2010 Nikon Predictions
Will he ever stop? (Yes, in 2012 when my calendar says the world ends ;~)
I generally don't revise my predictions once done, but I'm going to this time around since I've heard a few more tidbits that tie together some loose ends. Revisions are in red.
Once again I tread into the danger zone. I'll remind folks up front that my predictions are partly source-based, partly provocative, and never 100% right. The purpose of these articles is to get a sense of where the industry is at, what is likely (or possible) next, and what we might expect in the coming year.
As always, let's talk first about the past year, 2009. Compact camera sales were basicallly flat, though a few vendors (Nikon was one of them) did manage to increase their unit shipments. DSLR sales were up slightly, perhaps 10% overall. But when you look at the financial statements from every camera vendor you see the same thing: dollars collected per unit was down. In some cases, way down. And that's driving profits down (or losses up in a couple of cases). There's no real growth for revenues in sight.
Or is there? Some of the DSLR (actually interchangeable lens cameras) volume increase was due to the Panasonic and Olympus m4/3 cameras. These are essentially low-end DSLR-like in features and performance, but look at the prices people are paying for them: more than low-end DSLR prices. As I write this, I can get an Olympus E-620 (not the lowest end Oly) with lens for less than I can get an E-P1 with lens. Yet I'm pretty sure the costs involved in creating an E-620 are higher. Put another way, I'm betting that Panasonic and Olympus have very good product margins on the m4/3 cameras. Moreover, they're popular and selling well (especially in Japan, where all the other camera makers are looking at weekly sales numbers). You know what happens when someone discovers a lucrative high-margin niche: all the other makers soon are making similar products to try to capture some of the same magic dust. Which means that while Panasonic and Olympus had the large sensor, interchangeable lens compact camera market pretty much to themselves in 2009, they won't in 2010. Correct assessment as it turns out. And the E-620 remark was on target: Olympus has decided not to produce a successor to that camera, it just doesn't work at to be profitable like the m4/3 models have.
But other things loom on the horizon, too. I've been looking at camera phone numbers and predictions lately. Camera phones are already a market two orders of magnitude larger than the compact camera business. Most of the sensor orders for upcoming camera phones are in the 3 and 5mp range, with 8mp right behind that (a 14mp sensor was just announced). Within two years, 5mp camera phones will be ubiquitous and 8mp will be readily available. This puts the low end compact camera market at jeopardy. Realistically, how often do you really need 10mp or more out of your compact camera? Well, for Facebook et.al, not so much. I don't see a lot of people paying US$100-250 for a basic compact camera in the future. Frankly, that's probably good news for the camera companies (they won't think so), because those units are either barely profitable or non-profitable for them right now, anyway. I would have never thought that we'd have so many remaining competitors clammoring for a market with no growth and declining per unit revenues, but I'm an entrepreneur at heart: I want to knock off the big companies with disruption. Well, guess what, the disruption is happening, and it's happening simultaneously with the video market as well as stills (my iPod Nano does credible video).
A bit of an aside: I proselitize a lot about open platforms versus closed systems (cameras being completely closed systems for the most part). The amusing thing to me is that a company normally regarded as proprietary--Apple--is proving that even a little bit of openness--platform documentation and applications--suddenly makes a 3mp camera in the iPhone much more interesting (and fun!) than any 3mp dedicated compact camera that came before it. This pattern is going to continue, because we've got Google involved now, too. It's a darned good thing that neither Apple nor Google has bought, say, Leica, and created a monster of a real camera competitor for the Japanese. Fortunately (and unfortunately) for the Japanese, Apple and Google are after mass markets, not small speciality markets. Message to the Japanese: selling lots of cameras isn't going be your future. Selling smaller quantities of dedicated, highly specialized cameras will be. Even then, if someone really figures out that open platforms and close customer relationships could apply to a camera company, too, the camera companies might start looking a bit like the US auto industry: slow to react, too big to change course, and continually iterating what used to work instead of what will work. (A punctuation to the aside: check out this article from the Economist and read the part specifically about Nikon and Canon versus ASML in the stepper market. They went from owning the market--and steppers being the dominant force within Nikon's financials--to being also rans--and steppers being the drain on Nikon's financials. What brought them down? Lack of open partnering and close customer relations.)
