Boom or Bust? Sony’s Future Prospect

Sony produces some of the most talked-about and innovative cameras. Yet the company is worth practically nothing. Credit ratings agency Moody’s — right, one that missed the U.S. suprime housing bubble — downgraded Sony’s credit rating for corporate bond status to junk. With stable outlook. Meaning Sony cameras won’t disappear from the face of the earth overnight. Yet Sony, says Moody’s, faces intense global competition, rapid changes in technology and product obsolescence:

Sony’s profitability is likely to remain weak and volatile, as we expect the majority of its core consumer electronics businesses — such as TVs, mobile, digital cameras and personal computers — to continue to face significant downward earnings pressure (…)

Sony boom or bust?
Sony boom or bust?
Moody’s is particularly concerned about weak earnings in the Devices and the Imaging Products & Solutions segments as the rapid decline in demand for compact digital cameras continues to alter the markets for such products and associated imaging sensors.

It’s serious. A billion in losses and 5,000 said to be cut in layoff. TBH, Sony’s a mom-and-pop giant offering anything that’s remotely related to technology and entertainment. Cameras and sensors are part of Sony’s healthier business ventures. They’re in talks to sell their personal computer unit, including Vaio.

It’s highly unlikely that Sony’s getting rid of its imaging division — in autumn 2012 they acquired a $645 million stake in competitor Olympus and the company makes inroads into established photography segments with their rather revolutionary large sensor products, such as the RX1, A7/A7R, A99 and RX100 II — not to forget the RX10 which will be reviewed here soon.

Whilst many ignore that cameras don’t grow on trees, they’re not a commodity. Cameras are made by companies that must turn a profit. With the exception of Canon and Nikon no camera maker currently is in the black. All of Sony’s above mentioned cameras get favorable reviews while they don’t sell in sufficient volumes at prices to pep up Sony against the global market currents.

Relative to cash flow, Sony has a lot of debt. So the junk credit rating is not just a financial analyst’s hangover. Over half of Sony’s long-term capital is borrowed.

Fact is, most people buy Canon or Nikon. So should Sony spend even more in camera R&D, manufacturing and promotion? The world buys fewer cameras — and the high-end sector we all cherish isn’t as profitable as Sony wishes.

Sony made clear they’re in imaging for the long run — but the law of economics can’t be ignored forever. Or maybe their stuff is too expensive? Luckily buying a camera is not an investment, so why worry? Right, we invest in systems.

I remain convinced that Sony’s imaging business is a success story that’s just about to begin. Can’t call a Sony camera my own, but wouldn’t be surprised if Sony is the world’s camera maker no. 2 in a few years down the road.

Don’t forget, Sony is the world’s biggest sensor manufacturer and sells a lot of sensors to other companies. Even if you don’t buy a Sony you might buy a Sony. That — and innovation — is what’s keeping them in cameras for quite some time to come.



  • Dirk

    I think the problem is – and a future threat to Samsung as well – companies like Sony want to be present on so many markets with so many products. If you do everything, you’re not recognized for something particular. You don’t have a ‘name’. Sony knows that a bit, and is going more and more for hyping products but that brings them in an extremely dynamic, competitive and cost driven market. Something they were good at in the past, when they were a bit the ‘Apple avant la letter’. But Panasonic and Samsung are even worse. I’m really having very odd feeling with seeing the same logo on my microwave oven and my camera. One of the reason why I will never buy a product from those generalists, over a few months they leave the niche if doesn’t match the quarters’ targets. With Nikon, Canon,… Leica I know they will run this business forever.

    • The fatalist’s approach, Dirk. While the many more-of-the-same cameras are indeed not only flooding an already overly saturated market but also self-destructive for industry players, photography is more and more about technology and convergence — and less about optics. Which really is to Sony’s and Samsung’s advantage. Still wish though Apple would produce another than “just” the iPhone camera. Problem with Leica? I think the M line approaches the end of its circle of life. You can’t make it any better or different — aside from faster, more sensitive, etc. Take my word, two or three years down the road Leica will offer 35mm autofocus optics with matching bodies. Will that make them more vulnerable? On the contrary. Everyone will dump the old system and get into the new one. Leica certainly knows how to play the market.

