By Eamon Hickey
Since I have a bit of an insider background in the camera industry, I
thought I'd pick up a few random threads from Mike's "What Will the Canon 5D
Replacement Cost" post and the responses to it. But I'll get the bottom line
out of the way right up front: I don't know either.
What do I mean by "a bit" of an insider background? I was a sales rep for
Nikon Inc. (popularly known as Nikon USA) from mid-1994 to mid-1999 (and a
Nikon tech rep before that as well as a camera store manager even further
back). Sales reps in foreign subsidiaries do not attend product planning
meetings in Japan, and upper management in the U.S., in their blindness,
consistently failed to avail themselves of my wise counsel in their own
planning sessions. But still, you learn things. Bosses talk over beers;
friends get promoted into jobs with access to The Dark Secrets. (Since
quitting Nikon, I've done a lot of writing about cameras and the camera
business for various media outlets, and you pick up some scuttlebutt that
way, too.)
Me, circa 1997, in my Nikon rep's costume sitting in a photo buyer's office just prior to begging for an order and then taking him out to abuse my expense account. (Photo taken with a Nikon Coolpix 300.)
-
First, I'm certain that Canon has had in mind a moderately firm target
retail price for the 5D replacement (let's call it the 5D Mk II since that's
depressingly likely to be its real name) since they first sat down at the
drawing board...er...CAD workstation. You can't really design a camera
without knowing what you want to charge for it since the projected price
influences every choice you make about features, materials, performance,
production methods and much else. Well, really, price target and product
specification are inseparably linked; they exist as functions of each other.
On the other hand, I know for certain that the finalized price for each
geographic market isn't determined until about 30 days before shipping in
most cases. There can be some modest flexibility around the original target
price to adjust for market conditions (mainly competition), which will
have changed since you began to design the product lo' those many moons ago.
(My experience is that sometimes the Japanese camera companies are quite
well informed about future competition—when I worked at Nikon our product
manager types sometimes could tell me almost exactly what Canon or Minolta
or whoever were about to introduce—and other times they're largely in the
dark, especially about what the other guy plans to charge for his new
gadget, a really critical piece of information.) The regional distributor
also has a little input on the final price; the Spanish distributor is the
only person who really knows whether he needs to subtract 50 euros to
compete in Madrid, or whether it's safe to add 50 euros and bank some extra
margin.
A giant wrench in the cogs
In the U.S., there's a big wild card in these calculations, however, one
that was mentioned by a commenter on Mike's post who was channeling Thom
Hogan. The yen has gained 15–20% in value against the dollar in the last
year. That means Canon USA pays Canon Japan 15–20% more for every product it
imports; if an EOS 5D cost Canon USA, say, $1,600 a year ago, it costs them
as much as $2,000 now. The dollar's troubles are threatening to be by far
the biggest influence on the camera business over the next year or two.
Certainly that is true in the U.S., but Europe may feel it, too, even though
the Euro has been stable against the yen over the last year. The size and
importance of the U.S. market means that if currency issues are driving
prices up here, the camera companies often try to counteract that problem by
lowering their manufacturing costs. Hello, plastic.
In any case, I can picture economists in every corporation in Japan sitting
bleary-eyed and despondent in front of 40-page spreadsheets attempting to
understand the U.S. economy's recent dramatic perturbations and trying to
predict what the dollar will be worth over the next year or 18 months. And
whatever prediction Canon's guy makes will be a very important factor in the
5D Mk II's price in the U.S. and possibly elsewhere, too.
Unforeseen revolution
I'll add to Mike's point on market research with my own experience. I joined
Nikon in 1991 and well remember the utter, incredulous dismay within the
company during the early 1990s as large numbers of professional
photographers switched to Canon for autofocus. At that time, Nikon was
paying a market research firm to periodically survey professional
photographers about their needs and desires. (I'm sure Nikon still does
this.) Consistently, the surveys done in the mid-to-late 1980s yielded a
resounding NO to autofocus in a pro SLR. They hated the idea, and Nikon did
not pursue AF technology all that aggressively. Well, what the pro photogs hated was the crummy autofocus that existed in 1987. When they
saw the really good autofocus that Canon unveiled in 1990, they went for it
like a slice of chocolate cake.
And then I clearly remember a day near Christmas in 1997 when an amazed
Olympus sales rep whispered to me, after looking both ways for
eavesdroppers, that he would probably sell $2 million worth of digital
cameras that year, something like 10X the volume that Olympus had originally
projected. To their utter surprise, they (along with Sony) had stumbled on
the biggest revolution in photographic history. (For contrast, Nikon had its
first digital cameras that year, two surpassingly goofy little
point-and-shoots (shown above and at right) and I probably did $20,000 worth of volume with them.)
There is no question that none of the camera companies, market research
notwithstanding, had the slightest inkling of how fast digital cameras would
overwhelm film and how huge the business would become.
Contra Mike, I don't think that Nikon is currently kicking itself for
pricing the D3 too low. Nikon was in terrible shape in the photojournalist
market and they needed a buzz-generating grand slam home run, even if they
left some money on the table. Mindshare or buzz-share (might as well go
whole hog on the marketing mumbo-jumbo!) was arguably more important than
profit dollars in this case. The D3's low price ($3,000 less than the only
other pro full-frame DSLR) helps create the notion that Nikon, simultaneously
increasing performance and breaking price barriers, is now the pro digital
train to be riding on.
And that brings me to Sony, which is in a similar position. To sell any
decent number of units in the mid-to-upper end of the DSLR market, they have
to displace two brands, Canon and Nikon, which together have completely
dominated the mindshare, and consequently the spending, of serious
35mm-style photographers for almost 50 years. (Yes, yes, I've heard of
Leica; my statement stands.) That will be no easy task, and Sony must
certainly understand that. I'll be really surprised if the A900 isn't priced
very aggressively—if, in other words, Sony doesn't sacrifice a lot of
margin in hopes of carving out a meaningful foothold in the serious
photographer segment. If Canon and Nikon are anticipating the same thing—and I bet they are—we will see some aggressive moves in the price/feature
ratios of these presumed new cameras.
But again, currency exchange rates, wherever they end up going, could throw
all these calculations off.
So rolling all those factors together and weighing the probabilities I come
up with a price for the 5D Mk II of...still no idea.
Last word
On a last tangential note: a couple of commenters to Mike's post wondered
about support for discontinued cameras. When I was at Nikon, the company
policy was to continue providing spare parts for camera bodies for five
years after discontinuation (and service for however long parts were
available, which often ends up being longer than five years). For lenses,
the spare parts commitment was for ten years after discontinuation. I'm not
sure that's still true, and I don't know the specifics for other brands, but
I'd be willing to bet a slice of chocolate cake that they are very similar.
______________________
Eamon
Ever wondered what your rights and obligations as a photographer are? Carolyn Wright, who has written for this site and who maintains the photoattorney.com website, lays out what you need to know plainly and simply. Her book is reasonably brief (who has the time to read a textbook the size of the phone book on this subject?) and avoids an excess of legal jargon.
