Sunday, October 15, 2017

What the Camera Industry Did not Learn from Apple

Back in the years leading up to Steve Jobs' passing in 2011, Apple was well and truly on an ascendant path. New products every year, incredible growth in unit sales and an expectation that there was always going to be something new on the horizon. It's not so much today in 2017, where their product lineup can best be described as evolutionary and their strategy to be one of consolidation. But never mind that; those of us roped into corporate strategy meetings at the time were subjected to one too many gatherings that basically revolved around the theme of "How can we be like Apple?" Actually, what our corporate masters meant was "How can we make more money like Apple"...  because why bothering making the tough choices that Apple made and doing all of the hard work when you can just emulate their success? /sarcasm

Here's one of those "be like Apple" moments in history:

Source: Apple via CNBC

There's a gem in the data and it's clear as day. Do you see it?

Notice the crossover point at 2011; that's the year that Apple sold more iPhones than iPods. The reason isn't because the iPhone is a better device, or that people didn't want to carry two devices to communicate and to listen to music, both of which are true. The fundamental reason is that Apple intentionally wanted it to be this way.  We take it for granted today that a smartphone that does everything is the natural way to go, but the market had to be coaxed from what was a $250 consumer device up to something today that costs upwards of $1000 when bought without a subsidized phone plan. You see, there's a basic truism of business, cannibalize your own sales before somebody else does. iPod sales were already declining when the iPhone overtook it in unit sales, but it was still earning a substantial amount of money for Apple. What happened was that the iPhone strategy was crafted around making sure that it was the more desirable of the two products... more power, better battery life, newer processors, subsidized contract plans... what brought us to the point of "of course nobody wants an iPod anymore, the iPhone "does it all."

Compare that to the camera industry. The technology and form factor is very clearly headed towards mirrorless, even more so than it is now. Again, the maxim is "cannibalize your own sales before somebody else does it for you." Did the camera industry follow in Apple's footsteps? Not quite

Source: CIPA
A couple of notes first. CIPA did not break out mirrorless back in 2011, and 2017 isn't finished yet so we don't have a solid number to work with. By all accounts it should be better than 2016, the year of the Kumamoto earthquake, but it won't ever be as good as the peak DSLR years again.

If the camera industry had followed in Apple's footsteps, you would have seen a drop off in DSLR volume with a corresponding rise in mirrorless volume, but more importantly, the switch point would have occurred at a point when DSLR's were still substantially healthy in terms of sales, arguably around 2013. And by "switch" we mean Canon and Nikon, as Sony, Fujifilm, Panasonic and Olympus had already become serious about mirrorless earlier. "Intention" is the key word. The iPhone completely took over from the iPod because Apple designed it that way. Canon and Nikon have been slow to enter mirrorless because they are heavily invested in their DSLR ecosystems. Canon finally has a mirrorless platform in the EOS M5 and EOS M6 that is a credible alternative to to their Rebel line of entry-level DSLR's; this is very much where the future is headed for them. Nikon, of course, has no equivalent in 2017... Another truism of business is that it's not "what" will happen but "who" will actually do it. Until the two biggest entities pivot, the market cannot truly be said to have changed.

The danger here is that the camera market as a whole is shrinking. Mirrorless is a bigger proportion of the market now, but that is because it has been flat and the total number of DSLR's is shrinking. Hindsight is 20/20, but a case could be made that the market as a whole would have retained more customers if it had pivoted towards smaller, lighter and more convenient mirrorless cameras sooner. Even if that is not the conclusion that you draw, the data certainly shows that in how cameras and smartphone sales are now, they took two very different paths to get to their present state.

1 comment:

  1. So... dSLR's were ultimately cannibalised by phones?