The Economist last week published an interesting article, "The last Kodak moment?" Definitely something readers of this site should read (especially you lingering film users), but it was a quote within that article that really got me to thinking.
Fujifilm's CEO Shigetaka Komori was quoted as saying "[a digital camera company] is a small business and not enough to support a big company." Okay, I added the word "camera", but I think in context that is justified. Indeed, a digital camera company would be an even smaller market than a digital company, which is the point I want to address.
Let's do some back-of-the-envelope calculation here. Let's first assume that the overall camera market (compacts, mirrorless, and DSLRs) is going to be relatively flat for the next five years. After all, phones are nibbling at the bottom, and DSLRs have reached saturation. So we're talking about 115-120m units. Nikon grew Coolpix 8% and interchangeable lens cameras 10% in the past year, so let's just assume 8% overall unit growth.
See the problem? Nikon has about 18% of the overall camera market (23m out of 120m) at the moment. If they grow their unit volume 8% a year as they currently suggest, we get 20%, 22%, 25% for future annual market shares. One out of every four cameras sold would have to be a Nikon by 2014 for them to continue their current growth.
That's not impossible, but given the players in the market and the potential for both buyer burnout and product disenfranchisement, it seems a bit unlikely. Indeed, it's possible to envision a future where Nikon's unit volume drops but their market share grows.
As Komori-san hinted, it's not a big market. It has huge price pressures, too, so retaining margin is tough. This is a similar problem facing Nikon to that which faced Kodak. Which leads me to one of three possible conclusions: (1) we're seeing the zenith of Nikon in the next few years; (2) cameras need to be reinvented to an extent that it rekindles new purchasing; or (3) Nikon needs to find another market to play and grow in (that could be phones, but that seems unlikely).
So what does Nikon look like 10 years from now? Just the biggest fish in two ponds that are growing smaller? Or a fish that flies over land and finds a bigger pond? Here's hoping for flying fish.