Installed Base Versus Current Sales Rate

An installed base is the number of customers who have already bought into an ecosystem and who from time to time buy accessories or supplements. Current sales rate is how many people are buying into an ecosystem today (or the previous recorded period, such as a month or quarter or year). 

Inevitably, both of these things change. 

Aside: Installed base has several potential definitions. You could count all cameras that were ever bought, all cameras that were bought and are still owned, all cameras that were bought and are still in regular use, and so on. You'll note that I used the words "who from time to time buy accessories or supplements," so I tend to refer to the installed base as the active users, not all those that bought the product in the first place. Getting a strong handle on what that number is can be tough, though. I've tended to estimate what the active base is through surveys, but don't have an absolutely current survey at the moment, so can't give you a realistic estimate of how many DSLR buyers are still using those DSLRs.

In the DSLR era that began in 1999, Canon and Nikon had high early sales rates that they sustained for quite some time. The result was a huge installed DSLR base for both the EF and the F mounts. Fujifilm and Sony, meanwhile, had low or no current sales rates in the early DSLR era—Fujifilm eventually just stopped production—and ultimately did not establish an installed DSLR base anywhere near the size of Canon's or Nikon's.  

In the mirrorless era that began modestly in 2009, Olympus, Panasonic, and Sony had early high current sales rates, and Sony sustained and grew that high rate. The result is (currently) a large installed base for Sony E/FE, though not nearly as large as the DSLR installed bases of Canon and Nikon. 

While overall unit volume in 2021 was 60% mirrorless, that also means that 40% were still DSLRs. In other words, Canon and Nikon added to their huge DSLR installed bases, while Sony also added to their largish mirrorless installed base. 

As I noted above, things change. The questions are how much, how fast, and what triggers the change.

Let’s start with the last one: what triggers the change. Now that Canon and Nikon have relatively full lineups of mirrorless cameras, it’s urgent for them to convert their DSLR users into mirrorless sales. Which brings me to my first comment: I don’t see Canon nor Nikon doing everything that’s necessary to get all those closet DSLRs turned into practicing mirrorless. Nikon, for instance, sold over 500k D750 DSLRs in about eight years, but the near equivalent mirrorless camera(s), the Z6/Z6 II, has sold just over 200k units in four years. The Nikon mirrorless lineup is "thinner" than their DSLR lineup became, so one would think there were D600 and other DSLR owners that would also be opting for the Z6 level of mirrorless camera faster than they have been. 

Of course, the overall sales market for cameras has plummeted dramatically since the D600 was first sold, so it's difficult to assess whether the Z6-type body installed base is currently a moderate success or a slight disappointment. Still, the point remains: it's incumbent upon Nikon to move the tens of millions of F-mount installed base to mirrorless. That's not happening rapidly enough for Nikon to sustain their overall market share, thus my comment that they're not doing everything they can to move units. 

As I’ve noted before, Canon’s M-mount was a poor decision that put them in a mirrorless dead end, and they should have already learned that lesson from Nikon’s ill-fated Nikon 1 mount. When you make something that ultimately is found to not be connected to your future plans—the M-mount can’t use RF-mount lenses even by adapter—all you do is upset your established customer. If the consumer buys into your ill-fated effort, they get disgruntled when it becomes an obvious dead end. Many just don’t buy into it in the first place because they see through the marketing messages and see the product for what it is, a stop gap. Nikon 1 and Canon M have turned into giant sales frictions that both companies need to get customers past. The marketing teams at both companies whiffed at the plate and the customer sentiment shifted to “Sony might be the safer bet.” 

Not that Sony didn’t have a dead-end or two in their mirrorless efforts, but at least the lens mount stayed the same. Think of it this way: Canon and Nikon had to start again from scratch in mirrorless with both cameras and lenses, but Sony was able to refine and reengineer their way to the current Alphas without doing a mount restart and having to recreate lenses. It’s why their installed base is becoming the most significant in mirrorless, and will be difficult to dislodge.