  • Roger Cicala over at Lens Rentals wrote a recent blog article that I believe ties into your article about Sony (http://www.lensrentals.com/blog/2014/02/disruption-and-innovation). Sony has made great strides in both technological and innovations. However, being first is not necessarily mean you will be the winner.

    There’s no doubt Sony makes great sensors. Their latest camera is an example of what they’re capable of achieving and may in the future show that they were the innovators of the FF mirrorless camera. But a company must remain profitable to take advantage of their expertise.

    We may find some unknown company in the future that is able to harness what may not be able to achieve but utilize the tech and innovations that Sony created.

  • Bengt Nyman

    Sony has always been an innovator. Their business strategy is to be first with something new and sell it on the way up. Sony is not trying to be in the camera business. Presently they want to sell imaging products, including camera image sensors. New cameras with new technology is Sony’s way to market their component technology.

    Sony does not want to and will never seriously compete with their component customers.

  • dierk

    After selling my Nikon gear a few months ago I am convinced, that the change to mirrorless is great (for me). As I can adapt any lens to mirrorless means, that I can use all my C/N/M/V/Z lenses on my Sony cameras today and if there is a “better” alternative, I just have to buy new adapters for this new system. With this possibility I/we can change the body like we used to change film in the analog days and keep the good lenses.
    The lenses “make” most of the picture – besides the photographer.

    • Exactly Dierk, I first look at lenses and then what camera I can attach to it.

      Still, camera and lens are a package. Awkward looks of a body and lens that do not match would put me off. Holding and working with a nice combo is one of the pleasures of photography.

      • Noyb

        @Dan & dierk,
        You are both undoubtedly correct. However, you are also undoubtedly not the market. Purchasers of the vast majority of mirrorless cams are moving from p&s cameras or cropped sensor dslr’s. I seriously doubt these people even know their lens, with some, if not many, sacrifices might adapt to their new body — and double its size and weight.

        I moved from a D800 to Fuji X. Put a G lens in the Fuji? I have an adapter, that’s as far as it went, never been used. Give me a shelf full of Leica mount glass and it would be another story. But that’s takes the market from tiny to obscure.

        The mirrorless options that will be handed to us will be a function of what’s introduced for the general market. Companies that do not follow this — perhaps Sony — will perish.

  • Gary

    Sony has always been difficult to understand, in part because they have such a diversified business.

    In some ways that helps them, but in other ways that deprives them of focus, and deprives them of a solid brand identity in anything.

    Here’s a problem for Sony: many of their product markets have become commoditized, such as HDTV’s, Windows PCs, and consumer camcorders. Sony does not do well selling commodities, because they have higher prices. In general, Sony does well when they lead through innovation and can command higher prices.

    In cameras, they have some innovative ideas but the entire camera market is under pressure from smartphones. Also, as others have noted, it is so difficult to dislodge Canon and Nikon in the minds of most consumers.

    Personally, I salute Sony for trying new stuff with their cameras, and their sensors are great. But the Sony sensors are the best part; in many cases their ergonomics isn’t too hot, and their lens selection can be lacking. Ask yourself this: if it were not for the Sony sensors, would you really consider a Sony camera? Now admittedly, the sensor is a really important part of any camera, but it shouldn’t be the only high point.

    Roger Cicala of lensrentals.com, who is one of the most perceptive commentators out there, a while back compared Sony sensors to Kodak film, with the observation that just as Kodak film was at one time in use in virtually every camera, the day may come when Sony sensors are used in virtually every camera make. Now that’s fine if Sony just wants to make sensors, but right now they seem to want to grab a slice of the entire pie: camera bodies, lenses, etc.

    If you’re going to compete against Canon and Nikon, you have to compete with the total package.

    I grew up in the days when Sony came up with the Walkman, the CD player, the handheld camcorder, etc, and so to me Sony was always synonimous with innovation. In fact, even though they had a diversified product portfolio, they were able to achieve a greater brand reputation, namely, that in any market they entered they would be a leader in innovation and creativity. It would be a shame to see such a venerable brand go under.

    • After Minolta > Sony and Pentax > Ricoh we might not see the end of Sony cameras, but something like an Olympus > Sony offspring?

