Is lens manufacturing a money losing business

[Mark K]

I was rambling about the shortage and lack of quality prime lenses from Sony. This local dealer told me that it is too costly to manufacture a lens. He quoted 135 stf as an example that Sony may have to pay much more money than we pay in the shop. That is why some lenses cease production.
I cannot understand is if this is true, how come Fuji and Olympus have not stopped launching quality lenses all the time?

[bfitzgerald]

I don't buy that at all.
With any product there is a cost, including r&d and manufacture.

Lenses traditionally have very good margins (I'm not sure exactly what they are but they're clearly good)
Same as folks saying Sony can't make a 70-200mm f2.8 at Canikon prices.

The new mark II 70-200mm f2.8 has a pre order price of £1999 last I looked, that's up £500 from the old one
Funny thing is Tamron can make a 70-200mm f2.8 for under £1100 (I'm sure it will drop to under £1000 at some point)
As for primes I would imaging the manufacture is easier, but the fast ones require good QC and more optical glass.

Sony have been on a bit of a price hike of late across many lenses (bar the budget stuff)
It's quite obvious that many people will simply ignore Sony's lenses if they are priced too high, I'm ok with that I'll just buy Tamron glass instead.
If Sony's lens sales are slow, then they only have themselves to blame. OEM makers can charge more than third party ones that's accepted. but £2000 for a few coatings and a new AF Motor isn't good value.

[peterottaway]

And those of us with a quality and still well functioning Minolta 80 - 200 lens have even less interest in parting with large sums of money when the old solution is good enough.

Although these oldies will eventually run out / wear out, you would expect Sony to want to generate a decent market for the new stuff. It would encourage the retailers at the very least. But the new FE f4 lenses would seem to be somewhat more sensibly priced. So the question is are Sony playing a deliberate 2 tier pricing structure ?

On the other hand there are probably those in Sony who would argue that lenses such as the FE 35 and 55 primes whose prices have been criticized are reasonably priced in comparison with the manual focus Carl Zeiss lenses.

[classiccameras]

I think whatever works for you then stick with it.
Tamron along with Sigma are prime examples of independant lens makers supplying a market so the photographer has an option other than the Camera manufacturers own lenses and quite often better value and better performers for money.

As Barry said no problem, I'll go with Tamron glass, which is my intention if there are better A mounts out next year.

[bfitzgerald]

Actually the 135mm STF was designed by Minolta I should have remembered that so no R&D costs there it just got a Sony make over when they took over. That's a specialist lens for most shooters (it's not even on my want list being honest, nice but I've better places to put my cash ie it's a luxury purchase not an essential one)

I was playing with a Tamron 24-70mm f2.8 on a Canon a few days ago, the owner decided that the £1800 odd Canon were asking for their own version (with no IS) was just too much to bear and saved the best part of a £1000 going with the Tamron. It's a nice lens and well built with good optics it's sharp. If the Canon is a bit better no idea, but I doubt it's £1000 worth better.

Sony's problem is they seem to be on a lens price hike rampage this last year, a CZ 24-70mm is just under £1400 (that's more than the Nikkor, Tamron or the older Canon mk I) they seem to think the 16-80mm is still worth £600 odd, and the 70-300mm G continues to command an unrealistic and head in sand price of almost £700. They are also more expensive for their 50mm f1.4 v Canikon too. About the only good price is on the 16-50mm f2.8 which is under £400..maybe they don't feel it's that good?

There are 2 issues here. With not that great lens prices people might ignore Sony altogether. Those that are in the system many will just buy s/h or Tamron/Sigma.
I know when I was buying a macro lens, despite liking the 100mm f2.8 macro a lot it is simply not worth paying £550 for a new version of that lens. I can buy s/h, but the Tamron 90mm is optically on par with the 100mm and cost less than half the price.

Maybe I would have paid £400-£450 max for the 100mm. People are price sensitive, Sony have to be at a level where people will buy, if not they won't be selling many and therefore not making a lot of profit. Pentax already tried the price increase on lenses strategy and it didn't work. You just lose market share. Not saying Sony should sell at bargain basement levels, but you can't ignore what the top 2 are doing.

Be honest now who would pay £2000 for that non sealed AF Motor upgraded 70-200mm f2.8? Not many
I've not used the 80-200mm Minolta, the only turn off is most seem to be for sale in Japan so adding customs and VAT on that makes me think Tamron are a better bet.

[classiccameras]

The list below is not a lab test or a very scientific review of lenses, just user reports which have been averaged out over the number of users submitting reports on Dyxum web site. Maximum score is 5.
There are a couple of surprises.

