Analysis: "EVIL" cameras: Sony’s big bet to boost market share

By Isabel Reynolds

TOKYO (BestGrowthStock) – Sony Corp (6758.T: ) has launched a fresh line of attack in its battle for a bigger share of the high-end camera market with new models that pack some of the features of a bulky, professional-style camera into a small body.

The electronics giant’s two “electronic viewfinder, interchangeable lens” (EVIL) cameras scored an instant domestic hit when they hit store shelves in June, backed by a splashy advertising campaign.

Sony won almost 20 percent of Japan’s single-lens reflex (SLR) market for the month, while Canon Inc (7751.T: ) and Nikon’s (7731.T: ) combined share of the home market fell by nearly 10 percentage points that month, according to research firm BCN.

If the trend catches on beyond Japan, Sony could realize its dream of expanding in the lucrative segment where, despite years of effort, it languishes a distant third.

“It’s an evolution that could shake up the current 75 percent global share Nikon and Canon have together,” Christopher Chute of U.S.-based research firm IDC said in an email.

With $8 billion in sales, Sony’s digital imaging business, which includes both digital still and video cameras, accounted for just under 10 percent of Sony’s overall revenue in the year ended March.

Credit Suisse analyst Kunihiko Kanno downgraded Canon in late June, partly on its perceived lack of interest in competing in the segment, though Canon later said it was working on a small high-end model.

Nikon has dropped hints about a new product, but is tight-lipped about details and launch timing.

Yasuyuki Okamoto, head of Nikon’s camera division, told Reuters on the sidelines of a recent presentation that the company’s cautious attitude was a result of witnessing novel camera formats fail in the past.

If growth comes at the expense of high-end cameras, it could certainly mean manufacturers make less money on accessories.

But, on the assumption that both Canon and Nikon will join the fray, IDC forecasts indicate the global market for EVILs will likely surpass that for standard SLRs in terms of unit shipments by 2013.

Digital SLR cameras made up 9.4 percent of the nearly 106 million digital cameras shipped in 2009, according to Camera & Imaging Products Association, which tracks major Japanese camera makers accounting for the bulk of the global market.

OUT WITH THE MIRROR?

Like earlier market entrants Olympus (7733.T: ) and Panasonic (6752.T: ), Sony saved space in its NEX models by ditching the mirror from the traditional SLR format, resulting in the term “mirrorless” also used to describe the products.

That’s an advantage in terms of sheer portability — and Sony’s Thai-made model is the lightest of its type — but means users must compose pictures via a liquid-crystal display rather than a traditional optical viewfinder.

Unlike their compact cousins, EVILs feature large sensors, offering high picture quality, and are compatible with a variety of lenses.

Makers hope to attract SLR users tired of lugging around heavy equipment, as well as compact users looking to upgrade.

“The weight of the combined lens and camera has always been an obstacle to broader proliferation,” Macquarie Securities analyst Damian Thong said. “That’s the main reason why the broader camera market is about 10 times the size of the SLR market.”

So far, camera enthusiasts seem keen, but analysts say the real hurdle will be persuading mainstream compact camera users to see the advantage of forking over $600 dollars or more for a mirrorless model. Existing SLR models with similar specifications cost $450-800.

“That is the single most important point of our marketing campaign,” said Hidehiko Teshirogi, the senior Sony manager behind the development of the NEX models.

“It’s a problem we seem to have overcome in Japan, but we’ll have to wait a while to see about the rest of the world.”

Naohiko Kawamata, a director of Olympus’s imaging division, whose PEN Lite was one of the first mirrorless offerings, said the new products had been an easier sell in gadget-loving Japan than elsewhere, partly thanks to knowledgeable store clerks.

But analysts agree developing countries, especially China, are now the key to success, rather than near-saturated markets such as Japan and the United States. Sony says it is fairly confident of demand.

“We have identified a ‘status-seeking’ type of consumer in China, who is attracted to new and stylish products. We think this will appeal to them,” said Teshirogi.

(Editing by Anshuman Daga)

Analysis: "EVIL" cameras: Sony’s big bet to boost market share