A Look At The Camera Industry In 2016 and Beyond

Steller Sea Eagle flying over Sea of Okhotsk

I am still on my Japan Wildlife Photo Tour. Spent about 2 weeks in Central and Northern Japan photography Snow Monkeys, Red-crowned Cranes, Steller Sea Eagles, etc. Now I am down in the south western part of Honshu to do some travel photography. You can follow my travels on Facebook and Twitter. See my equipment bag and works on MichaelDanielHo.com

It is no secret camera manufactures have not been doing well in the last few years. Nikon recently announced a big loss and layoffs. Medium Format companies are especially endangered.

Lenvid recently released their 2009 to 2016 infographic chart showing camera and lens sales figures. The drop in point-n-shoot and DSLR cameras and lenses is still continuing. The silver lining in these disappointing sales figures for the last few years indicate the share of DSLRs has increased at the expense of compact cameras. Mirrorless cameras did the best and is taking a bigger share of the total photography pie.

Compact cameras are predicted to lose ground again in 2017, primarily due to advancement and popularity of smartphone cameras. Mirrorless and DSLR cameras may have seen its nadir and make a comeback this year.

Generally I am in agreement with most of the findings and prediction except I expect Canon will come out of the pact much stronger. In past years, I have argued Canon has under priced its higher end models (EOS-1Ds and EOS-5Ds) and put too many features into the lower end bodies like the EOS-XXDs and EOS-6D.

This encourages many serious and even some pro photographers to buy the EOS-5D models instead of the EOS-1D. The EOS-1Ds Mark III sold for $8000 in 2008 and the EOS-5D Mark III's price was $3,500 in 2012. The latter is clearly a better camera in many ways. Loading up a camera with more features and capabilities and selling it for less may be great for consumers but hard on the bottom line for a camera manufacturer.

The entire camera industry is racing to the bottom by putting more and more goodies in their lower end models and selling them for less. Unfortunately, smartphone manufacturers have the economies of scale and technology to match and beat the camera manufacturers in this game.

Take a page from luxury car manufacturers. They all have entry level, medium and high end models. But in order to get some of the more advanced features, the buyers must buy the high end models or pay extra on lower end cars. That's how the car companies increase their profit margins and lure customers to trade up to more and more prestigious marques.

LensVid has come to the following conclusion after analyzing the data for the last few years :

• Smartphone cameras are replacing many point-n-shoot and low end DSLRs
• Mirrorless cameras are still not good enough to threaten the high end DSLRs
• The DSLR market is mature and may shrink slightly or stabilize
• Millennials buy smartphones and their cameras. Mature photographers prefer mirrorless and DSLRs 

LensVid predictions for 2017 :

• Global market for cameras will drop below 20 million cameras (1/6 the size of 2010).
• Downsizing and consolidation will continue for the camera industry.
• Fewer innovation and less funds available for R&D.
• The professional camera market will get the best technology but at a premium price.

Canon Projects 10% Rise In Operating Profits in 2017

Nikkei Asian Review reports Canon Inc. is projecting a 10% rise in profits for the year 2017 after a two year earnings drop. It is no surprise to any observer of photographic equipment manufacturers that the industry is facing less than stellar times.

Recent data from CIPA points to continuing decline in camera sales and large format manufacturers like Phase One and Hasselblad are in particular trouble. The latter may be in the process of being acquired by DJI.

The following is an excerpt from Nikkei Asian Review :

TOKYO -- Canon's group operating profit is seen topping 250 billion yen ($2.17 billion) for the fiscal year ending December 2017, roughly 10% over the expected figure for 2016, with two years of decline reversing on strong earnings from recent acquisitions.

Sales for the Japanese electronics company are seen growing nearly 20% to 4 trillion yen -- a height last seen in fiscal 2008. Toshiba Medical Systems, acquired late last year, will likely contribute some 400 billion yen in income. Canon uses American accounting standards.

As the market for such mainstays as cameras and printers matures, recent acquisitions should support the upswing in operating profit. New businesses will likely contribute a quarter of the group's total sales, up about 10 percentage points on the year.

Canon bought Dutch commercial printing powerhouse Oce in 2010 and Swedish surveillance camera maker Axis Communications in 2015. Both will likely see demand grow from Western corporations. Another Canon arm produces metal deposition equipment -- crucial for producing OLED screens -- for which demand is growing rapidly.

The company is investing actively in China and sees improvement for its production equipment for semiconductors and liquid crystal panels. Earnings from such mainstay products as cameras and printers will likely bottom out.

Canon is assuming an exchange rate of roughly 110 yen to the dollar for the fiscal year -- weaker than last year's 108 but seen as stronger than the actual figure. Further depreciation by the Japanese currency would make profit grow even more. The company also intends to continue promoting sales and cutting costs on such high-margin offerings as mirrorless cameras.

Fiscal 2016 earnings are due out Tuesday. Operating profit likely fell 35% on the year to 230 billion yen, slightly under Canon's projection of 235 billion yen.

CIPA Data Shows Camera Sales Are Declining Again

It is probably the worst kept secret to anyone following the photographic industry but camera manufacturers have been experiencing declining sales for the last few years. The main reason is due to changing customer preference and the advancement in many smartphone cameras.

Canon, the largest photographic equipment manufacturer in the world has experience a drop in profits in their latest few quartera. They are hardly alone and based on data published by CIPA, the Japan-based Camera & Imaging Products Association, published the charts below illustrating the trend in camera sales over the past decade.

The latest CIPA (Camera & Imaging Products Association) numbers for the last 3 years are out. It indicates camera shipments of all types have increased slightly earlier in the year but is beginning to decline again. 2016 figures are in Orange, 2015 in Black, 2014 in Blue.

It seems mirrorless cameras offered the industry a bright spot for about two years but now sales are leveling off and the increase in sales may have been at the expense of the traditional DSLR market.
There is no question smartphones have taken away some sales from the low end point-and-shoot and DSLR camera segment, but the best way to keep a photographic company relevant is to come out with the state of the art product to convince serious photographers why it is still the traditional DSLR camera that takes the best photos. What is more important than the number of DSLR sold is the mix of the sales, since low end cameras like the Rebel and SL series bring considerably less profit than the higher models like the EOS-5 and EOS-1 bodies.

The Yen has started to 'weaken' against the U.S. Dollar and other currencies. This will present some tailwinds to companies like Canon, Sony and Nikon, which are major exporting firms, selling their products overseas. Nevertheless, Canon is expected to announce more products for 2017 and beyond. Read my earlier post on Canon's roadmap for the next few years.