On May 20, 2011, some eight months after it was first introduced at photokina, Sigma announced the price and availability of its new flagship camera, the SD1.
The camera itself seems like a decent enough lower-mid range DSLR, with features and specs that are mostly comparable to cameras currently selling in the $900 – $1,400 range. The Pentax K5, Nikon D5100 and Canon 60D come to mind. But the SD1 has a Foveon X3 sensor, which purports to offer significant advantages over a similarly sized Bayer pattern sensor: higher apparent resolution and superior colour rendition.
This means that the SD1 can command a modest pricing premium. Conjecture, fueled by comments by some Sigma executives at trade shows and meetings during months prior to launch, hinted at $1,600 – $2,300 as the likely price point. Fine.
But then on May 20 the Manufacturer’s Retail Price was announced at US $9,700. Web discussion forums lit up like a tree at Christmas with irate Sigma aficionados expressing their astonishment and disappointment. They universally vented dismay as well as anger at the price. They had been betrayed by Sigma. At least that’s how many expressed their feelings. Acquiring the camera of their dreams had been rendered Mission Impossible.
Knowledgeable industry executives that I spoke with over the following few days universally expressed astonishment as well as disbelief at the price. Like many on the forums, they thought that the price must be a typo, with a misplaced decimal point. But when assured that $9,700 wasn’t a typo, to a man they had just one sentiment –major fail.
In my SD1 announcement article I tried to imagine a reason for this completely irrational pricing decision. The only plausible explanation that I could come up with was that yields on the new larger Foveon sensor had turned out to be much lower that anticipated. What else could justify an $8,000 premium for the SD1 over its erstwhile competitors?
But the more I thought about it, the more I realized that this was almost certainly not the case. We know that one of the reasons for medium format sensors being as expensive as they are is that the larger the sensor the higher the chance of defects and therefore the lower the yield. The lower the yield the higher the per-sensor cost.
But the Foveon sensor is not a medium format sensor. As I understand it from talking with knowledgeable people in the industry there is little in the Foveon design that would make high yields problematic.
But – let’s give Sigma the benefit of the doubt for a moment. Let’s say that initial yields on the sensor are indeed low. That could justify possibly an additional few hundred dollars? Maybe even $1,000? But $8,000? That challenges belief. In fact it simply can not be the case.
The reason is because the way that yields are increased is by increasing production. By even taking a small loss on the initial few thousand SD1s so as to ramp up demand with an affordable price, higher yields could be achieved and therefore long-term price viability accomplished. Doing the opposite is counter-intuitive.
It can be argued as well that if the yields are in fact so low as to demand an $8,000 per unit premium, then the design or the manufacturing process is flawed and untenable. I simply don’t believe that this is the case, because if it were, Sigma would have bagged the whole thing long ago.
So the answer is NO. The reason for the $8,000 premium on the SD1 can not be low chip yields. At first it seemed like a good rationale, but I have now received enough phone calls and emails from knowledgeable industry observers that I am confident that I was wrong. Low yields on the sensor are definitely not the reason for the nearly $10,000 price being asked for the SD1.
Misreading The Market
So – if you take away the possibility of a chip yield problem what are we left with? Why price a $2,000 camera someeight thousand dollars higherthan first indicated? Customers are not stupid. This is a highly competative marketplace. Based on its specs the SD1 is a $1,000 camera that might be able to command a $2,000 price point, if, and only if, it actually does offer superior image quality to anything on the market.
Occam’s Razor tells us that the simplest answer is the most likely one. The reason that Sigma priced the SD1 at almost $10,000 is because someone senior in the company responsible for such decisions mistakenly figured that this was a good idea.
The industry is replete with examples of products being priced higher than anticipated. The Leica S2 is just one such example. Many argued, myself included, that a more egalitarian price would surely increase sales. But Leica know that they would be manufacturing constrained on both bodies and lenses, and so decided that premium pricing was the best business model. And, of course, the S2 is a Leica, which means world-class design and construction, which has historically demanded a premium.
But Sigma isn’t Leica. Indeed Sigma historically lies at the opposite end of the spectrum both in terms of pricing and product performance. Rather, Sigma is a mass market lens maker with a limited reputation in the DSLR marketplace. Leica makes world-class products known to be able to command premium prices. Sigma historically makes mass market products known mostly for mid-tier pricing.
There can be no doubt that a senior executive within the Sigma organization decided that they had a winner with the SD1’s image quality and that it could therefore command a premium price. There is likely no other explanation for why the SD1 is priced at $10,000 – higher than any 35mm DSLR in history. (Ignoring Kodak DCS Pro model of the late ’90s)
In the real world though the marketplace decides how products should be priced, not out-of-touch executives. Can you imagine a $150,000Ford Focus? No, neither can I, even if it had a 300HP Twin-Turbo engine and got 40MPG. It’s still a low-to-mid-tier car. A fast one, possibly, but a Ford Focus in the end.
