Prelude to an Obituary? Nikon’s Latest Financial Results

Can it get any worse? Another huge loss and forecast drop for Nikon, the camera industry’s number two whose authority no one would have questioned only a few years ago. From the latest financial report for Q1, 2014:

Net sales for the three months ended June 30, 2014, decreased by 61,536 million yen (25.7%) year-on-year to 177,444 million yen, operating income decreased by 2,527 million yen (41.9%) year-on-year to 3,505 million yen, ordinary income was down by 508 million yen (9.9%) year-on-year to 4,642 million yen, resulting in net in come of 3,697 million yen, a decrease of 738 million yen (16.6%) year-on-year.

Further quoting from the report:

In the imaging products business, the market conditions for the digital camera interchangeable lens type were sluggish, and the compact digital camera market shrank as well (…) Sales volume decreased both for digital camera interchangeable lens type which saw worsening conditions mainly in the European market, and for compact digital camera which was affected by the shrinking market (…) The compact digital camera market is expected to continue shrinking (…) Although conditions continue to be severe in the digital camera interchangeable lens type market, a moderate recovery is forecasted
mainly in the U.S.A. and some other areas in the latter half of the fiscal year.

The imaging products business, the sector most of us know Nikon for, is in the doldrums with no end in sight. Precision equipment business on the other hand, capital investment in the semiconductor-related field, is on a recovery track, while the instruments business, the microscope-related market, is expected to remain firm, and the recovery trend in capital investment in the industrial instruments-related market is expected to continue.

Meaning: If I’d be a strategic planner first I’d spin off is the imaging products business. As with Olympus (Sony) and Fujifilm, they find reprieve in the medical instruments respectively beauty/health sector. More and more cameras are built and sold, but there is less and less money in it. Alternative sectors offer the margins camera makers once enjoyed.

Or… or Nikon truly starts reinventing photography, as its president hinted in 2013, saying, “We want to create a product that will change the concept of cameras.”

If that's not the future -- imaginary concept of a reinvented Nikon FM3d prototype...
If that’s not the future — imaginary concept of a reinvented Nikon FM3d prototype…

What should Nikon — and Canon for that — do? We all know it. Just build the cameras people can’t resist. Make the mini Leica many are still waiting for, make a mirrorless digital FM (nah, wouldn’t sell my Df…) and/or build a camera system that’s in-body upgradable, meaning a tough, sturdy body whose sensor, circuits and other key components can be easily replaced by newer, faster, better, smaller and more powerful innards.

Right, everything gets cheaper — the Sony-sensored, full-frame Nikon D610 can be had for less than $1,400 on eBay. Won’t take too long and full-frame cameras break through the $1,000 mark. Everything gets cheaper, but not necessarily better.

If you’d have the choice, would you upgrade the body every two to three years — or would you buy an upgradable camera that itself is upgradable and will attract the attention of all sorts of third party, high-end and premium suppliers? Individuality and personalization are key. Keep photography quality, demanding, affordable and fun.

And don’t handicap cameras to push people to buy technology they could easily have in their present camera in the first place. Camera makers could in fact make more money by selling less cameras, but the right cameras.

Sure there are other and more innovative solutions to kickstart an imaging division again. One thing is certain. Won’t take Sony too long to overtake the competitor it supplies with state-of-the-art sensors…

No, doesn’t look like Nikon has anything reinventional ready for Photokina.

  • Silvestro Crino

    They need to build a Full Frame Mirrorless EVF having F-Mount…Rock Solid, Water tight and classic looks of the FE family of cameras… BUT fully digitally functional (i.e. Video) with the Full Frame 24mp Sensor without AA Filter… it won’t be as Small as the Fujifilm X-T1 because of the F-mount…but it can and should be smaller and lighter than the DF… Why F-mount? So I can use my small Voigtlander and Old Nikon primes on it…..

  • Ray

    I’m not even sure how much larger than the Fuji’s it would need to be. The sensor plane in the X100 is right at the back of the body. Not the case with the xt1 but that’s a challenge one would hope Nikon can handle.

    For this, I would sell my Fuji’s and return to Nikon. The old pre-Ais lenses are all I kept.

  • Nikon’s problem is the F mount’s flange focal distance:

    A whopping 4.65 centimeters… That’s why even the “smaller” Df’s mount socket kind of protrudes. It’s the most elegant way they could think of to “hide” the flange distance.

