Olympus was once the doyen of the photographic industry, with the OM range beloved for its svelte lines and high-quality manufacturing. Revitalized by mirrorless in the digital era through its collaboration with Panasonic, their OM-D range is iconic. So, why were they bought by the private equity fund Japan Industrial Partners — specialists in restructuring — and what are the portents for the future?
Film Camera Successes
Olympus has a heritage that spans back over a century, having been established in 1919. Initially, a microscope and thermometer manufacturer (and holding about 70% of the current endoscope market), they didn't start manufacturing cameras until 1936 starting with the Semi-Olympus 1 (a 4.5x6 folder) and followed by the Olympus Six (6x6) in 1940. As with other Japanese camera manufacturers, production ramped up after the war with the Olympus 35 coming in 1948, the first 35mm sold in Japan. It was the 1960s that ushered in Olympus' golden era. The beautifully designed half-frame PEN arrived pensively in 1959 but gained the admiration and a significant following. In 1967, Olympus launched the Trip series, selling over 10 million units and ingeniously incorporating autoexposure through a selenium meter surrounding the lens. Then, in 1972, the iconic OM arrived at a time when the high-end Nikon F reigned supreme. In stark contrast, the highly compact OM system (and it was a full system, including a generous lineup of highly regarded Zuiko lenses) was revolutionary, a real street camera. Olympus then launched the XA — probably the smallest true rangefinder ever made — in 1978. I have very fond memories of this camera and have one in my collection. It is a joy to shoot with, allows fully manual operation, and takes sharp pictures, yet slips easily into the pocket. Any film aficionado should own one.
As with a number of camera companies, the 1980s is where it started to unravel. Up to this point, manufacturers had often been optical businesses that had expanded into lens production and then the precision engineering of camera bodies. But the 1970s saw the integration of electronic operation: those that embraced it thrived, and this is no better exemplified than through the integration of autofocus. Minolta was at the forefront of this revolution (and formed the basis for Sony's current imaging division) with the 7000AF; Olympus' lackluster response was the 1986 OM-707, which was a commercial disaster and subsequently dropped. The 1990s was therefore a decade they would probably rather forget about in terms of SLR development.
Into the Digital Era
Olympus' success from 1990 through to 2010 was largely built on the bridge camera, the first film, and subsequently digital. Its Stylus and Camedia ranges were at the forefront of the resolution wars and persuaded consumers to buy cameras in their droves. It was a golden period of camera manufacturing as sales increased year by year, with those that made good products and were able to manufacture in quantity reaping the benefits. That said, it is hard not to make money in a rising market. With sales high, if you have a product, someone will buy it, and for Olympus, this meant they could sink profits into reviving their SLR line, which they did in the form of the E-1 in the defining year of 2003. Partnering with Kodak, they developed a Four-Thirds based DSLR from the ground up, which was perhaps counterintuitive at a time when Nikon and Canon were converting their 35mm systems. It was innovative, incorporating the first ever sensor dust removal system, but not quite competitive with the leading brands.
However, Olympus' digital legacy will largely be remembered for Micro Four Thirds, which they co-founded with Panasonic in 2009. Essentially a modernization of Four Thirds, achieved by removing the mirror box, it was a return to their film roots — a svelte street camera that would fit the hands of the well-heeled prosumer and targeting a different market to Panasonic. They started with a reboot of the successful PEN line with the release of the E-P1; however, it was the OM-D E-M5 that got pulses racing a little more, as it was genuinely built in the vein of the original OM, offered a range of quality lenses, and brought in-body image stabilization to mass production. It was a groundbreaking camera that garnered a plethora of awards when it was released in 2012. The M1 introduced phase detect AF in 2013, with the M10 coming in at a lower price point in 2014. All three have gone through two subsequent iterations, with the E-M1X arriving in 2019. The latter was a return to the ethos of the E-1: professional news photography. Built to a high specification and making good use of the 7.5-stop IBIS sensor, it was the best digital camera they had ever made.