I’ve not been silent about all the miscues that the camera makers have been making (and continue to make). However, large installed bases give you a chance to recover from self-inflicted problems: in theory, you should have an easier time upselling your installed base than a competitor will have converting them. For Sony that's happening. For Canon and Nikon, it's not happening as fast or as easily as it should, which indicates potential product and marketing miscues.

Next: exactly how much is the world of installed bases and current sales rates changing?

A lot. 

Post Kodak and prior to smartphones, people believed that you needed a dedicated camera in order to document key moments in your life. 75 to 85% of those folk bought Canon or Nikon SLR/DSLRs. But you’ll note that I used the term “closet” in passing, above. The majority of those DSLR cameras sat in a closet most of the time and only came out for vacation, graduation, holiday, engagement/wedding, or new baby. Contrast that with today, where it seems like everyone under the age of 40 is documenting every meal, every place they visit, every life event of any kind, every friend they meet up with, all with selfies taken using their phone. 

Have the camera companies ever taken the Kodak marketing approach? 

What approach is that, you ask? “Don’t waste your precious life memories using something that will prove ephemeral.” Realistically, are those folk that documented their life with their 4mp smartphones in the period just post iPhone 1 going to like the images they see when they project them onto their (eventual) 8K screen? Probably not. But despite pushing the digital camera so far, so fast, all the camera companies failed to get past the “smartphone is good enough” argument in their marketing and point out that you should be recording for posterity, not today's Instagram post.

What this means is that the biggest installed base of cameras at the moment is now phones. Computers probably are second (that, by the way, was my goal when I helped design and launch QuickCam back in 1994). And these are not just moderately larger installed bases, they're orders of magnitude larger. As in billions versus millions. 

This brings us to the “how fast” question: digital camera sales peaked in 2011/2012 depending upon how you measure. So, for the last decade the current sales rate for the industry overall has been falling regularly, and pretty dramatically. COVID has disrupted our ability to know whether we’ve reached a real bottom in current sales volume or not. But let’s assume we have, which turns out to be 8m total camera units a year currently (compacts, DSLRs, mirrorless). That’s down from 121m total camera units in 2010. 

See the problem? No?

So how do you grow your installed base in a new system (Canon RF and Nikon Z) when the market volume has gotten so low? Moreover, how do you do that when a key competitor or two has had a longer run at doing so (e.g. Fujifilm, OM Digital Solutions, and Sony)? 

Canon and Nikon both seem reluctant to give up those lingering DSLR sales. Remember, DSLRs were 40% of all ILC shipments in 2021. Canon is especially wanting to keep all unit volume, as they are still pursuing an overall market share approach. However, even if all you do is shift your DSLR sales to mirrorless, yes, you may keep your overall market share, but you’re still significantly behind in installed base at current volumes. 

Today, Canon and Nikon are seeing the things I’ve been writing about for the past decade: samplers and leakers, for instance. Sony—thanks partly to successful social media hype, fan boys, and a lot of intentional misinformation mischief on the Internet—looks to many like an interesting and “safer” choice than Canon or Nikon. Sony's bigger mirrorless installed base has attracted the Sigma/Tamron/Tokina trio to support it with additional lenses. The Sony model lineup is full, and all the still camera options are in their third, fourth, or soon fifth generation. (Okay, the A1/A9 aren’t, but I sort of see the A1 as a third generation of A9.)

Against that, Canon then comes out and says—on the record, no less—they won’t let other autofocus lens companies play in the RF mount? Bozo move of the decade, Canon. Did that just cause another 2%, 3%, 5%, 10% of the Canon DSLR installed base to decide to try the Sony Alphas instead? Whatever the actual number turns out to be, you don’t grow your installed base faster by announcing things that make customers think they might not want to be in your installed base in the first place. Harvard's MBA school is probably already wondering whether they should put out a Case Study on this bonehead move.