    Compare this to Leica’s M mount with a 2.78 centimeters flange focal length. Now this makes it easy to build a compact system.

    The F mount’s physics make it almost impossible for Nikon to invent a mirrorless F mount system. They’d have to find a way to cheat physics. And a smaller flange distance allows for smaller optics.

    Rather sooner than later they need a new mount — right, yet another mount after the recent introduction of the Nikon 1 system. But then we’d have another Micro Four Thirds-like contender. As said, differentiation and personalization is everything, technology alone won’t be enough.

  • Silvestro Crino

    I understand what you’re saying, but how much of the DF’s size and placement of the sensor is because of the Mirror and the the Prism? I have to think that without either, Nikon could move the sensor back from what is in essence the middle of the body thereby reducing the “bump” while maintaining the flange distance… I get that the F-mount means that this new camera would still be bigger than say the Sony A7… but it could still be significantly smaller than the DF…. We are talking about what might save Nikon… and yet another mount won’t … I have a Fujifilm x-t1 and had a Sony A7r and frankly their primes aren’t that much smaller than my Nikon primes… Heck compare the Sony 55mm F1.8 to the older F-mount 50mm F1.8 and its downright gigantic… and its not any lighter or smaller than today’s 50mm F1.8G… so we can deal with lens size….

  • I use and love the Sony A7R, my/the most universal camera today. I use Sony, Zeiss, Leica-M, Leica-R, Canon and Nikon lenses on this camera. For others than the E-mount lenses I use adapters. The Metabones Canon adapter even supports AF, aperture control and full EXIF support.

    If Nikon want to stay in the market, they have to get rid of the old huge 46.5mm mount. For compatibility the could offer a smart adapter for the G and AF lenses like Sony does it for their DSLR lenses.

  • Jack Anders

    Although the concept of camera bodies with interchangeable internal electronic components maybe the answer for some, I believe this direction only caters for the enthusiast and maybe professional categories. Unfortunately, the declining camera market is not about enthusiasts or professionals, it is about the average purchaser / user.

    As an amateur enthusiast photographer, living in a tourist area in Asia, I see thousand of tourists daily all with cameras of various different formats and sizes. Many use cell phones, some tablets, a minority use DSLRs (95% on auto) and a few use compact cameras. Portability is the future, IMHO. Cameras like all other electronic devices need to become more portable and intuitive to the average user / purchaser. The average user out numbers the enthusiast and professionals by a large margin and therefore there is an opportunity to manufacture a product for the masses.

    Although Asians do not dictate market trends, their opinions drive their purchase, like all of us. Most Asians purchase a phone nowadays because it has a good camera. Why, because the majority of smart phones can do what the majority of users need, and therefore the purchasing decision is dictated by other features, such as photography.

    On this site one year ago, I read an article on a concept “Leica X3” that was small, trendy, could deliver quality results and most importantly could hang around ones neck. This is the direction camera makers need to pursue to revitalise the industry and create a passion to own a piece of camera jewellery that looks great and delivers. This product needs to hit the market with Apps that can be used by all smart phones to transfer photos for uploading.

    The X3 seemed such a great concept. The LCD was the viewfinder and there were enough direction function buttons to have some control for those that required it. It could also work in fully auto and that was absolutely paramount. Most importantly, it folded in half and could easily be pocketed or hung around ones neck. The prototype suggested an APS-C sensor, but I am not sure that would be possible in such a compact design. Quality results that could be transferred directly to a cell phone for uploading is what the majority of purchasers want. They also want something simple, fashionable and trendy that can be displayed to all around them.

    An analogy to this would be the arrival of the first iPhone. Like many, I was using the most current flip phone when the iPhone was first announced. The wow factor, intuitive operation and features that this phone offered, rendered all other phone obsolete overnight. It created and drove a new passion that lasted for 4-5 years. Currently the smart phone market is slowing due to the market being flooded with models offering little or no innovation over previous models. Cell phone manufacturers are now trying to determine what will sell in the future and recreate the passion. They believe it will be smart watches; many doubt this. Maybe a folding phablet is the answer with seem less operation between 2 separate screens.

