Another Day, Another Reuters Article

(news & commentary)

Reuters is reporting that Nikon has cut its full-year profit target (both this year's and next's, apparently), though they're attributing this to mirrorless cameras (with some help from Nikon's executives).

As usual with Reuters lately, we get the "cameras are in trouble" article filled with statements that aren't challenged plus some odd other constructs. For example, consider this statement: "strong mirrorless sales at home, where shipments..." (emphasis added). Shipments are not sales. The Reuters reporter doesn't allow for a simple fact: that the Japanese companies, having discovered that mirrorless doesn't sell all that well in the US and Europe, are now refocusing all their shipments to Japan and Asia, where they can expect to eventually sell them. No use putting the inventory where it won't sell. It doesn't mean that mirrorless cameras are actually selling 16.8% better this year in Japan as Reuters seems to suggest. (To be honest, no one publicly knows for sure; the available numbers that we could use to evaluate the statement are private. BCN doesn't provide volume information publicly.)

The statement that especially troubled me in the Reuters article was the indirect quote from Nikon's Imaging Company President, Yasuyuki Okamoto: "falling prices for mirrorless cameras are pinching margins and hurting the interchangeable lens division." The second part of that statement is certainly partially true: without strong mirrorless sales the interchangeable lens camera numbers aren't growing. Though we seem to forget that if DSLR sales aren't growing, that, too is a problem ;~). The first part of that statement is probably not true, and is a gross simplification of the problem. 

Anyone who doesn't think that Nikon can sell a Nikon 1 profitably at US$400 is almost certainly wrong. Nikon 1's have probably the highest gross profit margin of any Nikon camera product. At least if they sell at their original list price. There's the rub. Pricing the cameras too high, then having to mark them down is causing far higher selling costs than if they had just priced them right in the first place. 

The trend is clear. Canon earlier said they were going to reduce their profit expectations, now it's Nikon's turn. Other camera companies are also reducing their expectation numbers for the next reporting round. It seems clear that no one had a great last quarter of 2013. The problems that plague the camera companies persist. Blaming it all on the lack of sales of mirrorless cameras, however, is just picking a scape goat. Compact sales are going to be down. Mirrorless sales aren't what was expected. DSLR sales are flat at best, and actual sales to customers are probably down given the inventory buildups we're seeing and the fact that in many cases cameras two generations old are still being sold "new." 

I also have to point out Okamoto's comment about women and mirrorless cameras: "…quite popular with women because it's light." I'm not sure that's accurately said. Women want small cameras, which happen to also be light. They want purse-friendly cameras and don't want things that hang from neck straps (note that bag straps are designed differently for women for a reason). They don't want to learn something complex, but they often have complexity in the things they want to document (e.g. soccer moms). But here's the thing: how many of Nikon's top executives are women? How many of the key decision makers? How many of the Nikon 1 engineering and design team? To my knowledge, the answer is probably zero. 

When I write about not solving user problems or being connected with users, there are many different permutations of that. If you're trying to design something that women will buy, you have to connect with and understand the issues women face, not give them some fancy colors to choose from. While men can still dictate to women in some cultures, might it be that in the Western ones such as the US and Europe—where mirrorless sales aren't exactly taking off—that you can't? That you'd need to actually connect with that user and solve their problems before sales would go up? 

Meanwhile, Nikon introduced 9 Coolpix models at CES and apparently will introduce five more shortly. Nothing like being "all in," Nikon. 

Could it be that the camera companies aren't really making the products that consumers would actually embrace? Cameras that allowed long file names, automatic and camera-settable EXIF data, the ability to get rid of card readers, and much, much more. Heck, here's one for you (remember, Nikon tried to make a camera with a projector in it): why can't I bring edited images back to my camera and use my camera as a presentation device? Why do I need an HDMI cable to my television even if I could use the camera as a presentation device?

The camera companies are still stuck in the linear shoot, transfer physically, process, print, transfer physically procedures that film used. The world changed. The camera companies didn't change with it. The potential for them to be disrupted completely out of business grows each day they don't figure that out. 

The problem, of course, is that it's software that does all the work. The hardware is just the box of things that the software uses to do the work. Apple knows this. Google knows this. Microsoft knows this (though they're having a hard time with who should make the boxes of things part). Amazon knows this. Sony is starting to figure it out (hey, it's like a PlayStation! Oh wait, we haven't quite fixed PlayStations yet). 

So, Nikon, think of it this way: dozens of Coolpix, seven Nikon 1's, eleven DSLRs (I'm counting everything that can still be bought new here in the US) are still just boxes. Very nice boxes. But boxes nonetheless. Until Nikon figures out the software part of the equation the future demands, I don't think we're going to see anything other than more of the same (more new updates of products, more disappointing financial results, etc.). 

Nikon needs to fear the Alan Kay quote (Alan Kay was an early pioneer in high technology, and his Dynabook concept is the forefather of today's tablets): "People who are really serious about software should make their own hardware." That statement was made in 1982 at a Silicon Valley computer industry seminar called Creative Think. He said a lot of other things at that conference that also apply to cameras today, though the one that stuck with me was "...it's all software…". 

We've got a lot of companies that are serious about software. A number of them have bought photography software companies along the way (e.g. Google buying Nik). I'd have to guess that the resurrection of the camera industry will come out of one of them, for all the reasons Kay outlined over 30 years ago. 

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