1: Sony 16-50 F/2.8 70 reports, 4.61

2: Sony CZ Vario Sonnar, 200 reports, 4.43

3: Sony 16-105, 87 reports, 4.42

4: Tamron 17-50 F/2.8 [NON VC version], 202 reports, 4.40

5: Sigma 17-50 F/2.8 'C' model, 3 reports, 4.50

6: Sony 18-55 SAM Mk 1, 91 reports, 4.00

7: Sony 18-55 SAM Mk 11, 5 reports, 4.42

8: Sony 18-70, 213 reports, 3.47

9: Sigma 17-70 HSM DC OS, 15 reports, 4.44

10: Sony 18-135, 23 reports, 4.63

[alphaomega]

We see again Barry Fitzgerald going on about Sony lens pricing. Fact is we do not know whether Sony "have their heads in the sand" or are simply rational i.e. they have limited production capacity and can sell what they can make at good prices. If you don't like their prices buy Sigma or Tamron. In the case of E-mount buy a converter and purchase some other brand to put in front. I am not saying that BF is wrong but rather that I think he is as much in the dark as I am about Sony's motivations.

[bfitzgerald]

I'm only commenting on the obvious, pricing might vary in other regions. Canikon play games where they might have a slightly cheaper lens v the other, but they are broadly for most offerings similar. Sony on the other hand, are IMO pricing a bit too high with quite a few lenses.

Someone might sit there and say ok increase this lens price 15%, but if you lose 25% in sales you've actually lost more money.
The examples given clearly are off on pricing, it might look good to price the 16-80mm CZ at £600, but anyone who's used the lens knows whilst it's a decent lens and sharp a £600 lens it is not by any stretch. Yet Nikon offer a 16-85mm for £440. For some users that's a substantial price difference and it can't be ignored.

A bunch of dudes in suits making prices up who are not paying attention to the market might actually do more damage than good.

Even looking at the 18-135mm I have, it was at one time £199 from one uk seller. It's now about £340 making it around £40 more than the Canon equivalent (used both the Sony has the edge optics wise, but still) Maybe £199 was too cheap, but at around £250 I can recommend the lens. Over £300 I would hesitate somewhat.

Prices are quite psychological for buyers, even moderate price ramps can put them off.
Even body prices Sony are being blown away sure the A77 is being discounted, but not to the levels Canikon are doing. Don't expect a new A77 or FF body to be anything other than priced above rivals. Higher prices reduce sales simple as that.

[Birma]

Actually the 135mm STF was designed by Minolta I should have remembered that so no R&D costs there it just got a Sony make over when they took over. That's a specialist lens for most shooters (it's not even on my want list being honest, nice but I've better places to put my cash ie it's a luxury purchase not an essential one)
...

The 135 STF is on my want list . I shall wait until the spring though I think.

[alphaomega]

Higher prices reduce sales simple as that.

Absolutely Barry and reduce profit margins unless you are offloading excess stock to reduce loss. Stock that does not sell is a 100% loss less scrap value (if any).
I once did some consultancy work and I remember a largish producer of drink telling me they increased production and worked max. overtime to meet demand and actually reduced their profits as the marginal cost per bottle exceeded the selling price at the gate on the extra production. So they would have been better off adjusting their price to trim demand to their production capacity and thus increase the margin per bottle. If you are in the production business the trick is to balance price with production capability. If you increase production capacity it takes time and you better make sure there is a demand for your product at the larger output level, maintaining at least the same margin per unit. None of us know what game Sony are playing, but I would expect that they would start discounting if they found themselves with overstock of particular models.

[Wes Gibbon]

I'm only commenting on the obvious

If something is obvious, what value is there in repeating it? Perhaps it not obvious to everyone, in which case can it actually be said to be obvious?

Someone might sit there and say ok increase this lens price 15%, but if you lose 25% in sales you've actually lost more money.

I don't get this. If you are selling a lens for what it costs to make it, your profit is zero however many you sell. If you up the price by 15% you are starting to make a profit even if sales drop. It depends on how much it costs to make the lens. As you increase the selling price there will come a point when the decrease in sales outweighs the extra profit per item.

Of course it's complicated by the fixed costs of designing the lens, setting up the production line, marketing costs etc. which have to be recouped from the profit from each indivitual sale. I guess Sony are at a disadvantage here because if their sales are substantially less than those of Canon or Nikon then they have to charge more for each lens to recoup these fixed costs. Where the volumes are relatively high, that may not be too significant, but for lower volume lenses Sony may calculate that they simply cannot recoup the fixed costs by lowering prices where the projected increased sales will not generate enough additional sales, but they may be able to get some overall profit by charging a lot and making a thumping profit per unit from those few users who can afford it.

