What Did I Miss?

(commentary)

One of the things I use the year-end holidays to do is to reflect backwards and project forwards. I don’t do this just with cameras, but with pretty much all things that interest me, including my modest stock portfolio ;~). As part of the exercise, I try to understand what trends I missed and how that might impact what I do going forward. 

I haven’t previously published my “miss list,” so I’m going to actually throw out a few things from previous years lists as well as this year's. Without further ado, here’s a sampling from my photography miss list:

  1. The decline after peak digital camera sales is steeper than I originally expected. I correctly foresaw almost a decade earlier that we’d be in an extremely mature digital camera market by 2011. I predicted the peak almost uncannily accurately, but I didn’t predict such a severe decline from the peak. Some of that has to do with the rise of smartphones. It wasn’t until 2007 when I sat on the side of Kilimanjaro with an iPhone as the only Internet user on a brand new cellular network that I understood how smartphones might change what would happen with digital imaging, and it wasn’t really until 2010 or so that I fully understood just how big the smartphone market was going to get and how competent the cameras in them would actually be. 

    On top of that, I also expected that the camera companies would understand that they needed to reinvent imaging by the time the peak hit, not just iterate it. We’ve seen a couple of feeble attempts at that, but unfortunately it appears that the camera companies just don’t understand the bottleneck problem they have to solve: workflow. In all of its permutations. Generally, iterating hardware doesn’t change workflow. It’s a problem you have to directly tackle with new ideas. Hasn’t happened yet, and doesn’t appear to be happening at all.

  2. Nikon’s push into FX would be so strong. While I reported many early signs of Nikon’s FX obsession, I discounted them too much. I interpreted the push as “sell what’s new” and what happened in early 2012 was there were two new FX cameras to sell. In retrospect, all the FX-is-important-to-us signals were in place back around 2009. Moreover, it’s obvious now that Nikon saw that they needed to move to protect their high end, and that selling higher priced cameras actually would help deal with #1, above. I’m not sure this was the entirely right strategy for Nikon, but it certainly was a logical strategy to pursue. Indeed, historically it’s exactly what Nikon tends to do: succeed in high end, rush to consumer, eventually hit a wall in consumer, return to high end.

  3. Market shares didn’t distort during the decline (so far). I would have guessed that one of two things would have happened by now in the sales decline: (a) Canon and Nikon would increase their dominance; or (b) Sony and the seven dwarves would steal significant market share from Canon and Nikon. Instead, so far we’ve seen almost no movement of Canon and Nikon ILC and overall market shares, while Sony has retaken market share from the dwarves. We’re almost exactly where we were in the Canon/Nikon/Minolta standings of the 90’s, with Nikon being a little stronger and “Minolta” (Sony) being a little weaker. 

    In retrospect, I should have noted that even things like mirrorless were more on the iterative side than innovative and adjusted my thoughts accordingly. Strong iterative moves by one player generally don’t tend to significantly distort market shares, though they sometimes move them a bit. Truly innovative moves can quickly distort market shares. Only problem is, no one has really made one. 

    Further, it’s abundantly clear that the camera makers are all looking at each other, not at customers. Anything different (more pixels, different sensor size, lower light capability, different focus system, IS, you name it) tends to be quickly matched or reacted to in some way very quickly by most of the players (uh, Pentax, hello?). Sometimes it’s just marketing message or pricing that adjusts, but often we see things like the Canon EOS M putting a mirrorless stake in the ground, which has a FUD-like drag effect on the others. Short of a truly breakthrough technology that’s patent protected, none of the camera makers are going to manage to beat the others to the punch by more than a cycle or so. 

  4. The push to support 4K video is happening faster than I expected. Horse or cart in front? Apparently cart. In terms of actual needs-based buying, there’s very little in 4K video. This hasn’t stopped virtually every camera maker from exploring it and many from releasing it. It’s a relative to the “more pixels is better” marketing that the camera makers have gotten used to. Obviously, 4K video is better than 2K (HD). Already we have some talking about supporting 8K video. 8, 16, 32, is there an end? Sure, but not in terms of product engineering, apparently. It took the US more than a decade to transition to HD (2K), and our bandwidth is struggling with that, despite heavy compression.

    Still, a few brave videographers have discovered that 4K with modest compression down sampled to 2K looks really, really good. So they’re signing up with their wallets. But I still find even this small group being more acceptance than I would have originally guessed. What I missed is the “stand out” aspect: a 4K videographer that markets well can claim “future proof” and “higher current quality” compared to the average 2K Joe still shooting 1080P.

  5. DCF hasn’t been updated. Who would have thought we’d still be designing around and using what are basically 30-year old standards that have lots of workflow liabilities? My problem here was that I think from the software side of hardware, which is the Silicon Valley mindset. The camera industry has mostly just thought from the hardware iteration side, which is the (mostly Asian) consumer electronics mindset. In Silicon Valley, hardware is a means to an end, and the end is generally performed by software.

    One of the classic Steve Jobs philosophies centered around his perception that the ability of an exceptional hardware engineer might be 3x the average, but an exceptional software engineer might be 25x the average. If you hired exceptional software engineers you could far exceed the average software offering, and software drives what the hardware does.