It's perhaps strange to think that it was in 2003 that Olympus nailed their future strategy to the mast, one that they haven't veered from since: consumer bridge/compact cameras and Four-Thirds DSLRs. This business direction was taken on the hoof and a result of their failure to develop a winning AF solution for the original OM back in the 1980s. With no SLR line to produce in significant numbers in the 1990s, they found a winning formula in producing the Stylus and Camedia lines. These were hardly high-brow cameras, but the strategy of pile it high and sell it cheap (and not so cheap models targeted higher up) was successful and largely created the bridge camera market.
However, they needed an ILC alternative, something to place on the top tier, and this is where the E-1 came in. Developing Four-Thirds was a fascinating move and genuinely different at the time. It wasn't unsuccessful, but it wasn't the direction the market took either; however, they innovated over the lifespan of the system, including the introduction of IBIS and live view. In fact, it was during this "golden period" that Olympus introduced many of the features we now take for granted with mirrorless, as well as expanding its long-term sensor partnership with Panasonic. Innovation has been a central tenet for Olympus engineering, and so, it's perhaps no surprise that the MILC came out of this bonfire of technological development, although the PEN E-P1 was a low key start. Panasonic arguably stole the limelight when the G1 landed in 2008 (as Fstoppers' Wasim Ahmad outlines). The OM-D E-M5 was a return to form and pushed Olympus back to the fore of the camera industry; however, two bombshells caused this turn around to stutter.
The first of these was the infamous accounting scandal that rocked Olympus and the Japanese industry more widely. This involved the discovery of more than $1.5B of investment losses, kickbacks, and bribes, wiping out three-quarters of the company's valuation in the process. This dated back as far as the 1980s, with ~$600M of bribes from $7B of sales in the US alone between 2006 and 2011 resulting in a ~$650M fine. This was bad enough for the company, but also coincided with the collapse of the digital camera market. Olympus didn't know it, but by 2013, industry sales would halve in size and lead to year-on-year losses culminating in a $157M loss in 2019.
The cash cow that was compact cameras died off rapidly, leaving Olympus with an excellent (but small) MFT system. The original 2003 strategy of compact/Four Thirds was looking particularly shaky. Drawing an analogy, Nikon was facing a similar dilemma with a limited compact camera market and the increasing sidelining of DSLRs. The winning strategy was APS-C/FF mirrorless, one that Sony has leveraged to great effect. For Olympus, the blind adherence to MFT has continually pushed it into a corner, where the benefits of sensor size (cost, system size, and reach) have increasingly become less important to consumers and not valued by pros. The release of the E-M1X only made that more perplexing.
Olympus isn't a small company, employing over 35,000 people and generating a turnover of more than $7.5B. However, while it has championed the Four Thirds sector, it is its medical instruments (endoscopes) and science divisions that regularly post the strongest earnings: imaging accounts for just 6% of sales. It's clearly the combination of division losses and a bleak outlook that has ultimately led it to the decision to jettison the group.
To succeed in the camera sector, Olympus needs a leaner and more agile division. Whether that is enough remains to be seen; however, Japan Industrial Partners (JIP) clearly thinks that — at the right price — it is worth buying. JIP are private equity investors that specialize in spinning out unprofitable divisions from large companies to form profitable medium-sized firms that can then be sold on. Their most notable acquisition is Sony's Vaio laptop brand, which has successfully maintained core sales (with Sony maintaining a 10% stake) since they purchased it. This broadly looks positive.
With Panasonic shifting their strategy to both MFT and FF, Olympus' sole focus on MFT seems untenable in the long-term. They don't have the ability of Sony, Nikon, or Canon to rapidly pivot their R&D, ramping up production to meet these needs. Given how bleak the camera market now looks, what should a reinvigorated Olympus do? Whatever it is, it can't be the status quo.
