Camera producers death spiral

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rattymouse
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p.1 #1 · Camera producers death spiral

Fascinating read by Thom Hogan about the global overproduction of cameras by the manufacturers.

Amazing how different industries repeat the same problems over and over and over again.....

http://www.sansmirror.com/newsviews/the-jc-penney-problem-only.html

Nov 19, 2012 at 10:47 PM

phuang3
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p.1 #2 · Camera producers death spiral

Cameras have very high profit margin (some says 70%+), so big sales is no hurting at all. Those manufacturers are competing in gaining market share, and lowering the price fast is just one of the strategy. Once people buy their camera, they are forced to buy expensive accessories and super-expensive lenses. Those are the main income from camera industry.

Nov 20, 2012 at 05:58 AM

rattymouse
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p.1 #3 · Camera producers death spiral

No one is getting 70% margin on cameras. That's a fantasy.

Nov 20, 2012 at 07:11 AM

phuang3
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p.1 #4 · Camera producers death spiral

Years ago, I got my digital rebel 300D for $4xx after rebate, and the retail price is still around $800. That is for an entry level DSLR. Flagship like 1 series is possible to have much higher profit margin.

Nov 20, 2012 at 09:08 AM

jotdeh
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p.1 #5 · Camera producers death spiral

Where can you still buy a 300D retail?

Nov 20, 2012 at 09:12 AM

MarcG19
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p.1 #6 · Camera producers death spiral

I can't vouch for Thom's data since I don't have access to it, but he claims to have talked to all kinds of executives/insiders and to have strong tech and camera industry experience. I can only judge his logic and the data he presented, which looks good to me.

It is clear that there's overcapacity in the camera market - though I suppose one could say Thom exaggerates by judging black friday sales, but I'd like to see contradictory data - and I do fear that smaller camera divisions with high volume pretentions (Panny and Olympus) might be buried in a race to the bottom.

And there's no way consumer cameras (P&S, low end DSLRs) make anything close to a good profit margin, especially if bought at discount. (that being said, I'd imagine the tops of the line have good profit margins).

Edited on Nov 20, 2012 at 02:39 PM · View previous versions

Nov 20, 2012 at 11:38 AM

ukkisavosta
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p.1 #7 · Camera producers death spiral

Thanks for the link. The article sounds plausible to me, and I've been amazed at some of the discounts on mirrorless bodies.

Consumers wait for new discounts, while the lifespan of certain products is only a year or so. Do they actually sell any of those for MSRP?

Jaakko

Nov 20, 2012 at 11:50 AM

AhamB
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p.1 #8 · Camera producers death spiral

phuang3 wrote:
Cameras have very high profit margin (some says 70%+), so big sales is no hurting at all. Those manufacturers are competing in gaining market share, and lowering the price fast is just one of the strategy. Once people buy their camera, they are forced to buy expensive accessories and super-expensive lenses. Those are the main income from camera industry.

That goes against what I've heard, especially about expensive to make cameras like the Sony A900 and A850 that were maybe even sold at a slight loss.

Nov 20, 2012 at 12:16 PM

Jman13
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p.1 #9 · Camera producers death spiral

I really don't understand Panasonic's strategy. They release these great high end bodies, with extremely limited US availability, and for months people can't get them...then the market floods and the huge discounts begin. It is discouraging. I bought my GX1 last January, and in less than a year, it's dropped 36% (B&H). That's really depressing. And on Amazon, it's now nearly half price. I paid $699 for it new, and Amazon has it right now for $379. (which, BTW, is a great price on a great camera). I wouldn't care as much if it didn't so horribly affect resale. I mean, less than a year after release, I'd be lucky to get $325 for it. Though frankly, at that price, I'm tempted to pick up a second one for some reason. (I have a $100 Amazon gift card right now), but I won't.

Nov 20, 2012 at 02:20 PM

eosfun
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p.1 #10 · Camera producers death spiral

I really don't understand Panasonic's strategy.

If you read this thread you get an idea that maybe this isn't strategy, but more or less survival measures: http://www.fredmiranda.com/forum/topic/1164784

Nov 20, 2012 at 02:33 PM

Exdsc
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p.1 #11 · Camera producers death spiral

This is great. Its about time the prices of cameras came down to what they're actually worth.

