New Models - Path to Profitability?

[Mike]

My theory is that the new alpha models have nothing to do with new features. They are Sony's attempt to make the alpha line profitable. The impetus for the new models was to reduce the manufacturing costs. I suspect that the alpha line is not profitable and is considered a cost of remaining relevant in the consumer digital camera market. The pricing is market based rather than production cost based. The new models are Sony's vast experience in the mass consumer market being brought to bear on DSLR cameras to make them profitable. This is the same company that became a major player in the VCR market even after a disastrous failure in the format battle, that then went on to win the HD DVD format battle by owning a major studio. Their vision is long term.

If the manual has made it through QA there are likely thousands of the cameras waiting to ship. If the new models were based an incremental increase in features there would have been major press releases by now and the cameras would have been in the hands of every major photography publication.

If I'm right, the 350, 700 and 900 have already been discontinued in production planning. This of course will not be announced until the new models have been established to protect existing inventory and production runs. Who wants to buy, or more importantly who wants to carry, a discontinued model? This is more true of "brick and mortar" stores than Internet based sales that do not have to invest in displays, training, etc.

It's hard to see from the finished product what saves on production costs. It may even appear that there are some added features because the hardware and firmware have continued to evolve and it can often cost more for legacy parts than the new version costs.

The good news is that Sony religiously protects their brand. I have never bought anything Sony that was a piece of junk.

Mike

[alphaomega]

There could be something in what Mike wrote above. I have been a Purchasing and Logistics manager in engineering and know all about "value analysis" - taking costs out of products. The key is not to go so far that customers are chased away through a combination of obvious product feature/quality deterioration combined with price increases. It may help in the short term but it can be a sure way of forced exit from the market if customers take their money elsewhere. If volumes then decline the cost per unit will go up due to overheads being spred over smaller volumes.

[bfitzgerald]

So if they want to reduce production costs, why did they dump the A200-350 series, all they needed to do was give them a re-fresh, but instead changed the body style completely. Surely that added to cost, re-tooling and production costs etc??

The shared body concept is not a terrible idea, but sony need to do more than a very minor spec difference between bodies. DSLR's are not cybershots (and cybershots are not that good anyway!)

[Mike]

I have been saying they have been stripping costs from the alpha line for quite sometime now...this is
-Sonolta

I'm not sure that's a totally bad thing. They are pushing the leading edge of technology and bringing the price down. I'm just thinking that this round of new models has nothing new to offer. Once this round is over, the same resources will likely be aimed at new technology.

[Mike]

So if they want to reduce production costs, why did they dump the A200-350 series, all they needed to do was give them a re-fresh, but instead changed the body style completely. Surely that added to cost, re-tooling and production costs etc??

That's a numbers game; manufacturing savings versus non-recurring design costs. Are you making 1,000 or 1,000,000? If you are making 1,000,000, one dollar saved in production costs pays for $1,000,000 in design costs.

[KevinBarrett]

The difficulty here is that a camera system must have product offerings for the market share that is largely insensitive to price. These become "Halo" models, or "flagships," basically no-holds barred examples of the company's commitment to developing the system. The people that buy these cameras effectively sell the lower end cameras to new users.

If Sony does not offer a camera competitive in that market, then they will not attract the professional shooters, who will, in turn, not carry your cameras, and not sell them. Ironically, this is an example of the theory of "alpha buyers," that you market your product not to every consumer, but to the specific kind of consumer that gets excited about a product and sells it to all his friends. Lots of markets operate like this, and there are alpha buyers in all levels.

What Sony is showing us now is that they don't care about or are unaware of alpha buyers. The system is based on affordability and ease of use, and maintains a feature set that is competitive only with film SLR bodies. The a700 users are stranded, as are the 900 users; affordable 1 or 2 year-old camera in hand, we've no upward path in the system and no entry-level products that we would recommend to a friend.

[PhotoTraveler]

The idea the alpha line is a looser on money is rumor. And has been even contridicted at times by Sony financial reports stating DSLR sales in some regions of the world are what helped them not do worse. That's to say, the Alphas have been money makers, not losers.

The A100 has moderate success for a short time. The A700 was a bit of a flop (really was an issue of timing and lack of other gear in the system, not the body itself). Everything since has sold very well and sony has repeatedly said models have exceeded their expectations.