The same is true of the Sigma SD1. No matter how good the image quality it’s still a $1,000 camera. $2,000 would be justified by the fact that it has a hot engine (I mean great image quality), but it’s neither a Leica nor a pro grade Nikon or Canon, in either reputation, build quality, or feature set.
Simply put, if launched at nearly $10,000 the Sigma SD1 will be a disastrous flop. The camera will sell in the low hundreds a year, world-wide, rather than the tens of thousands that it might at a sustainable price point of around $2,000. At $10,000 the launch of the SD1 is simply a business school study in corporate failure.
But Will it Blend?
There is a humerous meme in the US calledWill it Blend?, where various products (including cell phones) are put in a blender. The blender in this case is the real-world. Companies and their executives can price a product however they wish, but in the end the marketplace acts like a giant blender and will spit out the rejects – typically ground up into small pieces.
Let’s look at some of the issues which will sink a $10,000 SD1…
– Sigma is not a brand historically associated with high-end (expensive) photographic products.
– The Foveon X3 sensor technology is not well known or understood by most people.
– Other than its sensor, the SD1 has the specs of a $1,000 camera, not a $10,000 camera.
– The camera is essentially limited to Sigma lenses, not all of which may be of sufficient quality to support the sensor.
– The Sigma SD1 fails the “prestige” test. No matter how good the camera might be, the brand lacks the cache to support a premium price.
– The competition at this price point is fierce: Pentax 645D, Leica M9, Nikon D3x, Canon 1Ds MKIII and various low-end medium format systems, and the annual unit sales for each of the above ranges from a few hundred to a few thousand.
– The Sony A77 (or whatever it will be called) will have a 24MP sensor in an APS-C body for well under $2,000 later this year.
– Canon and Nikon will both be introducing pro-grade 30+ Megapixel camera this year.
– Will typical dealers, who currently sell Sigma products, be able to afford to stock a $10,000 camera body from a company not known for premium products?
Even if the SD1 has image quality that trumps or even just equals other cameras in the $5,000+ price range it will have an impossible road ahead of it given the competitive environment.
Once review sample cameras are available and reputable reviewers are able to put the camera through its paces one of two things will happen.
A: The SD1’s image quality will be found to be brilliant, justifying a premium price (but definitely not $10,000 or anything close to it).
B: The SD1’s image quality will be found insufficient to justify a premium price – any premium price.
Sad to say, in my view with both cases the camera is doomed to fail in the marketplace at anything much above a $2,500 price point. If A is true, the battle will be won, but the war will still be lost. This is still just a $1,000 camera body that is restricted to a limited array of high quality lenses. Very high image quality is available from other sources and in combination with other winning features that justify a high price point. Assuming that the SD1’s IQ is terrific this is still its only calling card.
If B is true then the game is over before it’s even started. The case of the Sigma SD1’s $10,000 pricing will turn out to simply be just another case of corporate hubris.
Is There a Solution?
One lesson that I learned during my years of corporate life, especially from when running a public company is – don’t obfuscate, don’t dissemble, and don’t stall. If you have a problem, face it right away, communicate openly and clearly, and take all of your stakeholder’s needs into consideration – especially your customers’.
The $9,700 cat is now out of the bag and there’s no putting it back. It’s clear that this price is unsustainable and needs to be reduced to something in the $2,000 range. How to do this?
If I were asked to problem solve I would immediately announce that the camera is indeed launching at $9,700, but that this price is for a “time-limited special edition” which includes a good selection of Sigma’s best lenses, primes and zooms. It could be promoted that this will allow early buyers to make maximum use of the image quality that the SD1 is capable of.
Once this special bundle offer is sold out the camera will become available at $2,000 (or whatever reasonable price is established). This way the company saves face, early buyers get a special deal, and long-term customers are mollified.
And if the SD1 really does have the exceptional image quality that Sigma believes that it does, this earlyfaux paxwill quickly be forgotten. If it doesn’t, then the game will be lost no matter what the eventual price.
Theonline sample JPGsthat Sigma has posted don’t impress me that much. They look like decent quality images that could have been shot with any current mid-range 15MP DSLR. But the only proper evaluation that can be made is by shooting side-by-side comparisons with competitive systems, using raw files and in my own controlled conditions. This I hope to do soon.
What I see as imperative though (and so universally do industry executives that I have chatted with over the weekend since launch), is that Sigma act immediately to correct its pricing fiasco. A quick about face will allow the problem to disappear in the noise of history. A delay in repricing to a sustainable price point though will certainly cause the product to fail – big time. It will then simply become a business school case study in how to botch a product launch.
23 May, 2011
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