Is Thom Hogan correct?

Started 7 months ago | Discussions thread
jfriend00
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Re: Is Thom Hogan correct?
In reply to calson, 7 months ago

calson wrote:

Thom Hogan is still living in the age of film when one could get a F100 instead of a F3 camera. It would be nice to have a D4 junior but that is not how Nikon or Canon have been producing cameras. They both have distinct pro and consumer lines of cameras and the confusion arises with a camera like the Df that is a stripped down D4 that is hobbled to keep it from cannibalizing sales of the D4.

My first D1 cost me $5500 as compared to my last F5 which cost me $1700. Now more than 10 years later the top of the line Nikon camera still costs $5500. These are basically computers but unlike computers the cost has not gone down one penny in the past decade. Neither Canon or Nikon want to give up the very profitable flagship cameras profit margins so cameras like the Df and 5D are designed so as not to compete head on with the D4 and 1d X cameras.

From a marketing and profit maximization perspective what Nikon and Canon are doing makes perfect sense.

People should be asking how it is that Nikon can produce a camera with the sensor and signal processing capabilities of the D610 and sell it for $2000 and yet require that customers spend an additional $3500 to get a vertical grip and 10 fps. Hard to see the justification for the huge price gap.

The D4 is a low volume product with an architecture that doesn't lead to low cost.  It's got a bunch of one-of-a-kind parts in it.

  • Sensor and read-out circuitry developed just for the D4
  • Mirror that both goes 11fps, but also does it with less mirror blackout time than other cameras (so AF gets more time to focus at max fps)
  • Custom buffer memory and read-out circuitry (not just what is in the EXPEED like most the other cameras use)
  • Custom, low volume body design
  • Fastest memory card bus in any Nikon camera
  • First Nikon design to use XQD memory cards
  • Builds in Japan (more expensive labor)
  • Lower volume means less manufacturing tooling so assembly labor costs are higher
  • Built-in grip and larger capacity power system
  • Higher duty shutter
  • Probably higher shock/drop requirements in the design, parts and testing

Since all this original engineering needs to get paid for, the D4 sells for a bunch in order to pay for it.  Now, Nikon may reap some benefit from all this engineering in other products down the road (like the sensor in the Df), but the D4 is probably not priced with that in mind.  Plus, it's priced like the market will bear.  Canon plays the same game (they are essentially a duopoly at the high end of the camera line) so Nikon never really feels any pricing pressure to do anything differently.

The D600/D610 however does not use so much unique one-of-a-kind engineering as, except for the sensor and body, it is mostly built out of parts used in other cameras - AF system, EXPEED 3 buffer, etc....  That allows them to aim for a lower price which lets the product sell in higher volume which lets them invest more in the manufacturing tooling and assembly process so they can build it in a cheaper location with less skilled and cheaper labor, further reducing the costs, further reducing the price, increasing the volume, etc...

As Thom Hogan said, in a product line of three products, it is often the middle product that has the highest profit margin.  The top-end product has a bunch of original one-off engineering costs and sells in lower volume to parts and assembly costs are higher and often uses high performance parts that cost more.  The bottom-end product is often under a lot of pricing pressure vs. competition to be the entry level price point to pull people into the brand so it has margin pressure and probably has lots of distribution/marketing incentives to move product (sales, rebates, spiffs, etc...).  The middle product can be a better balance - not the most expensive parts or most expensive design and not under as much pricing pressure as the low-end product. So, in Nikon's FX line, that would put the D600 as the low-end product under constant pricing pressure.  The D4 would be expensive to design and build.  The Df and D800 would the higher margin products.

Now, I don't have any numbers to back this up, but this is reasoned conjecture based on how the whole process often works.

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I don't think Nikon is going to be able to keep up this charade for much longer because we know it's probably technically feasible to build a reasonable margin 8fps, top AF action camera and sell it for $3000-$3500 at pretty good margin.  It just takes the D4 or D610 sensor with the D700 mirror assembly with the D800 AF and body with the EXPEED 4 chip to process the images.  If it's doable out of well understood parts and there are people who would value that extra speed in a mid-range FX product, then someone is likely to do it sooner or later.  If not Canon, then maybe Sony or someone like that.

Heck, we've now seen Pentax do the K3 at $1200 for an 8fps, 24MP APS-C product so that establishes a pretty low price bar for tech that can go fast at 24MP.  If you figure the retail price difference between a DX and FX product with somewhat comparable specs is about $700 (the delta between D7100 and D610 prices), then an FX version of a K3-like product could potentially sell for $1900.

Now that 24MP sensors are readily available, now that image processors like the new Fujitsu Milbeaut that can process 12fps at 24MP at very low power (believed to be in the Pentax K3) are out there and we know 8fps mirrors are out there from the D300 and D700 and other dSLRs that have gone this fast, the only way this won't happen in the short term is if everyone somehow decides that 8fps offers no meaningful new sales.

Add into this that it should not be long before an APS-C or FF mirrorless camera comes out that goes even faster than a mirror can go (like the 30fps of the Nikon 1) which will add even more competitive pressure.

My guess is that because the current generation of dSLRs bumped the MP a lot but were stuck with EXPEED 3 processing capabilities, they were all slowish (4-6fps).  But now with speed to burn in the EXPEED 4 at low power, Nikon will return to making some faster cameras - if for no other reason than to give their cameras broader appeal, capable of excelling at more kinds of shooting, capable of fending off FF and APS-C mirror-less advances better, driving some upgrades from the existing base and fending off pricing pressures to help preserve margins.  The next 18 months should be really interesting.  We'll probably get some really killer mirrorless offerings with speed and hopefully the dSLR line will get back some speed.

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John
Gallery: http://jfriend.smugmug.com

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