that or the figures are so unrelated that no correlation can be drawn at all and the article might as well read could the sale of SD storage cards come to the rescue..

Thierry Tramoni's picture

I think that most photographers keep their lenses for decades but change their camera every three or four years... in my mind new mounts on Mirrorless are here to break this rhythm...

Malcolm Wright's picture

That is a great thought, but would mean that everyone bought a camera to lens adaptor, as most brands changed mount between film and digital bodies.
Some brands have even changed mount since 1999, before mirrorless came about.
You would also expect lens sales to go up quite sharply after the launch of digital cameras and then tail off (exceed camera body sales at some point between 1999 to 2010 say). The graphs don't show that.
You're correct the new mounts will increase lens sales, unless every one uses adaptors?

Jim Cutler's picture

Deleted by author

Michael Newler's picture

Nikon can absolutely increase camera sales, but it will take them a long time if they keep doing what they've been doing for the past 20+ years and not going anywhere but down.....!!! I created the "Explorers Of Light," and I first offered the program to Nikon because decades earlier I used to work for them when it was E.P.O.I as a Nikon School Instructor. They turned down my program, so, instead I too it to Canon, and the rest his history. How can Nikon get their mojo back now that the entire photo-marketing industry has changed mainly because of the iPhone. Believe it or not the iPhone is an incredible imaging tool - to phone home about, too....!!! Nikon needs to go back into their roots if they want to survive and grow out of the hole they dug for themselves. Nikon needs to bring back a group of the best most note-worthy image-makers that are well-known worldwide and put them to work EXPLAINING what they did to CREATE THEIR IMAGES. No hard sell, and no sles pitch — if it is good enough for "xxxxx" that's all consumers want to know. HOWEVER, this group of image-makers MUST be the "UPPER CRUST," so to speak, of image-makers - wannabees need not apply, and no relatives of company employees including their "friends" who takes good "snaps".....!!! Hey, Nikon, I'm ready how about you — wanna play let's make a deal.....??? I have a few "interesting people" that would just love to come back HOME to Nikon......!!!

All the BEST,
Michael Newler (a.k.a. "Captain Explorer")
www.newler.photo