So what did the industry learn from 2008 and 2009 and will be applying to 2010? Well, I'm going to break this down by company:
I think 2010 is a very pivotable year for the camera companies. Olympus, Panasonic, and Leica have made changes that flip them from downward trends to upward. Sony continues to try to buy market share. Pentax is still doing the same-old, same-old (even down to the digital 645 being on-again, off-again, on-again). Nikon and Canon seem to be mostly only seeing each other and more worried that the other gets the upper hand on them. Put another way, I'd say that Olympus, Panasonic, Leica, and Sony have a plan. Pentax has no plan. Fujfilm thinks they have a plan, but don't actually possess one. Nikon and Canon have their old plan and think it will work forever. Let me put all that into a momentum chart:
I'd revise the chart by moving Olympus and Sony to the Hard to Tell column.
You'll note that I didn't put Nikon in that chart. Technically, they are in a middle ground between rising and falling (compacts rising, DSLRs falling very slightly). If I had to put them into a category I'd put them into the falling category, though. Why? Because this is about momentum. Nikon basically hit a low-momentum point with the intros of the D3000/D300s/D3s. By the end of the year, prices will be under strong pressure, so I'd tend to put them in the falling momentum category. Wrong. While prices are under strong pressure, the D3100 and D7000 look to regain some of the momentum.
2009 was also the year where DSLRs became video cameras for no particularly good reason. That's not to say that they aren't good video cameras--some of them are quite good at video. No, we're finally getting the impact of the newspaper craze of several years ago. You see, newspapers and news organizations buy large quantities of cameras at a time, which gets the makers interest. Back around the D2 generation, all those organizations thought that they needed to capture video, too. The goal was to send one person out into the field equipped with a camera, and that person would write the news story, take the still pictures, and capture video and interviews for the Web site. Call it Dreams of Productivity. Well, the makers listened. The engineers said it could be done, so it got the green light. And...well, the news organizations that asked for the capability are in deep financial difficulty and are finally starting to realize that it's a rare person that can do a quality written story, plus shoot quality stills and video all at once. Lucky for the camera makers there was another client they hadn't really talked much with waiting in the wings: the professional videographer trying to compete with the bigs. The ability to get shallow depth of field and shoot at 24 fps gave them Hollywood-like style abilities they couldn't get with their current pro video rigs (ironically, also from Japanese companies that don't seem to listen to their entire customer base much).
In case you aren't getting the picture (or is it a video now?), 2009 produced a bunch of surprises that are destined to disrupt the camera market for awhile. Some of that disruption will be good (small, large sensor cameras are a good thing) and some will be bad (adding more and more video features to a still camera doesn't make it a better still camera). What I'm not seeing from any major camera maker is a clarity of vision. They're busy grabbing at anything that looks like it might allow them to raise market share or product margin or both. Some of those things they grab at will turn out to be faux paths. I'm actually more worried about the financial health of many of these companies in the coming two years than I have been in the past. We're heading into the "make a big mistake and you're out" territory, I think.
Since this is a Nikon site, some people reading that last remark will be immediately panicking and getting ready to send me a "Is Nikon Dead?" email. No, Nikon is not dead. They are, however, vulnerable, and I'm not sure they realize how vulnerable they are. The stepper division (Precision) has been decimated. At one time earlier this decade, they provided the majority of Nikon's income and profits. Now Imaging (cameras and lenses) is 72% of the company. Nikon Precision lays the blame for their woes on the ups and downs of the semiconductor business. Yes, that business is highly cyclical, but there are more semiconductors being made today than there were yesterday or the day before. The thing that Nikon doesn't really want to admit is that an entrepreneurial European upstart managed to take a majority market share away from them. It's the double hit of losing market share and an industry downturn that has crippled the Precision division. One of those things was within their purvue to deal with (market share, by providing the products the market wanted the way they wanted them). I regard Nikon's Precision division as a major failure. (Yes, I understand that the Japanese reading this will react in shock over the use of the word "failure," but we here in the Western world don't look at that word the same way. You learn from failures and do better next time. That's it. Failure isn't a reason to hang your head in shame, it's a source to look at for lessons of what to do next time. There's always a next time.)
