When will Canon 50d prices really drop

[bmpress]

Since people all over the world are in financial stress, sales of just about everything have dropped and prices are now chasing buyers' money. That is prices of most things, but not yet for cameras such as Canon 50d.

In fact, Canon has postponed plans for a new factory, just reported last week.

So how come the Canon 50d still sells for over one thousand bucks?

Hey Bob...any ideas?

[Bob Atkins]

I'd say the EOS 50Dells for around $1070 because (a) that's what it's worth and (b) because that's how much it costs Canon to make and distriubute it.

I would make no sense for Canon to sell it at a loss and it's already selling for more than $200 less than the recommended price. Part of that (about $125 or so) is due to discounting by retailers and part ($100) is due to the Canon Instant Rebates" which end on January 17th. So in the short term I'd expect the price to increase rather than decrease after January 17th.

If you want a less expensive Camera, Canon have options. The EOS 40D is now selling for well under $800, the Rebel XSi is selling for well under $600 and the Rebel XS is selling for around $470 - and that's with an 18-55IS lens!

So my guess is that you will not be seeing a sub-$1000 EOS 50D anytime soon, and in fact you may be seeing the lowest prices in early January before the rebate ends. It's possible that Cnon may extend the rebate if sales are slack, but then aganin they may not and I think it's pretty unlikely they will increase it.

Price will really drop after the EOS 60D appears, which will probably be in late Spring of 2010! By that time I'd guess they will be where the 40D is now, at around $800-$900

[bmpress]

In normal times I would agree with you, Bob, but these are abnormal times. Cars are a good example by comparison. You can now purchase a Hyundai Sonata, an excellent mid sized sedan for about $12,000 plus tax. Even at that price dealers make some money. The factory cost of a new Canon 50d is probably about 25% of its retail price. I would estimate that dealers pay about 50% of that retail price.

If true, than two things may be happening in the marketplace. First of all, considering all the competition from a proliferation of authorized Canon dealers, and then looking at the thin spread of dealer prices, ranging from about $1,050 to about $1,085, it is patently clear that price-fixing should be investigated by our Federal government. It looks as if Canon may be using their dealer contracts to enforce this narrow range of prices.

By comparison, you could find a very large price range on automobiles by going shopping from dealer to dealer. Now I am not saying that Canon, or Nikon is doing something illegal, but I am suggesting quite strongly that the appearance of price fixing warrants investigation.

Finally, when you say that the 50d is worth the price, Bob, you must be joking. Americans don't want to pay for cushy profit margins. They want quality merchandise at the lowest possible price, be it cars or RVs.

[Bob Atkins]

A 50D isn't a Hyundai. Maybe a Rebel XT is, which y9u can buy, with an 18-55 IS lens for $470. When I see BMWs selling for $12,000 new is the time I'll start to be concerned for the economy!

If you actually have data on what it costs to build a 50D and what dealers pay for them, that would be interesting information, but if you are just guessing (and I suspect you probably are), then you can't base prining theories on guesses.

The alternative to your "price fixing" theory is, of course, that Canon sell cameras to dealers at a fixed cost (let's say $900). It may vary a little depending on whether the dealer orders 5 cameras or 5000 cameras, but the range of prices is likely to be small.  Then dealers add on enough to cover their expenses (rent, wages, utilities, services etc.) and provide a small profit margin (let's say that comes to $100-$200), so all the dealers have very similar prices (except for the few who still try to sell at full retail).

As for ever falling prices, be careful what you wish for. There's an economic situation called "deflation" and it's not something you'd really want to see.

If a product isn't worth the asking price, then the market will take care of that situation. Just as you can buy a Hyundai if you think a BMW is overpriced, you can buy a Rebel XT if you think the 50D is overpriced (or you can buy a 50D if you think the 5D MkII is overpriced). If you think Canon is raking in huge profits, you can always look for a better deal from Nikon, Pentax, Sony or Olympus.

Canon's profits have now been down for the last 9 months. For the first half of 2008 their income and earnings dropped by about 15% - and the first half of 2008 was MUCH better than the last 6 months have been.

Don't get me wrong. I'd love to see an EOS 50D selling for $500 next month (and a 5D MkII selling for $1200), but I certainly don't think that's a reasonable expectation.  I think prices will hold, with maybe a maximum of a 10% slide down over the next few months (if the rebates don't end). I certainly wouldn't expect to see more than that.

[bmpress]

Actually I was a product marketing executive in the field of electronics and software, for a few Fortune 500 and smaller companies, and the profit margins that I cited are really conservative. Hopefully for Canon, margins are much better. Also, photo industry magazines have recently commented that the manufacturing costs of prosumer cameras, like the 50d, and amateur dslrs, like the xsi, are not much different. This is not surprising when one looks at camera designs and construction. A magnesium casting costs a bit more than a plastic body, etc. and a Cadillac costs a bit more than a Chevvy but as we all know, the Cadillac sells for much more than the Chevvy.

At any rate, my forecast for the future is for lower prices based upon the greater competition that seems to be exploding, ala Sony/Minolta with its body-based IS coupled with the ability to spend megabucks on advertising, as well as the entrance of other major corporations including Samsung.

It should be an interesting ride, and meanwhile I have decided to keep using my 20D for another few Canon generations.

[Bob Atkins]

You could be right about Canon's profit margin, though that depends on the amount they spend in R&D as well as in manufacturing costs. I do know that discount vendors work on a pretty small margin. It's not unusual for a small "mom and pop" camera store to have to pay more to Canon wholesale for a camera then they could buy it for retail from B&H on the web! The deep discounters work on volume and slim margins, so markups of 10-15% aren't uncommon.

I suspect we may be in for a period of stability in camera design for a while for two reasons. First R&D money will be tight. I've worked in industry and many short sighted companies cut R&D when money is tight as it only affects future profits, not this year's bottom line! Second, there's no point in bringing out new models if nobody can afford to buy them. If people are worried about jobs and employment, they're less inclined to buy a new camera when the one they have works just fine. So I suspect a conservative approach from most of the major players in the camera market in 2009. That doesn't mean nothing new of course. New cameras may spend 12-18 months in planning and development, so what's in the pipeline now might show up in the new year anyway.

Sony isn't in very good shape right now either. They've lost $3 billion on the Play Station 3 so far. It's estimated that they lose $250 on every one they sell, and their music division posted a significant loss for the year too. I wouldn't count on them spending huge amounts on R&D or advertising in 2009. I don't know about Nikon , Pentax and Olympus, but they are all going to be suffering for a while due to both the economic slowdown and the rise in the value of the Yen (which reduces profits on exports).

I think the good news is that the current generation of digital cameras is very good indeed. Even the last generation isn't bad, so if you want to "upgrade", there will be relative bargains to be had on models like the 40D and 5D, which have now been succeeded. The low end models aren't bad either. I suspect that Canon are selling far more Digital Rebels (especially the XSi) than they are mid and high end cameras, and they're possibly making most of their DSLR profits on the Digital Rebel Series cameras.