The Upgrade Situation

In doing some basic end-of-quarter bookkeeping, I noticed something in my data, which triggered me to run a quick, deeper analysis: virtually all of the D850 Guide purchasers I'm seeing have purchased a D800 or D810 Guide from me in the past. 

Now on the one hand, this doesn't surprise me. The D800 to D810 to D850 progression has been one of the best camera iteration sequences we've ever seen. The D8xx camera got significantly better at every iteration, enough so that it felt like and shot like a different camera each time. The D8xx sits at the top of the line for all but the dedicated pros needing a speed camera (D5), so it appeals to users who want the best. These folk are not (currently) Last Camera Syndrome users as far as I can see. They're active, serious, enthusiast and pro practitioners. 

Still, we're talking about people who are willing to pay the minimum equivalent of either US$660/year for a camera (D800 upgraders) or US$1100/year (D810 upgraders). That's not peanuts. 

That's not what puzzled me, though. What puzzles me is the lack of new to Nikon users I see in my latest data. Indeed, even new to D8xx. There aren't as many newcomers I can identify in this round as I've seen in the past. That's problematic, because when you don't add to your base you eventually start a slow decline. Even upgraders moving from lower end Nikon bodies now seem to be only a small part of my data set for the D850 Guide. 

The implication here is that if Nikon users have stopped (or at least slowed) moving upwards—the original D800 triggered one such rush I can clearly see in my data—and non-Nikon users switching to Nikon's top camera have also stopped appearing, thus we've pretty much hit peak upgrading for Nikon. To maintain the revenue stream from the D8xx line, Nikon will have to update the D850 in late 2019/early 2020 with another compelling upgrade, because it's mostly catering to the already converted.  

As I noted in my D7500 review, that camera is the eighth in Nikon's key line of serious enthusiast cameras at a popular price point. Nikon let the perception be that it didn't make a compelling upgrade to the D7200 with the D7500 (even though I believe the truth to be different). I can track the D70 to D80 to D90 to D7xxx sales. The D90 was the peak upgrade in that progression. The D7200 held serve over the D7000/D7100, but it's unclear yet that the D7500 is doing so over the D7200. 

Nikon's management has talked about "targeting high-end," but what I see in the sales and upgrade numbers is this:

  • D3 series was the peak for the top camera. D5 selling lower than D4 series.
  • D850 is holding serve, as did the D810 (and technically D800 over the D700).
  • D750 is basically a one-off entrant at the moment; there's no update data.
  • D6xx is similar to the D750, but I can see that it's sales are way down over time.
  • Df was another one-off; fairly low sales numbers, and very front-loaded in time.
  • D500 isn't going to sell as well as the D300 series, even if they sell for as long ;~).
  • D7500 isn't currently out-selling D7200. The D7200 held serve.
  • D3400 and D5600 aren't holding serve: volume is down from predecessors despite sales.

Take off the bottom bullet, and that's Nikon's high end. The products that Nikon says they want to emphasize moving forward. Note the one thing I didn't write in any of those bullets: clearly outselling previous models. That's the thing that worries me most: Nikon's bean counters may think that this is just the price to pay for being past Peak DSLR, but I see it differently: I'm not seeing any strong influx of new customers to Nikon, but rather an outflow that started out weak  a few years ago and is now growing. They need to change that and turn things around, frankly. Otherwise we'll just continue a slow progression of decline in unit volume. At some point, that will trigger additional write-downs and that will only increase the rate of decline. 

Olympus went through something very similar to what is happening at Nikon. At one point early in the century, Olympus was the number three seller of digital cameras (compacts, ILC, everything); and yes, they outsold Nikon in unit volume. That didn't last. Olympus slowly wrote off non-performing assets and downsized while trying to maintain the higher end models. The Olympus mirrorless group now needs about 500k units a year to keep in the black, and they've been right at that mark for the last couple of years. But they're not growing. 

In Silicon Valley culture we call that a Zombie company: not growing, but not cash poor, so able to basically to continue to walk around looking alive. But in terms of ROI? Basically zero, sometimes negative, so it's tough to change the Zombie fate as no one wants to put more money into zero ROI. 

I certainly don't want to see a Zombie future for Nikon. But for Nikon not to suffer the same fate we're going to need to see something change, and change sooner rather than later. The Coolpix and low DSLR feeder system is broken. There's no "Switch to Nikon" message out of the company (let alone a well-marketed reason why). Bean counting decisions, as was made on the D7500, just generate negative friction that the camera then has to overcome (and again, no well marketed message coming from Nikon to do so). And then we have the non-existent DLs, the choking of CX, no new mirrorless plan in evidence, and more. 

Management in Tokyo appears to me to be locking in a future that isn't great for us Nikon users. Yes, we'll certainly get good D6, D870 (or D900), D550, and D7700 updates, plus a small handful of excellent new FX lenses. And that will keep most of us loyal Nikon DSLR users around and upgrading when they do it right, just as they have with the D8xx series. But where's the upside in all that? There isn't one.

Nikon needs an answer that restarts growth. It's not that they haven't been looking for one. They've just been looking for it in all the wrong places (KeyMission, anyone?). We're half way through a RomCom movie and our protagonist is making all the wrong decisions that keeps them from getting what they want. Will we get to Act 3 and the happily-ever-after result, or are we actually watching a Tragedy?

Short term there are few simple things that need to happen:

  • Never cripple an upgrade, as with the features that were removed from the D7500. 
  • Always keep to cycle with all upgrades, as has been done with the D8xx. The missed D5s and D500s mid-cycle refresh are worrisome in this respect.
  • Push an upgrade to the D750. ASAP.
  • Re-attract those serious DX users (D7500, D500) that won't stay without more DX lenses. Show DX some lens love, ASAP.
  • Launch new mirrorless, whatever it is, with a clear road map. Personally, I think new mirrorless should be the new feeder system, as the DSLRs aren't broken (or topped by mirrorless) at the moment.

Nikon still has a feeder/switcher problem longer term. If all Nikon tries to do is hold on to as many of its 10m+ loyal users as possible, the future has a clear ceiling on it. Nikon again needs some better products that catch new users in the lower price ranges and feed them upward, and it needs to convince more people to switch to Nikon than are switching from Nikon. 

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