What should Canon and Nikon do? This is a hard one to answer. I am sure clever brains in Canon and Nikon HQ with much better knowledge (market trends, technology etc.) than we posses are scratching their heads and pondering the same question.
Lets have a look at this.
Its not quite a doomsday scenario for Camera manufacturers, but it is not too far.
Some people here suggested that Canon and Nikon should invest more in mirrorless because that's the future. That's what a lot of people thought back in 2010 and they made some predictions (Graph at right upper corner). See how miserably they failed. I am sure there are many reasons why people didn't adopt mirrorless as was expected. One of them would be that Canon and Nikon wasn't too serious about it (for obvious reasons). After all, Canon and Nikon still decide what majority of the people buy when they are buying a serious camera. Other brands are either too small or just video game and TV makers, not a camera company. For now at least mirrorless is a niche market and without Japan it would be dead by now.
Canon and Nikon have two major problems to overcome.
1. Poor worldwide economy
2. Smartphone
They can't do much about #1
They can try doing something about #2. At the moment their (and other companies) approach seems like making small fixed lens cameras which have features smartphone can't match, such as better IQ with larger sensor, better zoom, waterproofing etc.
Canon and Nikon know that their DSLR sales are down not because of mirrorless or smartphone, but because of world economy and the maturity of their products. Think about it, lots of people with D700 or 5DII have no incentive to upgrade. For them higher pixel count or improved DR don't mean much. They can still make excellent pictures with their current cameras.
At the end it is not going to be Fuji or Sony who will determine the future of camera market and its survival and relevance in the changing world of photography in the age of internet, facebook and instagram; it is going to be Canon and Nikon, at least for foreseeable future. Their market will always be those who want more than what smartphone can deliver. For them they will have to introduce some revolutionary technology with regard to sensor, lens, flash and connectivity. Before that they need to do enough to keep existing users happy with incremental upgrades.
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https://www.flickr.com/photos/catch45/
Nice colorful charts but they just show what happened in the past.
I tend to disagree with the notion of a "cameralyptic". so many pundits were wrong when they dismissed the american car industry. Is easy to show stats during the crisis and stick with current situations.
But the market for high end cameras to me it seems it may expand. I am shocked about the huge number of very young people in my photography groups using high end Nikon, Canon and the new E-mount Sony cameras. And I am talking about amateur photographers using Canon 1Dx, Nikon D4s, Sony A7r.
Then, there are at least six potential sources for growth:
1. technological replacement. People moving up from current cameras. In this scenario, manufacturers can growth through innovation.
2. Demographics. The world population continues to expand at 1.9% a year. This is the natural growth for each market: entry level, medium level, high end or advanced level.
3. More disposable income in the BRIc countries: Brazil, Rusia, India, China and other emerging markets where the new middle class can afford luxury items the previous generations never heard about.
4. despite the whole communications industry changing and evolving, there is a growing need for images and documentary. The information society is also an image society.
5. replacement due to obsolescence: people that needs to replace the gear: specialty professional photographers and news agenciesécorporations.
6. New markets and micro segments: MILC will become a segment per se, with its own dynamics. Full Frame dslr may continue to advance, not as fast as in the past but it wil innovate: wi-fi, geo-tracking and geo-coding, wider DR, better focus capabilities, low light performance, etc.
The advancements in entry level models and cell phones won't impact the industry significantly in the long run. People with no time, little interest in photography that gets satisfied with a cell phone never will buy a DSLR anyways. Then, this is a market that never existed for dslr. It is the same for example for me: I hate mostly everything related with water. i never will buy a sailboat , a kayak or even a vest life
Does it matter for the nautical industry? not at all, I am not part of that market. For example, in my family all my siblings love photography, except my younger sister. There is nothing in the world that will make her buy a dslr or even a P&S. There are so many DSLR models lying around our places and she never touches a complex camera. Does it matter for the whole industry that people like her only enjoys using a cell phone for snapshots? I don't think so.
Then, all this thing about the cameralyptic I think is getting overstated. The industry goes over adjustment cycles, as any other industry, but I believe there is potential for growth in new markets, new segments, new applications, and the population growth and income growth in developing economies.