Having just invested in a NEX system, I notice that the lens most likely to be purchased in addition to the kit lens is the 55-210 telezoom, which is reasonably priced (and starting to be discounted - is there a replacement on the way?). The 30mm macro is also quite reasonable. Most of the other lenses are unpleasantly expensive (10-18mm nearly £700 for example).

[classiccameras]

I suspect Sony are exercising a degree of exclusivity to their products especially lenses as some are clearly a cut above the opposition's equivalents. This could be a small factor in their overall price structure.

[bfitzgerald]

Wes where did you get the idea of "selling a lens for what it costs to make"?
If that were the case you'd more than lose money as the retailer has a margin too (and taxes)

I don't know what the manufacturer margins are on lenses, but we can take a logical guess.
As we can for other items that camera makers sell.

- Budget DSLR bodies: Smaller margins but I don't expect them to be making a loss
- Higher end bodies/cameras: Good margins esp the pro level stuff
- Budget lenses: Decent margins as costs are cut (ie build and materials)
- High end lenses: Good margins, more cost but more premium attached to the higher end stuff
- Grips & Flashes: Very high margins esp grips which cost very little to make and manufacture, flashes again are quite simple devices and have a low build cost
- Filters: Massive margins esp for top end brands like B+W, small piece of glass in a metal frame, one of the great rip off's of the photo industry
- Premium compacts, good margins an RX100 II sells for more than a comparable DSLR and clearly costs far less to make
- Budget compacts, smaller margins due to discounting and over saturation of the market.

I've no idea where you get this "making a loss" on lenses from.
True Sony won't shift the volume that Canikon does not even near it, but there are smaller makers like Samyang who manage to get by too with their own range of MF lenses, they're not making a loss!

Now if Sony have a lot of stock lying around not selling then that will hit their supply/demand and cost. But you can't honestly expect me to believe the 135mm STF is sold at a price below what it costs to make, or at a loss making level. I'm sure it does cost more to make than a normal lens, but it's not exactly a cheap lens to buy by any means. It's also a prime lens and not a hugely fast one either (ie less glass)

I have worked in the retail industry in the past, and you would be surprised at the margins on some products. And the golden rule is premium brands/products have bigger margins than lower priced products (by quite a lot as well) In a lot of cases the wholesale cost might be only a bit more than a moderate/decent brand, but with a significantly higher retail price to the consumer.

It's quite easy to spot, a Dyson hoover is made of mostly moulded plastic and a motor with some tubes etc. The actual manufacture cost of those parts is very low, really low (Malaysia factory) Yet as a premium brand they have high retail prices. Marketing at work. Similar for Apple who have low production costs as Foxconn are mostly making their stuff in China (low production cost, huge manufacturing base/output, cheap labour etc etc), I know for a fact the retailer margins are not great on Apple products (they're ok but they rely on shifting the numbers) Apple by far are making most of the profit on their ipads, phones etc.

The actual manufacture and assembly of lenses is going to vary. Higher end ones have better quality components and more elements possibly the material cost is more no question, but it's not as much as you might expect either. It's pretty obvious that the higher priced lenses attract better margins, so it's a mystery to me why one guy in a shop says the 135mm STF is a loss maker for Sony. He's smoking something called "I don't know what I'm talking about"

[classiccameras]

That kinda annoys me about 'Dyson', Which magazine found one or two cheaper brands were just as good. Establish a high end product market and then charge a premium price, then its perceived as, if its that expensive it must be the best!

[bfitzgerald]

The only reason I know about Dyson is my sister has a business that sells parts and they sell a ton of them, and they do repairs.
Even the official Dyson motor costs under £20 to buy wholesale, you can work out the rest of the cost on how expensive moulded plastics are, and add a bit for the chrome tubes. Are they any good? Well not really considering the price they are, they're not more reliable than many other brands out there.

It's an exercise in marketing and Dyson are good at it, just like Apple are.
It's not the only industry to be a bit of a rip off, I know a retired optician who openly admitted to me that the margins are simply huge on frames (something I think we've known for a while now) The actual out of door cost of a pair of glasses is stupidly low even with the lens cost. If you pay £250 for a pair of Beats headphones, don't assume they cost £100+ to make, again a high premium price does not always translate into a premium product.

Camera makers have, for years been exploiting the prestige element of higher end lenses, with high prices and very good margins. If we found the actual out the factor door price of these products you would be quite shocked.