Considering how much gear goes out of stock so often. And that when new models come, the old stuff is gone from stores very quickly. The A200/A300/A350 were gone almost instantly once the new ones came. The A850 hasn't hit yet and stores have all ready run out of A900s. Even the new models are going out of stock. Only the A700 has shown to be hard to get rid of. But I suspect after the announcements of the new 5series and A850, they will disappear as folks now know the options.

We also see how much Sony market share has grown, and them having quarters were sales triple. Not bad at all. So no, I don't see anything as them trying to get back to profitable. I think they all ready are.

On discontinuing bodies. Sony has been good about announcing bodies as discontinued before even replacements comes. The A700 has been officially discontinued for a while now, and production was stopped around a year ago. The A200 was discontinued for a while before the new bodies. Strong sales help with this as Sony doesn't need to be concerned about clearing them out. It's not that hard to clear out an old model simply because they cost hundreds less than the replacement, so even when old, they are easy sells.

It's also very easy to see from an end product where they saved money. It won't take long to piece it together when A850s are in hand. Unless they also make an announcement about a new stepper for making sensors in one pass, or the price difference is very small, we will pretty much know they were just taking a lot of profit on the A900.

A cheaper model will smaller profit margin won't help Sony's profits at all. It will do just the opposite. We don't know the price yet, but it looks very simple. Sony is trying to pull a Canon 5D. Canon lost money on the 5D. It shed 500 bucks in price very quick in it's life. But it was critical to Canon's survival. Nikon was on the upswing, and there was some competition on the low ends from KM and Pentax. Canon needed to hold marketshare. They kept selling it, which was most certainly zero profit or negative as the thing tipped into the low 2ks and sub 2ks. But it didn't matter. They knew anyone who buys in with a 5D, maybe buys a lens or 2, won't leave Canon any time soon. Especially since there wouldn't be a body that cheap from Canon again. It wasn't even certain if anyone would get a FF body that cheap again. In the end though, it got Canon users, and the important ones who buy expensive lenses, and ones who won't move on at a whim like entry level users.

Sony has been able to grab marketshare, but needs more. They have picked off lots of entry level folks from N and C who will switch brands any time they buy a new camera which is often ever 18 months. Sony needs higher end users now. So they will try the low profit, high sales path to boost their marketshare. High risk path to go. If it doesn't pan out, it will hurt Sony. And my fear is they are going about this without the lenses. Canon's success in their move was just as much due to the 4/24-105 as it was the 5D. They were a matched set. Sony doesn't have that. Unless the 4/24-105G appears.

My theory is that the new alpha models have nothing to do with new features. They are Sony's attempt to make the alpha line profitable. The impetus for the new models was to reduce the manufacturing costs. I suspect that the alpha line is not profitable and is considered a cost of remaining relevant in the consumer digital camera market. The pricing is market based rather than production cost based. The new models are Sony's vast experience in the mass consumer market being brought to bear on DSLR cameras to make them profitable. This is the same company that became a major player in the VCR market even after a disastrous failure in the format battle, that then went on to win the HD DVD format battle by owning a major studio. Their vision is long term.

If the manual has made it through QA there are likely thousands of the cameras waiting to ship. If the new models were based an incremental increase in features there would have been major press releases by now and the cameras would have been in the hands of every major photography publication.

If I'm right, the 350, 700 and 900 have already been discontinued in production planning. This of course will not be announced until the new models have been established to protect existing inventory and production runs. Who wants to buy, or more importantly who wants to carry, a discontinued model? This is more true of "brick and mortar" stores than Internet based sales that do not have to invest in displays, training, etc.

It's hard to see from the finished product what saves on production costs. It may even appear that there are some added features because the hardware and firmware have continued to evolve and it can often cost more for legacy parts than the new version costs.

The good news is that Sony religiously protects their brand. I have never bought anything Sony that was a piece of junk.

Mike

[destrianlives]

All you guys have strokes of genuis. Just to make it short. A new beefed up super weatherized A950 with Wifi and a 24-105 F4.0 G lens buys pros if its priced less than the top two competitors! Then need to bring in ppl for the lens'. Good lens create LONG term buyers that stay with a camera system. Not a camera model! New bodies are cool but I know a guy that still swears by his Fuji S2 Pro!!! Sony needs this kinda loyalty! The guy has 4 lens' from the strength of one body in the system! He's just bought 3 nikon SB-900's!!! This dude is valuable to Nikon! Sony needs to get on the ball and start moving lenses! Hell, with full frame... YOU NEED GOOD GLASS ANYWAY!

