When Olympus Corp. announced in June that it was selling its 84-year-old camera business to an investment fund, many camera lovers were in shock.
But analysts who closely watch the industry saw it coming. Standalone cameras just aren’t used that much anymore. When people take snapshots, they’re using smartphones, not the bulky devices Olympus and other dedicated camera-makers are producing.
The demise of Olympus was simply a reminder the market for digital cameras, dominated by Japanese, is in dire straits and stuck in a downtrend that hasn’t hit bottom yet.
Analysts say camera-makers haven’t been able to come up with a turnaround strategy and warn more companies may be forced to exit in the future.
“Since the camera-makers are trying but haven’t been able to find their next move, it’s hard to say the market has hit rock bottom,” said Ichiro Michikoshi, chief executive analyst at Tokyo-based marketing researcher BCN Inc.
According to the Camera & Imaging Products Association, 15.2 million digital cameras were shipped by Japan’s nine manufacturers in 2019. That’s only 12.5 percent of the 121.5 million shipped in 2010.
“Since smartphone image quality has been improving remarkably, general users only need smartphones as long as they are shooting just for fun,” said Michikoshi. “It has become very difficult to promote the merits of purchasing standalone digital cameras.”
Some of the latest smartphones come with multiple sensors and lens systems that let people experiment with zoom and ultra-wide angle shots, or blur the background to highlight the object in focus.
To differentiate their products from smartphones, one product camera-makers have been pushing over the past few years is a premium mirrorless interchangeable lens camera that takes superbly sharp images. But these remain high-end niche products for avid hobbyists who are willing to shell out hundreds of thousands of yen.
Another key feature they have been working on is video for heavy users of social media. For instance, Sony Corp.’s latest compact digital camera, the ZV-1, has been dubbed the “Vlogcam” because it is clearly targeting video bloggers and YouTubers.
But video features aren’t likely to reinvigorate the market because videos require a lot of editing before they can be posted online.
“They may help slow down the shrinkage of the market, but are unlikely to lead to drastic recovery,” Michikoshi said.
Still, the 5G ultrafast communications networks expected to proliferate in the coming years could give the companies a chance to come up with new products, he said. By enabling cameras to connect to 5G networks, for example, there will be more potential demand for the ability to edit photos on the spot and directly upload them to web, indicating digital cameras could get more functions similar to smartphones.
For now, though, camera-makers are scrambling to stop the bleeding from slump caused by the COVID-19 outbreak.
The health crisis has forced many events, large and small, to be pushed back or canceled. The delay of the Olympic and Paralympic Games, in particular, took away a big opportunity for marketing cameras.
According to BCN, unit sales of mirrorless interchangeable lens cameras in April and May in Japan were only 26.1 percent and 38 percent of the previous year’s levels.
Given the grave circumstances, Olympus announced on June 24 that it would sell its imaging business, including its camera products, to Japan Industrial Partners Inc., a Tokyo-based investment fund.
The history of Olympus’ imaging business dates back to 1936. Its hits included the PEN and OM camera series, which mainly comprised compact models.
To adapt to the “extremely challenging” environment, Olympus said it reorganized production bases, slashed operating costs and produced more profitable lenses. But these moves were not enough to keep the imaging business afloat.
“If we were to keep the current operation or business model … we would hit a dead end at some point,” said Olympus Chief Financial Officer Chikashi Takeda during an earnings briefing last month.
Given that its camera business was hitting a wall, Olympus’ exit was predictable, said Masahiro Shibano, a director at Citigroup Global Markets Japan Inc. who watches the camera industry.
While Olympus blames the smartphone boom and the COVID-19 pandemic, Shibano pointed out that its camera business was already losing money before smartphones undermined the camera market.
Although digital camera shipments peaked in 2010, Olympus was failing to make a profit even then, so “it’s not that their business started going wrong recently,” Shibano said.
In fact, the company’s imaging unit only posted a profit once in the past decade.
If Olympus’ camera business was bad enough to sell off, what about its rivals? Will they be next in line to withdraw or will we see a shakeup in the industry?
At present, the digital camera market is dominated by Japanese makers, with Canon Inc. holding about half and Nikon and Sony around 20 percent each, according to an estimate by the Nikkei newspaper. Olympus only had a share of about 3 percent.
With few merits seen, mergers and buyouts among the camera-makers appear unlikely, Shibano said.
One big reason is because their lenses are not compatible with each other’s products. What’s more, “their brand history and value are different,” Shibano said, noting that brand image is significant when marketing cameras.
While it is possible that companies from other fields might get involved, “more exits and further shrinkage will likely be unavoidable,” he said.