  • Bengt Nyman

    Sony introduces the worlds fastest mirrorless autofocus.
    Faster than DSLR PDAF.
    It is introduced on the A6000, a mirrorless, E-mount, APS-C camera.
    This is BIG news!
    If it holds true, without compromises, it puts into place the missing piece of technology required for top quality mirrorless photography.
    Once it becomes available in FF, and Zeiss supports it with a line of autofocus lenses it will be the game changer that many of us have been waiting for.
    We can also expect Nikon and others to follow suit.

    • Gary

      I agree; if the new Sony A6000 AF is really as good as it is marketed, it is a huge leap forward for mirrorless.

      Once mirrorless can match or even exceed the AF of dslr’s, with both speed and accuracy, then you may see the market start to shift more towards mirrorless.

      Of course the mirrorless companies still have to prove they can market and promote their product adequately. To date they really haven’t been in the game, at least in the US.

      • Bengt Nyman

        The main “mirrorless companies” will be Canon and Nikon. Once the technology and the demand are in place Canikon will be all over it and the DSLR will be the steam engine of the photographic world.

        • Gary

          A very valid point; you are correct. Canon and Nikon will be ready to seriously move into the mirrorless space once the market is ripe. They will carry with them their established brand reputations, their marketing, and their retailing network. In all likelihood they will come to be the dominant players in the mirrorless space.

        • Noyb

          If their culture can support “all over it”. So far they have both been quite defensive. Not a good starting point to suddenly be not only innovative but ahead of the existing players. Witness Sony.

          For the vast majority of the mirrorless market, small and light sells. Which translates to none of the appeal of Canikon’s lens inventory will do much, if anything, to move cameras (witness Canon’s attempt with the EOSM — had to look it up in Google as the model designation is an unknown to me). This also poses a financial viability issue as bodies, after investment, short life cycles and promotions are less profitable than lenses for both of them (strictly my belief, no supporting evidence).

  • Ryan Lussier

    I’ve just purchased my first Sony an a99 and I love it. I bought it used for 1600 and it’s money so well spent that I picked up a new Sony Zeiss 50 1.4 ZA so I am buying into their system. The Sony is a second camera to my Leica M9 and Lux lenses so I was looking for something that could give me the same felling of quality and lens rendering. After shooting with Fuji, Nikon, and Canon this is as close as I can get to great glass and unique rendering in a “DSLR.” I really wish more people would give them a chance as I truly think they have something unique and they deserve more credit and respect then they get and I would choose as Sony over a Nikon or Canon any day now that I’ve tired them. I’ve been a long time browser of your blog and I love what you do keep up the great work and I hope that Sony is successful and they keep coming up with new lenses/cameras for A mount.

    Cheers,

    • You raise a very interesting point Ryan: something the could give you the same feeling of quality and lens rendering as the Leica M9 and Lux lenses.

      So you compared all major players and end up with a Sony. Interesting. Some people even complain about the “lost” light due to SLT…

      In terms of body handling and operation, the Sony still tops?

      • Ryan Lussier

        Hi Dan
        Thank you for responding I’ve shot with all the major players and I do feel that Sony has something special. Great sensor, Great Lenses (Zeiss) and perfect ergonomics and an extremely customizable solid feeling camera. The last DSLR is shot was a D600 and it was hard to get tack sharp images at 1 x focal length I couldn’t imagine what the D800 is like. Sony in body stabilization brilliant, articulated screen, and face detection that tracks all over the sensor (don’t knock it until you try it.) It just works! I think I have the most technologically advanced full frame (a99) and the least technologically advanced full frame (Leica M9) =)

        I can’t stress enough how great theses lenses are the Sony Zeiss 50 1.4 is solid metal and fells like a Zeiss and yes is priced at 1500 USD but the new Nikon 58 1.4 is priced the same and looks and feels like another plastic fantastic to me.

        If you are interested perhaps I can create a review for you site I’m working on my blog right now and hope to have it launched soon.

        All the best
        R

      • Ryan Lussier

        As to the lost light I generally don’t shoot the M9 past iso 800 so high iso on the a99 is mind blowing for me. Is it as good a D600 no but does a little more noise really matter that much? Not to me after careful processing. The noise performance was very similar to the d600 for me and the kicker for the a99 is the in body stabilization so I could shoot lower ISO’s anyways it’s was a wash for me.