    A new direction in the camera industry is needed to stimulate the passion of the consumer again. It must be aimed at the average consumer, as the enthusiasts and professionals are already catered for. The photographic industry is suffering market stagnation, with little innovation. New models are evolutionary, rather than revolutionary. Users are no longer upgrading annually, as they can see little benefit in doing so. Many are waiting to see what revolutionary product hits the market.

    The first company to announce a revolutionary design for the masses will conquer the market. This revolutionary design needs to create a new market that people will be passionate about. Interchangeable lens options do not suit the masses. The masses purchase one only and use it until they update to the newer model offering better features. This unit must have the basics that the masses understand; basic controls, flash and different size jpg exporting features. RAW would be nice, but the masses do not want to PP with RAW files. They want instant results that deliver and impress. It sounds fickle, but that is the market mindset for the masses with all appliances.

  • Photography is much about passion, as you rightly say Jack. Igniting this passion is key. Still, before the arrival of digital imaging technology the preferred photo apparatus of the masses was Polaroid, 110 film was popular, some even used 35mm film. Let’s call this the pre-digital smartphone market. The camera industry has since grown above average, and with it the number of amateurs and enthusiasts who are willing to pay more for good gear and better quality. Previously the playing field of a few though, many new names joined the camera industry, diluting margins and squeezing previously healthy profits. Producing for the broad masses will always be a fight about margins, but catering for amateurs, enthusiasts and professionals could still generate healthy sales. Could. But churning out new models in record numbers does the industry a disservice. Innovation yes, but I still prefer a solid body to a minuscule gadget. Technology changes, but not the ergonomics of my hands. So there is only so much evolution and revolution we can swallow. DSLRs keep on selling for good reasons — and especially in Asian tourist areas you see many women with bigger gear. Maybe there’s no point in trying to revolutionize photography. It’s about producing beautiful cameras that ignite passion. That’s what my main camera is and stands for. Was waiting a long time for the “right” camera. If the industry would start producing cameras people want, well then we have a win-win-situation. So far, they mostly produce cameras the industry itself wants.

  • Dave

    The length of the 7 comments show, we arrived at the end of complexity. Too much choice, too many wishes, but no universal top notch camera. Just bring back the soul into (digital) photography, fire the marketing department and hire some engineers with a photographic background. Then people will buy what Nikon offers. No way Nikon can satisfy the chewy wishes of all of us out there. I had a vision about my dream camera, but I hold back… Just give us a camera we like to learn, simple, one that delivers and does not let us down, a liberating tool not a spaceship. Maybe two or there models would do and Nikon can shrink into a safe and sound market.

    And as a side note, allow me to say, are we not a bit neurotic about photography? One camera and two lenses would do for years, wouldn’t it? Digital euphoria is over. But that’s just me.

  • Digital imaging technology has reached a stage where incremental advances have to be sold as major leaps forward. People are only that naive… Passion and soul, that’s what I’m in for, working since weeks with one camera and one lens, and truly enjoying it.

  • Pentax did that: keep old mount and distance to flange in a mirrorless and it was a total flop.

    OTH Leica has shown in the X7 a mirrorless up to scratch wih a simplified Menu, which some above believe is the main problem.

    However if it’s not broken you don’t need to fix it: despite the smartphone invasion, mirrorless is slightly increasing sales.

    Compacts were hit first, but now it’s dSLR which are taking the brunt, simply because they didn’t accept the technological disruption.

    Film industry told us a long time ago that there was room for both instamatics, and SLR.

    I believe that keeping memories, and enjoying image composition are still two different activities. Certainly some do both, but there is still a vast difference.

    I believe that mirrorless today is the middle way, that of virtue, in buddhist terms :)

  • Silvestro Crino

    I hear you… But Pentax’s camera looked like a child’s toy and not a tool for pros … Also, no EVF… But, it does show that it’s possible….

  • No, it’s the very demonstration of ubris, the refusal of digital evolution.
    Canon, Nikon and Pentax are so esconced in their mounts and lenses of the past, that they can only go down.
    Unless they betray their conservative audiences.

