In the last of our PMA interview series, IR publisher Dave Etchells and Senior Editor Shawn Barnett had a chance to talk in depth with Yoshiyuki Inoue, a senior camera planner from Panasonic Corporation. (Mr. Inoue's full title is Councilor, Planning Group/Development Planning Team, DSC Business Unit, Network Business Group, Panasonic AVC Networks Company, Matsushita Electric Industrial Co., Ltd.) Inoue-san has long experience in the camera business, having been a senior planner with Minolta (subsequently Konica-Minolta for a while) before working for Panasonic. Read on below to learn what Mr. Inoue's long-term dream is for designing the camera of the future.

Dave Etchells, Imaging Resource:
Micro Four Thirds has been very successful, at least we've seen a lot of interest and shopping clicks on our site for the GF1. Our sense is that it's been more for the enthusiast market. From previous comments, though, it seemed that Panasonic developed it thinking it would be the step-up for consumer users. Our sense is that the enthusiast is using it more, but does that match what you're finding in your customer base? When you look at who's buying the G-series, is it people coming from point-and-shoots, or enthusiast users?

Yoshiyuki Inoue, Panasonic AVC Networks Company:
I think all over the world, the G1 is popular with very average people. Some people buying it are the photography enthusiasts, some maybe for the purpose of attaching the old lenses. [ed. note: Because the Micro Four Thirds flange-sensor distance is so short, you can mount almost any lens on it with the right adapter] For the GH1, the main people buying it are enthusiasts and some pro movie editors. They find its movie quality very high, so are buying it because of the movie quality, even though its connectivity with other movie equipment isn't so good.

IR:
Okay. So there are really two different markets: For the G1 / GF1, it's really average users (consumers), and for the GH1 video enthusiasts, who are focused on high video quality.

Inoue:
Yes.

IR:
Interesting.

Inoue:
Very interesting! <laughs> This is - for us - is very interesting!

IR:
Given that interest from the higher-end videographers is so strong, do you see developing further in that direction, with other models like the GH1 that really have a very strong video focus?

Inoue:
I think some people are interested in this, but not so many people.

IR: So it's a small part of the market?

Inoue:
Yes. So I think maybe our video cameras will be improving in this direction.

IR:
Ah: So your professional video recorders will go in that direction, not the G-series.

Inoue:
Yes. Our G-series is aimed at more the average customer. I think the GH1 will continue, but specifications will improve.

IR:
So the GH1 is really aimed at consumers, even though many pros are using it...

Inoue:
Yes, yes.

IR:
...and its specs will keep improving over time. Good. Will we see lower-cost Micro Four Thirds cameras in the future? [ed. note: When we conducted this interview, we had just been briefed under NDA on the lower-cost G10 that was announced publicly on March 7. We'd prepared the question prior to our knowledge of the G10, though, and still wanted to hear what Inoue-san said about pricing in general with SLD-type cameras, vs conventional SLRs with a mechanical mirror assembly, separate AF sensor, etc.]

Inoue:
Yes, in the future, we'll maybe see lower costs. But, just because we remove the mechanical parts doesn't automatically mean lower cost. This is because to replace that function, we need additional electronic parts, so for example the GH1 has a big sensor, and main circuit board: If you can remove the back cover, there are many wires that have increased, that have a very high cost. There are many, many additional electrical parts.

IR:
Ah, so you've eliminated the mirror assembly, but there are many more electrical parts -- the little LCD viewfinder on the G1 and GH1, etc.

Inoue:
Yes, so right now, our product costs are not so cheap. The mechanical technologies for making mirror assemblies are very mature.

IR:
Oh, very mature technology. Mirrors are cheap, you've been making them for years.

Inoue:
Yes, yes. The mechanical parts are made in China, so they are very cheap.

IR:
That's interesting. So, at CES Samsung announced - Micro APS, I guess you could call it. Now here at PMA, Sony also announced Micro APS. What impact do you think their announcements will have on the market?

Inoue:
Yes, just more competitors. Adding competitors always makes for some nervousness, but I think this is actually very welcome. Because they recognize [the value of] our system, and are adopting that market. So it's very welcome!

IR:
Do you think that Sony and Samsung being in the market will change how you relate to Olympus? My sense is - I don't know if this is accurate or not - but, that Panasonic and Olympus developed Micro Four Thirds together...

Inoue:
Yes.

IR:
...but now are very separate. Products are compatible, but competitive. Do you think that there would be more cooperation somehow, between you and Olympus, to fight off Sony and Samsung?

Inoue:
I think we will still continue the relationship, defend the relationship, into the future.

IR:
This is another question about competitors, so you may not know the answer, but I'll ask it anyway: Now that you've got Panasonic, Olympus, Samsung, and Sony, all making SLDs (Single-Lens Direct-view) cameras, do you think Nikon and Canon will be forced to do that?

Inoue:
Maybe. At least, they'll consider it. <laughs>

IR:
Like it or not, they have to at least consider it?

Inoue:
Yes! I think they are thinking, "When should we release [such a product]?"

IR:
Ah, so it's a matter of when, not whether.

Inoue:
Yes.

IR:
Based on what you see in your sales of cameras and lenses, do you see the average consumer owning multiple lenses over time, or do they buy the kit lens and not many others? Or, asked slightly differently, how many lenses do you think the typical owner of a G-series owns, and do you think that will increase over time? Will the average user keep buying lenses for their cameras, do you think; more lenses beyond just the kit lens?

