Real Camera Economics

We’re in the time of year that all the camera companies are preparing to report their year-end financial results (other than Canon, who uses a calendar year). It’s also the time of year that new CIPA estimates have been provided for the coming year. Plus, with the return of CP+ last month as a live show, we’ve also been seeing the results of a round of executive interviews by a number of non-Japanese photo industry publications. 

Things aren’t exactly the way they’re being discussed in the media. 

While we’ve seen a bit of a recovery from the pandemic-challenged 2020, the overall unit volume trend lines are still downward in almost any statistical analysis you perform since peak sales (other than perhaps “moving average of last three years”). CIPA’s own estimates for 2023 are that ILC (interchange lens camera) and lens unit volumes will be 96.5% of 2022. In other words, another down year. 

The usual comeback to all the down cycle numbers is that the total value (revenue) of mirrorless camera shipments was up 61.3% in 2022. Shipments of mirrorless were only up 31.1%, so basically that means that Japan is selling more expensive mirrorless cameras to make up for the lower volume that the DSLR collapse is causing. 

The operative question is this: how often can you sell someone a US$2500+ camera? Because if you try to push more volume by pricing below that point (or any similar figure you might suggest), suddenly the revenue produced starts coming down, and that means that you’re starting to do less well. Once your gross profit margin (GPM) starts going down due to pushing products with lower list prices, it gets tougher to hit overall net profit goals (all of the Japanese companies currently target a net profit > 10% of revenue).

This past year’s financials from the camera companies are going to look really good when they’re reported in early May. You can predict that pretty much solely by how aggressive the late holiday and new year sales incentives were. Nikon, for instance, has seemed content with offering minimal instant rebates on cameras in the current quarter. I expect Nikon to post excellent—and probably above estimates—quarterly and year end results when they get around to it on May 11th. Ditto everyone else. 

But if you bought a Nikon Z9 in 2022, what would you buy in 2023? Certainly not another US$5500 camera. We’re nearing the peak efficiency of emphasizing “higher priced cameras” with higher GPMs. Both Canon and Nikon still have a fair number of higher-end DSLR holdouts that they might be able to convert, but after that, what?

There’s little doubt that the 6m or so ILC unit volume we currently are seeing is being driven by people with plenty of disposable income, so I don’t expect a sharp peak in per-unit revenue to instantly appear. Nevertheless, buying fatigue is a real thing, and pushing higher priced product over lower cost gear increases the rate of fatigue. 

In other words: push more volume and you lower net profit, but push more high price products and you encounter buyer fatigue. 

Thus I suspect late 2023 and 2024 will be another inflection point for the Japanese camera industry. I’m not sure how they’ll be able to drive “growth” of any meaningful sort after this next full round of product iterations completes. Probably by promoting sales. 

Generally, it takes a clear technology shift that is accompanied by a strong marketing message to change things in a mature market. What that might be for the next round of cameras, however, is unclear. Current top cameras exceed virtually all customer needs at the moment. Incremental change won’t produce another high price replacement cycle that’s large enough to show clear profit growth. 

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