    Frankly, I agree with that observation of Steve’s. Yet here we are well into the digital camera age and we’re still dealing with average software from the camera companies, at best. Outdated, average software. Personally, I would have never guessed that we wouldn’t have a true breakout from the rigors of DCF and all the other arcane standards at this point. But we don’t. Curiously, Samsung is running their recent NX cameras on Tizen, which should allow them to easily move well beyond DCF. But apparently without someone else showing them the way, Samsung is just using Tizen mostly to do the same things that other digital cameras do. (I’ll give Samsung credit for having probably the best smartphone integration, though, and that comes mostly through Tizen’s closeness to Android.)

  6. Camera makers are still trying to make smartphones. Panasonic’s 1” sensor in an Android phone base this past year—the CM1—is one of those toe-in-the-water things. I would have never predicted such a product, as the economics of it are futile. Panasonic even restricted the early sales of it to just a couple of smaller markets to emphasize the toe-in-the-water aspect. Apparently the toe didn’t get total frostbite, as they’re now releasing in more markets. 

    I pointed out to Nikon as far back as 2009 that it was already too late to be a player in being a smartphone manufacturer. First, you’ve got Apple, Google, and Microsoft doing most of the definition of what that market will be, they’re driving design mostly through software, and they’re so far ahead that it would be tough to catch them starting from scratch. But more important, Apple basically makes all the profits in smartphones. Even Samsung started to struggle with profitability of smartphones this past year, and they represent the #2 in profit in the market. Are there any other big players that are profitable? Not really. So especially for Canon and Nikon, basically they’d be the Olympus/Panasonic/Pentax of the smartphone world if they tried to enter, not the Canon/Nikon. Strong #1/#2 positions are tough to unseat once well established. As Ries and Trout pointed out in the 1970’s, it’s tough to make a profit in the #3 and downward positions. 

    The fact that the camera makers missed the fact that phones would become cameras and didn’t get there early just put them in a hole they now will never get out of. 

    That said, the thing that the camera makers are just now starting to come to grips with is that a smartphone (and/or tablet) is the center of most people’s mobile life. Cameras are also a mobile device. Oh, so maybe they should talk to your main one directly and seamlessly? Thus, the corollary to my first statement is this: I also missed how slow the camera makers would be to realize that they lived in a world controlled by someone else and needed to play nice with it. Frankly, the iOS and Android apps I’ve seen from most camera makers are sophomoric at best, and fail to actually make mobile life easier for the camera user at worst. Moreover, they just seem to copy each other rather than actually figure out what the real user problems needing solving are. 

  7. Megapixels roll onward. Okay, I actually thought that would be the case, but I’m not sure I’ve given the forward momentum enough credit. I knew we’d be at 24mp APS/DX about now, yes, but even though I knew that would enable ~50mp FX, I expected the larger sensors to roll slower than they have been (see #2, above). Moreover, I thought that smaller-than-APS/DX sensors would roll slower, too (they need the extra photosite size to be competitive with APS/DX). Put another way, I was pretty sure that APS/DX was going to keeping pushing the pixel counts rapidly: that was really core to keeping the upgrading market going while enticing new customers into DSLRs (and now mirrorless). But I thought FX would hew closer to the “quality pixels” line and follow much more slowly. Likewise I thought that the 1/2.3”, 1”, and m4/3 would tend to stay at lower pixel counts to mitigate noise tendencies.

    You can see some of that in the market. APS is 16-24mp and DX is 24mp. The implication would be that you can do 54mp FX/full frame and we’re a bit behind that. Likewise, you’d think that the smaller sensors would have stayed nearer the 12mp mark, but we’re well ahead of that. In other words, I saw the right trend, but didn’t quite get the weighting/timing correct.

  8. Trade shows are still regarded as relevant to the camera companiesLet me start out with this: I’ve never been a fan of trade shows. Especially big ones like CES, Comdex, Photokina, et.al. I really don’t see the net positive value attained from the show itself. Even a small booth at some of these shows is a half million dollars or more fully burdened. Big booths are multi-million dollar investments. Typically to reach tens of thousands of “customers” as well as people in the industry you already know ;~). 

    The Internet has changed the way you should reach customers, I believe. Consider how many key Internet sources I could invite to a big hands-on event I controlled for a million dollars. Think that might get some attention? Oh, wait, it did. Nikon did exactly that in 2007 when they launched the D3 and D300: they invited several hundred journalists and photographers to Tokyo at Nikon’s expense. Hmm, did that ignite a lot of coverage of the cameras? You bet it did. Far more than Nikon is getting these days with CP+ and Photokina launches from visiting journalists. 

    Perhaps it was because of some long lead deposits and prepaid expenses that it didn’t happen, but I really expected someone big to back out of Photokina 2014 this past year. 

  9. None of the dwarves have shifted to direct sales. Olympus really should just be selling directly to customers, IMHO. Pentax would be another logical candidate. With a camera sales volume now barely at a half million units, having an extended dealer-based distribution system costs money Olympus doesn’t really get back. They’d be far better going to aggressive Internet-only sales system with a strong affiliate program to pump up the volume. (Disclosure: Olympus approached this site about participating in something along those lines, and it was aggressive in its affiliate rewards. But I’m talking about an “all-in” approach that completely takes out the store middleman.)

    Such a Dell-like approach isn’t without costs and risks. But at the same time, it also restores margin or allows you to price more aggressively at the same margin. It also gives you pretty much instant and complete feedback as to what is and isn’t working if you do it correctly. A direct-only camera company should be more nimble and flexible than the traditional box-on-shelves approach. It also gets much closer interaction with its actual customer. 

    Of course, such an approach totally messes with the subsidiary-based systems that every camera maker spent decades building and refining. 


There you have it: a few trends or predictions that I missed along in the last couple of years. 



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