    Rather Leica took a bold step, but of course it deals with small numbers anyway. C&N instead will always dream of the profits of the past, and go down the drain like Kodak. Or do a Hasselblad Lunar – LOL

  • Andy Umbo

    The beauty of the mirrorless system is not that the bodies of the cameras are thinner, it’s that the lenses can be designed to be non-retro-focus. Almost every non-retro-focus lens seems to be able to be made substantially sharper, with less size, weight, and for less money. I started my career with the Miranda Sensorex, a camera I still dearly love, and it was “Leica quiet” with practically no noise or vibration, and the body was thin enough to use many other camera manufacturers lenses on it with simple adapters! Loved that thing…

    M4/3rd’s equipment, is the new “35mm”. A lot of photo-journalist types I know are testing it to make sure that it meets the requirements they are looking for, especially the Olympus, because it is sized like their old camera equipment. The output from it is certainly superior to what one sued to get from 35mm film in general (yes, even Kodachrome). Seems like if you were willing to professionally shoot 35mm film years ago, M4/3rd’s would be right up your alley!

    The only reason I’d like to shoot 120 DSLR based digital, is to get the 16 bit color! Now THAT looks like film!

  • deadlock

    All the current manufacturers are stubborn and lack vision. Enthusiasts and professionals will always want good build quality, good optics and control. They are also willing to download and process their photographs in dedicated software. But they won’t provide growth this segment desperately lacks. The question is: what would make an average person choose a camera over his/her phone? Is the camera more portable? No. Is there seamless wireless connectivity? Not in the slightest. Can we post pictures to social/sharing sites using our existing accounts? No. If we want to use advantages and high dynamic range of of RAW, is there an easy way to manipulate pictures (brightness, contrast, filters, proper resampling etc.)? No. Can we upload/backup pictures from camera to cloud? No. Can I seamlessly and wirelessly watch my pictures on TV? No. Is the camera a stylish/hip accessory? No. Is there an ecosystem that would allow people to brag about/showcase/rate their photos with possible rewards? No. The whole workflow is just too complex and draining for casual users. Not everyone has the ambition to become a pixel-peeping geek or gearhead. And frankly, the way pictures are consumed now, with poor resampling and heavy JPEG compression on web sites, is there _really_ that much difference? Will anyone bring DSLR to a party, hoping to take advantage of its low-light capabilities? He would get laughed at.

  • Albeit true what you say, people seem to love my DSLR party images… Seriously, serious gear delivers serious results. Everything else might look cool and funky, but from skin tones to detail to everything, the old style machines still win hands down. True, most people can’t tell the difference anymore. Does it matter? You say it: no. To the masses. To me it does.

  • deadlock

    And that’s the point – it only matters to a relatively small community (to which I too belong). Once we have a basic set of lenses we only upgrade bodies once in a while and that’s it. But people want to have fun with their camera, they want simplicity, instant gratification, maybe a sense of exploration (even though basic by professional standards). I’d say convenience and fun factor trumps the pursuit of image quality alone. Cameras have become one-dimensional in this pursuit and they plateaued in terms of image quality years ago so there’s less incentive to buy new ones.

  • One More Thought

    Let’s analyze the notion of “a camera system that’s in-body upgradable, meaning a tough, sturdy body whose sensor, circuits and other key components can be easily replaced by newer, faster, better, smaller and more powerful innards.

    Is this realistic? Where are the examples of this concept working on a large commercial scale in any other industry?

    This would be like saying let’s build a car where we can easily swap out the engine, the drive train, etc. Now we can accessorize a car to the max, but to replace the main components is difficult and costly.

    Can you easily swap out processors and lcd screens and camera modules in smartphones?

    The most obvious analogy would be with computers, but even then most people don’t like to change components inside of their PC’s. There’s a reason why Radio Shack and other stores like them are failing.

    Most people don’t like to be the system integrator. And today’s products are so complex and demand such integration that it’s difficult to change one component without it having impact on other components.

    Take for example the idea of swapping out the image sensor in a camera. The problem is that there is a host of other electronic components impacted by that. Swap out the image sensor and a lot of other stuff inside has to be adjusted. It sure sounds nice but it’s not a viable solution at all.

    Apple has become the most valuable company on the planet because they understand this concept. They get that to make the best products you have to pay detailed attention to the integration of all components, including software. They get that most customers want Apple to the systems integrator, not the customer.

    This concept of a modular Franken-camera is just not a viable idea.

  • One More Thought

    I totally agree with your points. The smartphone camera has won out. The point and shoot business is not coming back. And there is no way to compete against smartphones for their ease of use and convenience.