Nov 20, 2012 at 02:45 PM

alwang
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p.1 #12 · Camera producers death spiral

From my perspective, the prices on old cameras are dropping because the technology is still improving pretty rapidly. Thom talks about a GH2 for $500 as a great deal: I'd have a hard time recommending that to someone over a newly-released NEX-5R which can be had with kit lens right now for $650, and is better than the GH2 in just about everything, except possibly video. Even for the average consumer, I think the changes being introduced every year right now are impactful, particularly for mirrorless: better screens/EVF, better AF, better high ISO and DR.

I do think the time is coming where it will be harder for the average consumer to appreciate improvements in enthusiast cameras, and that might be when the bottom will fall out, much like it has done in the LCD TV market. The one saving grace for the camera companies is they haven't faced price pressure from Chinese electronics clones yet.

Nov 20, 2012 at 02:50 PM

Exdsc
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p.1 #13 · Camera producers death spiral

GH2 has a inbuilt EVF.

Nov 20, 2012 at 03:08 PM

davenfl
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p.1 #14 · Camera producers death spiral

AhamB wrote:
phuang3 wrote:
Cameras have very high profit margin (some says 70%+), so big sales is no hurting at all. Those manufacturers are competing in gaining market share, and lowering the price fast is just one of the strategy. Once people buy their camera, they are forced to buy expensive accessories and super-expensive lenses. Those are the main income from camera industry.

That goes against what I've heard, especially about expensive to make cameras like the Sony A900 and A850 that were maybe even sold at a slight loss.

Having spent the majority of my life as an executive in high tech electronic design and manufacturing your statement makes little to no sense. A digital camera is a portable computer with some mechanical parts. There is nothing terribly unique about it save the sensor, firmware, and digital image processors. Cost for full frame sensors were high but directly related to poor manufacturing quality yields. Manufacturing engineering has largely caught up there and while yields on full frame sensors are still not in line with smaller sensors they have in fact increased by 200-300+%, bringing full frame sensor costs way down. Factory costs for a Canon 5dM3 sensor are about $245 versus $800+ not to many years ago. No manufacturer is building high end cameras as loss leaders. Profit margins are excellent and in fact digital cameras have been the saving grace profit wise for companies like Canon, Sony, Samsung, etc.

Dave

Nov 20, 2012 at 03:10 PM

Mescalamba
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p.1 #15 · Camera producers death spiral

High profit margin..

D3X almost didnt have any and A900 was like PS3 subsidized. Sure some cams with recycled sensor tech like any 18 mpix APS-C Canon or any camera with 16 mpix APS-C from Sony have probably pretty high profit. For Canon and Sony. Much less for others.

Nov 20, 2012 at 03:21 PM

snapsy
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p.1 #16 · Camera producers death spiral

Cameras are razors, lenses are the razor blades. Profit is in the lens.

Nov 20, 2012 at 03:26 PM

FlyPenFly
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p.1 #17 · Camera producers death spiral

Same thing happened with TVs... only Samsung is really making all that much money now. Sony is not making any money on it and neither is any Japan heavy company.

About the only companies immune seem to be Fuji and Leica.

Nov 20, 2012 at 03:27 PM

Exdsc
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p.1 #18 · Camera producers death spiral

snapsy wrote:
Cameras are razors, lenses are the razor blades. Profit is in the lens.

That is why Nikon V1 is discounted heavily because Nikon thinks they will sell those cute Nikon 1 lenses for V1 and V2. The more V1s in the hands of people, the more likely they'll buy a lens or two for it.

Nov 20, 2012 at 03:34 PM

galenapass
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p.1 #19 · Camera producers death spiral

Nov 20, 2012 at 03:55 PM

timpdx
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p.1 #20 · Camera producers death spiral

Like many things, say the Canon 7D, it may have been sold at cost, but as costs drop, I am sure the 7D is a cash cow now for Canon, the manufacturers realize this. Just as Amazon is selling the kindle fire HD at cost, I am sure in 6 months as things get cheaper they will have a decent margin on the thing. You have to judge the profitability over the lifetime of the product not just on the release date of a particular model.

Nov 20, 2012 at 04:18 PM

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