Originally posted by falconeye Yes, but foremost, I wanted to move a fact out of the speculative region. Which is:
Nikon is now making more profit with FF bodies than APSC bodies.
Whatever else can be said, I wanted this single message to settle.
Profit is a hazy concept. On a free cash flow basis Nikon might feel very good about their FF cameras. Yet on a cost-accounting basis, amortizing the R&D and development expenses, tooling and SG&A then "profit" in a Nikon FF camera might be much lower than we imagine.
The hard part is to understand how much previous research, tooling and other expense is considered "sunk cost," or fully amortized. Those "soft" costs need not be added in to the accounting cost of a new model; therefore the "profit" on a unit may be
higher than we could know.
Cost/profit/pricing determinations are closely guarded secrets. We'll never know.
What we can safely surmise is that Pentax has a very steep hurdle to achieve profitability on a FF camera. Nikon and Canon have created a classic barrier to entry against competitors by exploiting their first-mover advantage. They are fragmenting the rather thin FF market by extending their ranges of FF bodies, dividing price points across various models and feature/benefit combinations, continuing to manufacture decently-selling older models (and perhaps earning outsized profits on them versus sunk costs) and thereby maintaining their dominant duopoly.
It really is the same as Procter & Gamble making 12 different kinds of
TIDE detergent in several different sizes. A competitor with one or two sizes each of two formulations (K-
r; K-01, K-
5, FF
) can't get enough volume to cover start-up costs versus all the
TIDE "sub-brands" it competes against. Add in Cheer (also P&G) doing the same thing and just getting shelf space in a store becomes a challenge. That doesn't even consider volume-based wholesale pricing. Look at what has happened in B&M stores - that's why it happened. This is really an undergraduate level marketing study. There's nothing complex about this at all.
There really doesn't seem to be an easy answer for PRI unless Ricoh is willing to invest several hundreds of millions of dollars of losses, over several years, developing general brand identity and a FF market share. Clearly Hoya was not willing to make that investment. We'll see some of Ricoh's cards beginning quite soon - within 12 months I'd say. And I think we'll be surprised by what we see..
What does appear possible is that PRI will develop the
Brand more competitively; some of that development might include a business decision to invest money in loss-making models that have transferable technology and brand identity benefits. Consdier that the K-01 might be a brand-identity move and it's apparent contradictions are more understandable!
In so many ways I am happy that I am not a brand manager or product manager for Pentax.
I still believe PRI has a plan to compete
aggressively against Canon, who may be somewhat vulnerable to Pentax. And when someone sees "Pentax" they either think camera or nothing. They
don't think Television. Nikon, however, is an entirely different breed of cat.
Be of good cheer, Pentaxians. Ricoh has a plan and you will be happy.