Two powerful trends are currently turning the established camera manufacturers inside out and upside down. These unique business conditions are creating a challenge for almost every manufacturer, and it is likely many will not survive.
Smartphones gut the market
Firstly, the dominance of smartphones has meant that the simple point and shoot camera marketplace which used to be the volume mainstay of big camera makers has collapsed. Unfortunately, the profit mainstay of the business is also suffering. The main profit engine for the big camera companies has always been the high end “system cameras” where expensive camera bodies are mated to even more expensive camera lenses. However the results here, while not as devastating as for compact cameras, are still appalling. Unit sales of system cameras plus lenses are today sitting at about half their peak volume in 2012. Meanwhile the total value of these systems has declined by about 1/3rd because of inflation and technical advances. There is possibly a further 50% unit volume reduction to go in the system camera marketplace before this decline levels off. There are few industries that can survive that kind of contraction without major casualties.
Sony shapes the entire camera market.
The second major trend is that Sony has undisputed world leadership in image sensor manufacturing. This allows them to keep their competitors permanently off guard. For example, Sony is driving dramatic improvements in high-end 35-mm equivalent sensors (full frame), at the expense of the smaller “crop” sensors that are favoured by second tier companies like Fujifilm, Panasonic and Olympus (also all supplied by Sony). Sony full frame sensors have technically led the market for the last 5 years, and they keep increasing performance in their own cameras, forcing their OEMs to keep pace. Key amongst Sony’s innovations in recent years has been the development of automatic on-sensor focusing systems that far surpass what competitive DSLRs are capable of for many shooting situations. They do not make these focus technologies available to their OEMs, who now struggle against superior resolution of the base technology (which they can eventually buy), and superior focus systems (which they must develop for themselves). For more information on how Sony grew to dominate the camera market look at my previous article.
Creating new or upgraded camera systems is an expensive business and very demanding on research and development costs, as well as stocking the dealer network. And heartbreakingly for manufacturers, as we have seen above, this absolute flourishing of astonishingly powerful new systems has not resulted in any growth in revenue or profit. In fact the opposite has been the case. Perversely, cameras have never been better and camera manufacturers have never been at greater risk.
Sony’s stranglehold on the market created massive problems for the established manufacturers. Canon was until recently unable to match the technical performance of Sony’s top end sensors, whilst Sony’s own cameras became more and more sophisticated and a greater and greater challenge to the top of the line Canon and Nikon professional DSLR systems. Nikon is now more than a generation of sensor technology behind, and along with Canon also has to make the transition to mirrorless, 8 years after Sony started.
Meanwhile, Sony has stalled development of sensor technologies in sizes smaller than full frame. The resolution of the most popular consumer format (APSC, used by Fuji, Sony and Nikon) has not changed since 2012 apart from minor upgrades. The next sensor size down is the so-called Micro Four Thirds (MFT) format, which was the basis of the very first mirrorless cameras in 2008, and that technology has been frozen since 2015.
This left Olympus (the inventors along with Panasonic of mirrorless cameras and the MFT system) high and dry with no development path for their sensors, while full frame cameras got cheaper and smaller. Olympus finally threw in the towel in 2020 and sold their fabulous camera business to a Japanese private equity company. Panasonic stayed in the game, but were forced to start all over again with a new line of full-frame mirrorless cameras, based on Sony sensors, and a brand new set of lenses.
The future for camera manufacturers
In 2020 Canon fought back with a radically improved sensor technology and a new generation of mirrorless cameras (the R5 and R6). Nikon is rumoured to be hooking up with a small Israeli firm, Tower Jazz Electronics to provide an alternative source of supply of advanced sensors. So the game may be on for the heart of the high-end systems camera marketplace between Nikon, Sony and Canon.
All this means that, somewhat improbably, a largely profit-free industry is creating some of the most fantastic products ever seen in this or any other technology marketplace, with fresh developments and capabilities appearing at a dizzying pace.
It’s a great place to be for a collector and user of camera systems. But who is going to win, what should I buy, and is Olympus extinct? All to be revealed in future episodes.