No, what worries me is that Nikon doesn't seem to fully understand why Precision failed and that this was a fixable fault. That makes me wonder if they won't see when Imaging starts to fail and address the fixable faults there soon enough to make a difference. And when I say "failure" in this context, I don't mean bankruptcy and dissolution, I mean contraction and loss of a clear path to renewed success. Nikon Precision will continue on. But unless they figure out the real reason why they collapsed so dramatically and address it, Precision will just continue on as a footnote division that's smaller and not particularly mainstream in semiconductors' future. The same thing could happen to Nikon Imaging. Not looking like it will happen in the short term. I was wrong. However, just because products are currently successful doesn't mean they will stay successful. At some point, the DSLR and compact camera markets as they exist today will wither. As many companies on top of the world (Motorola and Nokia come to mind) can tell you, if you miss a change in direction, your position in the market can change very quickly.
That's sort of my message for 2010: anything goes. Too slow to react or react to the wrong thing, and your market share and profitability may change. Oh, one more thing: 2010 is a Photokina year (held every other year). Some companies shoot for making a splash at this huge trade show, some don't (Nikon generally doesn't). If there's a disruptive technology or product lurking, we'll likely see it in late summer, early fall, just prior to Photokina.
So what do I expect product-wise in 2010? Here's what I see for Nikon:
Wait a second, that's it for Nikon? 5 DSLRs and a half dozen FX lenses? Well, I do expect a few more lenses than that, but I just don't know what they are. I seem to have lost any connection into what's really happening in the DX lens lineup, and there must be some more lenses coming there. I think Nikon's plan for the year is "big splash in FX, big splash just below DSLR, fill in gaps." Wrong (but it will right in 2011 ;~). Remember, 2011 is a big year for Nikon, as it will be year of the D4 and D400, and the introduction of many new technologies into the camera line, including a radically new AF system.
Finally, a word about my predictions. I write these to be provocative; to generate discussions about the health of the companies whose products we use and how they might best serve us in the future. When I write that I think a company or product line might not be long for the world, it's not that I want that to happen. Personally, the more players we have, the more competition we have and the faster we get new technologies and innovations that will make our lives as photographers better. While I make a modest living off of documenting Nikon products, I don't consider myself a Nikon fanboy. If you think I am, go back and read my Nikon Coolpix P6000 versus Canon G10 versus Panasonic LX-3 comparison for starters. Nikon themselves don't think I'm a fanboy ;~).
Okay, one more provocative prediction: interchangeable lens global market share for 2010.
This represents a growth rate of <10%, by the way. It's looking like I was low in overall market growth. The mirrorless cameras and Nikon's success seem to be pushing the market more strongly than I thought they would. I won't be able to update the actual numbers until April 2011 or so, though. But it's currently looking like Canon lost share, Nikon gained share, and the others nibbled at Canon's share.
11/22/09: initial post
What I Still Want in 2010
2. 80-400mm VR replacement with AF-S and a new tripod collar. Nikon is missing a critical lens for both prosumers and pros compared to Canon. Either update this lens with AF-S or give us something better to replace it. Please! Soon!!
3. Three hours of fast-moving Q&A with the guys who design the Nikon flash system, one hour of the same with the autofocus designers, and two hours of motivational cheerleading with the Coolpix team. I'll bring my own translater and pay my way to Tokyo. Drinks afterward are on me ;~). Hey Nikon, I plan to be in Japan in early 2010. Mind if I stop by?...
You might think I'd want more, but this is the dillema the Japanese companies now face: from a photographic standpoint, many of us are reasonably satisfied with most of what we have as tools. Getting us to invest in new ones is going to get tougher and tougher.
And, yes, this list is almost the same as it was last year. Alert readers will note that I've removed my APS Coolpix request. That's because I'm finding that m4/3 does everything I need in a smaller camera. Nikon will have to do better in order to win that business back from me.