[alphaomega]

destrianlives wrote above:

YOU NEED GOOD GLASS ANYWAY!

He is right, of course. I frankly do not see the point of the A850, if that manual is genuine, sp close to the A900 without additional FF glass.

[PhotoTraveler]

And you need even better glass with APS.

Hell, with full frame... YOU NEED GOOD GLASS ANYWAY!

[bfitzgerald]

I bet the margins on higher end camera bodies are higher than most think! I have no experience of cameras in retail, so honestly I have no idea. I can tell you however, that higher end branded clothing carries a notable premium over mid range stuff You would be surprised about how much that is, in some cases the name adds much to the final price, even allowing for VAT, the wholesale cost is not that much more than mid level makers.

Retailers are an evil bunch, would be great if we could bypass them!

[pakodominguez]

All you guys have strokes of genuis. Just to make it short. A new beefed up super weatherized A950 with Wifi and a 24-105 F4.0 G lens buys pros if its priced less than the top two competitors! Then need to bring in ppl for the lens'. Good lens create LONG term buyers that stay with a camera system. Not a camera model! New bodies are cool but I know a guy that still swears by his Fuji S2 Pro!!! Sony needs this kinda loyalty! The guy has 4 lens' from the strength of one body in the system! He's just bought 3 nikon SB-900's!!! This dude is valuable to Nikon! Sony needs to get on the ball and start moving lenses! Hell, with full frame... YOU NEED GOOD GLASS ANYWAY!

I do swear by the A700 (and 7D btw) but I wanted an afordable FF A-moun t camera and, if the A850 is a FF under 2000 $, everybody will forget about video on it and Sony will have finally the chance to make a dent into the US/Europe market.

Regards

[destrianlives]

Kinda true cause ppl are megapixel crazy. Sony is stirring it. However whats wrong with a 16mp full frame alpha with wifi and a built in 8 gig SSD harddrive? nothing. i'm just saying dont abandon A700 users. The aps-c lens' should be supported with a top end sony dslr to mount them too.

[PhotoTraveler]

I'd wager there are more "we need low resolution high ISO" screamers out there than there is high rez screamers. Few demand more pixels, they just happen.

Well, there is the problem that such a body ain't happening. Only if Sony is plotting a Pro Sport Shooter body to be their version of a 1D or D# will they develop a FF sensor with less pixels than the A900. I will grant the empty "A800" slot may be a hint, but it could stay empty. Far as a build in drive, that won't happen, as there is no reason to when you can have a non built in card that hold far more. Until you have so much storage built into the camera you don't need to swap cards, there is no purpose to built in memory except to cause heart break when you mess up something along the way of getting the images off (like forget you have 8 gig of shots in the camera, not just the ones on your cards).

I don't think Sony is abandoning anyone with the A850. And heck there are the A500/A550 coming. It's just them hitting both markets. I fully expect Sony to support APS for a long time. But also remember, a FF body is also an APS body.

But still, if Sony gives us a FF body for APS body prices, that haven't abandon APS users at all, just given them a new body with more ability. Plus made FF shooters happy.

Kinda true cause ppl are megapixel crazy. Sony is stirring it. However whats wrong with a 16mp full frame alpha with wifi and a built in 8 gig SSD harddrive? nothing. i'm just saying dont abandon A700 users. The aps-c lens' should be supported with a top end sony dslr to mount them too.

[David Kilpatrick]

One problem Sony faces is that the entire lens range, from SAM to CZ, is not weatherproof. There is very little point in waterproof or weatherproof bodies (beyond the stage of the A900 with its detailed sealing and gaskets on all controls) if you don't have any lenses like the Nikon G 14-24, new 70-200mm VR or Olympus Top Pro range. Even Canon has this problem, the top bodies are very well proofed but only the latest lenses match it.

A second problem which has not yet been addressed is the maximum aperture actuation speed of the M-AF lens system. 6.5, 7 or 8 fps might be possible but we don't know for sure. No Alpha body has ever 'driven' a lens at more than 5 frames per second in the history of the system.

David