Inoue:
Yes, yes. We hope! And it seems to be increasing with time...

IR:
I've always heard that lens development and manufacturing is usually a very thin-margin business; not as much profit in lenses as in camera bodies. I don't know if that's true, but I wonder from Panasonic's perspective if it's most important to develop more lenses just so you'll have a broader line and sell more cameras, or do you think that add-on lenses will be a profitable business by themselves?

Inoue:
Yes, yes. Lens profit could be a very big profit.

IR:
It's important for you, then: The lenses are a source of ongoing profit.

Inoue:
Yes. In Japan, already many people have the cameras. For the next stage, we have to concentrate sales of lenses, because we need to get the profits from that. Very important!

IR:
So the first phase was to get a lot of people with the cameras, and now more marketing focus needs to be on the benefits of other lenses, and selling the lenses.

Inoue:
Yes. In Japan, for example.

IR:
We also somewhat know the answer to this too, now [ed. note: from the NDA briefing], but the GH1 was a very video-focused camera, in that it had continuous autofocus, and continuous aperture. The GF1 didn't have the same level of video capabilities, though. Do you see solutions for full capability video like the GH1 coming down in price? Will we be able to get GH1 capability at lower price-points in the future?

Inoue:
That will depend on the lens systems. The GH1 video ability is not only because of the body, but also the lens. So we're not decided, but some day we may achieve such function in the future. We have not decided, but maybe a GH3 or a GF3 will have a different AF system in movies.

IR:
So there's a difference in both the camera and the lens in the GH1, and you're saying for now we'll probably have the GH-series and the G-series, but maybe in the future the two will come together.

Inoue:
On such a camera, we are not decided.

IR:
OK, I understand that there's no firm decision on that yet. For cameras like the GF1 that can record video, but it's not their main function or a primary feature, do you have any idea of how much or how often the average consumer records video? Is that something that a typical user does, you know, every time they're out with the camera, or just a few times. I'm trying to get a sense of how much people actually record video, or do you even know that? Once you make the cameras, I guess it's hard to know what they're doing with them out there, but...

Inoue:
This is a very difficult question. I don't know. Usually, people who buy a live view camera, they certainly think it can record movies, and this is our expectation for many, many users. So I think it depends on the cost. I think it is a necessary feature.

IR:
So people expect video recording, but you don't know how many people are using it. You know that you have to have it in order to sell the cameras, though.

Inoue:
Yes.

IR:
I know that Panasonic is a very big sensor manufacturer. I don't think you make CMOS sensors yet; it's all NMOS. And I also don't know what that technology allows: Can NMOS be used for very high-speed capture of a full-resolution image? We're starting to see some cameras from Sony and Casio (this is more on the point-and-shoot side) with very high speed, 10 frames per second, 30 frames per second, and I think it's also key for fast autofocus too sometimes. Do you see CMOS in Panasonic's future, or can NMOS reach those kinds of frame rates?

Inoue:
Manufacturers such as Sony or another maker have already developed these, so I think there is no (technical) reason Panasonic can not produce such sensors. But it is a very complex issue with patents. So I cannot answer this in detail, but I know there are limits caused by patents. [ed. note: the end of this sentence paraphrased more heavily, as Inoue-san had difficulty describing the issue. It seemed he knew that there are intellectual property issues associated with either CMOS or high-speed sensor designs, but wasn't familiar with the details.]

IR:
If we looked into the future (this is me asking you as the camera planner), if we could see today a camera from five years in the future, what do you think we would be most surprised or impressed by? Where would be the most dramatic improvements compared to today's cameras?

Inoue:
It's our dream (my dream): I want to make an absolutely "mechanical-less" camera.

IR:
No mechanics, all electronics.

Inoue:
Yes. In Micro Four Thirds cameras, we still have the mechanical shutter mechanism. But if we can develop a sensor that has an absolutely electronic shutter, then we won't need the mechanical shutter. But it is so far still a dream. If we could develop such a camera, I think that's what the next generation camera will become.

IR:
The last year in the economy has been a hard one for many companies. I think the photo business has not been as hard hit as some areas, but because of the slow economy do you think there has been any cut back in R&D spending, and do you think that means for the industry as a whole, do you think we'll see a slower pace of new models if we look ahead a year or year and a half from now? Or, do you think R&D has really been kept at the same levels even though the economy was bad?

Inoue:
We think research is very important. So I think research into how people are using cameras and the technology behind how cameras are made - the product parts - every type of research is important, I think.

IR:
So even if the economy's bad, you need to keep investing in research to make sure you get the next generation out.

Inoue:
Yes.

IR:
We've been asking all the executives this last question just to get an idea of what people are thinking about the economy. What do you think is going to happen the next year? Is the economy going to go up, stay the same, or go down?

Inoue:
<laughs> This is very difficult... In our planning, we will forecast next year will slowly go up.

IR:
Slow growth.

Inoue:
In the interchangeable camera business, even this last year, there was slow growth, so we expect next year to increase.

[ed. note: This seems to be the consensus among all the manufacturers we spoke with. No one is predicting a huge rebound, but all seem cautiously optimistic. This agrees with what we're seeing in our own traffic patterns.]