Moreover, the Canon M-mount buyers were the Rebel/Kiss buyers for the most part (in Japan, many M models were labeled Kiss). Now Canon has to transition those folk AGAIN. Second biggest Bozo move of the decade. And the two Bozos now form a giant Bozo to get past. (As an aside, Bozos have been, in my long tech world experience, one of the key things that make companies shrink or even fail. Not the only thing, mind you, but More Bozos certainly make problems More Likely.)

Nikon has a similar problem with DX. The Z DX triplets are basically the same camera in different cladding, and totally starved for lenses. At least in DSLRs we got a wide spread of DX cameras and an abundant quiver of 18-to-something zooms. Nikon's installed base of consumer-level DSLR owners is in the many millions. So far, the triplets have produced in the low 100K range in terms of mirrorless sales with the same level customer. That's not a healthy mining of installed base.

Nikon also has a consumer habit that has not been healthy. This started way back in the film SLR era. Nikon would make great pro cameras that proved successful, then think that they could dominate consumer cameras and thus expand the low end of their lineup radically to get market share, only to find that this was difficult and lowered their margins, so eventually they would back off. Only to try again. And again. 

I can’t really say that any of these consumer initiatives, including Nuvis, Pronea, Coolpix (A, S, L, and P), Nikon 1, KeyMission, and others, have really led to an ongoing, stable camera business, let alone an upgrading customer. Early film initiatives lead to closet cameras that never got replaced by the customer, while recent digital initiatives haven’t led to the building of an installed base Nikon can sell to. So we go through these cycles at Nikon where the consumer efforts are re-doubled and then un-doubled. At the moment, other than the DX triplets, it seems like un-doubling is in effect again. I fail to see the point of this constant "in the market", "out of the market" gyration. 

Then there’s the parts shortage. As long as the camera companies source parts from China and China continues its Zero Covid policy, I’m not sure parts shortages resolve into a regular, predictable flow any time soon. Moreover, I wonder how much everyone overshot the procurement orders during the worst shortage period. There’s a strong chance that parts suddenly flow beyond demand, which means that you suddenly have to discount to move all that product.

So where are we in transitioning installed base to current sales? Let me get out my Sharpie, mark up some reports, and give some mid-term grades. Remember, I have a long-held reputation for being a tough grader ;~)

  • Canon = C-. I’m tempted to grade far tougher, but their individual model scores are all over the place. Some cameras are resonating and do the right thing (R3, R5, R7), many aren’t. Ditto with RF lenses. Canon’s grade is also mostly about execution, not actual product, so even good product doesn't necessarily translate into good grades. Management has shot itself in the foot a few times and seems to now be aiming for the other foot, marketing doesn’t have a clear message to anyone, and the various pieces of the camera puzzle for Canon are at very different stages still. Recent signs indicate that their grade is getting worse, not better.
  • Nikon = C+. I’m again tempted to knock the grade down some more, but the Nikon FX lineup, the FX lenses, and the Z9 marketing are all pretty solid, and Nikon marketing has come out of hibernation often enough this past year to make some clear and convincing points. Those FX products hit at the hearts of Nikon’s long-term faithful, and play to the most invested of Nikon’s installed base. D850 owners, however, don't feel like their mirrorless camera is available yet. Nikon has a bigger installed base than just the totally loyal, and most of those are not being served by anything, unfortunately. The DX line is being fumbled about, with no clarity or sense of building a new crop sensor base. Moreover, Nikon seems to have a ship-to-demand problem, too. When they do create a product that should move people, those same people find they can't get it.
  • Sony = B+. If you're into video, you might give them an A. But for still photography, the crop sensor (APS-C) installed base is starving for new cameras that compete with the latest Canon and Fujifilm offerings. The full frame installed base should be happy with the iteration progression, though. Like Nikon, Sony has had some supply versus demand problems, too.
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