    The enthusiast and pro markets are all that remain. And even here the problem is not a lack of quality equipment to choose from. Currently Nikon and Canon make a range of equipment to fulfill the needs of anyone. Nikon’s lineup has never been stronger, and will probably get even better with Photokina, if rumors are to be believed. Nikon doesn’t have some mysterious problem unique to them; the entire field of photography is being disrupted.

    The average person who ventures beyond a smartphone and does buy a DSLR finds it so good these days that the problem is convincing them they need an upgrade.

    Right now only the enthusiast and pro markets remain. IMHO, the only real way to fight the trend would be to try to grow the enthusiast market and convince more people that they will realize profound benefits from something more than a smartphone camera. Perhaps as the population in general gets more technologically literate they will also in part discover that for themselves.

    But there’s no silver bullet to solve the problems…and as I noted before, Nikon itself has an amazing lineup of DSLRs and so the problem is not with Nikon per se.

  • Wanted to the discussion going, but it always strikes me how Leica sells these indestructible M bodies — more or less all looking the same — yet every few years people buy the latest model. Or look at the Sony A7 series. All the same bodies. Sensor, circuits and stuff… we love to upgrade and have shiny new things in our hands, but partial upgrades could probably be done with a bit of courageous ingenuity of these camera engineers. Not that it’s a DIY upgrade and sure these camera makers want to sell the whole thing. But an FM is an FM is an FM. No need to change anything outside. It’s perfect. I’d buy it.

  • deadlock

    I’d say the situation is similar to video-on-demand streaming vs BluRay. Yes, the optical disc provides ultimate picture quality provided you have a good, calibrated TV set but convenience factor of streaming will win over time. Same with music – quality audio is consumed only by a relatively small group of audiophiles who own sophisticated gear. The rest listens to compressed MP3s using poor headphones on a busy street. The way masses consume content dictates the rest. I think people would appreciate quality photos but it must be convenient – and it takes skill to even take a quality photo. And your point about Nikon’s camera lineup is true. Actually, all the manufacturers now make excellent cameras. I’m afraid though it’s a bit like making excellent typewriters in a laptop world :) The innovation must go beyond image quality alone.

  • One More Thought

    You are correct…convenience and practicality win out over marginal gains in absolute quality, if quality is good enough.

    With that being said, I don’t really see how any camera manufacturer can make a dedicated camera device be easier and more convenient to use than a smartphone. The phone is small, always carried by the user, always connected with cell service. The smartphone is designed to be easy to use, and because people use them so much, customers get more familiar with them and thus are more comfortable using them.

    I just don’t see how any camera, no matter how well designed, can compete against that for sheer convenience. No doubt camera manufacturers certainly can make their operation more user friendly. They are already adding WiFi to communicate with smartphones…but they aren’t going to be adding cell service to a phone.

    Now maybe someone will come up with some radical breakthrough that I cannot even imagine that will place the dedicated camera on par with the smart phone for convenience, but I just don’t see that happening.

    So that leaves camera companies, IMHO, needing to grow the base of people who value dedicated cameras…in other words, to inspire more people to love the hobby of photography.

  • One More Thought

    Correction to my post above: “but they aren’t going to be adding cell service to a phone” should read “but they aren’t going to be adding cell service to a camera.”

  • photographer 1234567890

    In response to “deadlock” (the “featured comment”) above:

    All the things you stated could easily be incorporated into cameras, if they wanted to. Like you said, these companies are stubborn and full of themselves.

    However regarding your statement: “Will anyone bring DSLR to a party, hoping to take advantage of its low-light capabilities? He would get laughed at.” why don’t you try it and report back from real life experience?!

    Any and every time I bring a DSLR to a party or party environment (like a club) I get lots of attention from simply having it on my shoulder. When I photograph people (who want to be photographed) they are always enthusiastic about it. Once they see the great pic, I always get “you have a good camera” which bugs the heck out of me. I usually respond with “Ya, it took the picture all by itself while I went for a coffee”! There’s the only laugh I ever hear with my DSLR (unless I’m at a comedy club)!

    Too many people make guesses in their mind and then post it as fact! How about turning off the computer for a while, abandoning the land of theory, and other peoples opinions; and get out into the world and experience what it’s like to create some beautiful images?!