Smartphones Are Killing Camera Companies Again

As smartphone cameras get better and better, camera companies that compete on the lower end of the camera market are seeing their share erode away. In fact, so many people are giving up buying cameras because their smartphones are good enough that one Credit Suisse analyst told Reuters that he expects only Canon, Nikon, and Sony to survive.

Mirrorless cameras are mid-market saviors for camera companies, but it won't stay that way. Photo via Zhao/Flickr

Less than a decade ago, the digital camera market was split largely into two categories: point-and-shoots and DSLRs. While they varied widely in price (and there are smaller segments in each), DSLRs have always catered to pros, who need the best photo capabilities possible, and enthusiasts who want higher image quality and more control. Point-and-shoots, meanwhile, were largely bought by average consumers to take snapshots of their family, their dog, their vacations, whatever.

Until recently, people took pictures with their phones, but they'd tend to avoid it. People who frequent camera forums love to repeat "The best camera is the one with you" ad nauseum, but camera phones used to suck. Even people who couldn't care less about photos would buy a cheap point-and-shoot, because there was no other option. That market was a fairly natural evolution from the film days, and camera companies got along fine. (Aside from Kodak, that is.)

But as smartphone cameras got better, suddenly there wasn't much of a difference between a point-and-shoot and the camera on your phone. Sure, you might get a better flash or zoom, but the calculus was simple for many people: If your phone camera is good enough, why spend more money on a point-and-shoot, which is just another device to carry around for marginal benefit?

Back in 2011, the iPhone 4 became the most popular camera on Flickr, while point-and-shoot cameras largely began to disappear. The iPhone 4's camera only has 5 megapixels, a paltry score for the spec camera companies best love to advertise. Yet its ease of use, quality, and ubiquity was enough to get a whole lot of people to ditch the idea of having a discrete camera altogether.

Today, the point-and-shoot is all but dead. In the first five months of 2013, point-and-shoot camera shipments dropped a whopping 43 percent; the four most popular cameras on Flickr are now iPhones. Many point-and-shoots may still have more capabilities than an iPhone. (That's definitely debatable though, especially considering an iPhone's connectivity.) But the type of person who buys a point-and-shoot—someone who just wants to take pictures, and isn't really concerned with photography—now has everything he or she wants built right into their phone.

Camera makers saw this coming, and about five years ago created a new mid-market camera segment to cater to people who wanted more capability than a phone could offer, but didn't want to spend the money to carry around a huge, clunky pro DSLR. The mirrorless segment, largely dominated by the Micro Four Thirds format, tends to feature cameras with plenty of manual controls and interchangeable lenses in smaller, better-looking packages than an entry-level DSLR.

Mirrorless cameras have been the saving grace for companies like Panasonic, Olympus, and Fuji, all of which never really captured the top end of the DSLR market. With prices ranging from a few hundred dollars to a couple thousand, they've attracted all ends of the camera market, and are a refreshing step back from the largesse of the DSLR market. Personally, I'd love to have a nice mirrorless when all I want to do is shoot some nice photos while walking around, if I wasn't spending all my camera budget on more lenses and crap for my DSLR.

But as well-received as mirrorless cameras have been, there's only one problem: They haven't lived up to their potential, as USA Today argues. It's because they're caught in a weird middle region: DSLRs remain largely irreplaceable because they're faster and more flexible than anything else, while the lower end of the camera market continues to wash away.

For the smaller camera companies, the decline is really bad news. According to the Reuters report, Canon, Nikon, and Sony share more than 60 percent of the camera market—Canon and Nikon because they dominate the DSLR world, and Sony because it sells sensors to everyone else. Panasonic, meanwhile, has seen its market share decline from 3.9 percent to 3.1 percent this year, and overall mirrorless cameras make up just around 10 percent of the interchangeable lens market in the US.

While cameras are a unique example of when more isn't always better—for example, you can only have so many megapixels before file sizes get unwieldy—it's an interesting case study on gadget progression in general.

There's always a better gadget, and a $6,000 DSLR with a $3,000 lens will take better pictures than a smartphone (as well as better pictures than a $9,000 camera system from 10 years ago). There's no way that a iPhone camera development will ever catch up with top-flight DSLR development. No one doubts that.

But the real-world calculus is a bit different, because people don't have unlimited budgets. Objectively, mirrorless cameras take better pictures than an iPhone. But spending an extra grand on a "better" camera makes no sense if your phone—which you had to buy anyway, already carry around everywhere, and boasts a free editing app—is already good enough.