Of course, there is another scenario to consider here: Olympus' Imaging Division isn't worth buying and that JIP is merely a mechanism for handling the divestment of "liabilities," unbeholden to any employment legislation. In short, they will be paid to take on the division. What they then do will remain to be seen. If the focus is solely on the bottom line, then the business will be about stripping assets (principally the patent portfolio) and licensing brands. Olympus' exit from South Korea gives an idea of the direction that might well be taken. A best-case scenario would involve a route similar to Vaio being taken, in which case production may be maintained in some form, but the design would likely be outsourced, with production shifted to low-cost domains.
Will Olympus Imaging become a shell company to profit from the remaining IP or still have a stake in camera production?
Lead image (OM) courtesy of Martin Taylor via Wikipedia, used under Creative Commons.
I would like them to get into medium format and compete with Fuji. To many in APSC and Full Frame to compete with but in the affordable crop medium format you have Fuji and Pentax and it doesn't seem like Ricoh is doing anything with the 645 line anymore.
They have a history of great all weather bodies. If they could get a medium format system they may get Pentax 645Z users to switch over to a smaller mirror less system.
Everyone has been publishing articles correlating increasing phone sales to decreasing camera sales. Add to that a global economy which is, or will be, in depression. Specific to Olympus, they produce a format, with perceived lower quality, in a zero sum market.
Yeah, I truly can't fathom what happened...
As to what will happen to Olympus or any other brand; I don't care, as it makes no difference to my existence.
“As to what will happen to Olympus or any other brands; I don’t care”
Sure you don’t care. You are a watercolor painter, why should you?
Adorable. You created an account for the sole purpose of trolling me.
I have been here for years, You are the troll.
Show me on the doll where I hurt you.
Look mom, I haz take foto.
Why are all the headlines saying "the end of" and "the demise of" when it hasn't happened yet??? Stick with the truth unless you know different, then write about that.
Yesterday Olympus updated the roadmap. A new 8-25mm f/4 is on the way, and a 100mm macro. And some other lenses.
They are not going away anytime soon it seems, just a change of ownership to restructure. But these influencers desperately want to hype ff and Olympus doesn't fit in their picture. So the same BS is told over and over again.
There's probably some small stock on these items already manufactured, like the 150-400 and such. This stock will need to be sold before the company is fully liquidated.
If that would be the case. They would just dump it on the market. Even if the stock is a few million it means nothing if liquidation is the goal. It makes no sense to do it this way if the intention isn't to continue business under a new owner.
Who knows, it may very well wind up being that. I'll just buy whatever I can and use it till it dies. I'll miss Olympus, I love my Olympus gear, but reality bites, and it's biting down hard on Olympus.
Truth and facts don't bring clicks. It's all about #fakenews and controversies nowadays. Journalism is already dead. Even more dead than Olympus or m4/3. Has been for years,
what will be will be --- until then it's all speculations and rumours . Whatever the will be is the earth is not going to stop spinned .
Write an article on the updated Olympus lens roadmap that was presented yesterday. And the new bird tracking AI update for the E-M1X that was also announced yesterday. And the yesterday released software to use your OM-D as a webcam.
I would like a philanthropist to step in to give Olympus camera division a chance to keep innovating, to save the Olympus legacy... at least until 2036, their 100th anniversary.
The fall / demise of Olympus has nothing to do with their cameras nor the industry. They have suffered from very bad and corrupt mismanagement. Its been a contact them in the media in Japan. In turn bad management has made very bad "camera" decisions, but this is not the core problem without dismissing anything in the article.
That problem was dealt with somewhere in 2011/2012. The persons guilty got there sentences. That doesn't have anything to do with Olympus in 2020.
That's their choice. But it has nothing to do with the announcement of last week.
In my region we have a lot of dealers who don't sell Pentax, even one who doesn't sell Canon. And two that push hard on MFT and have more MFT equipment than any other mount.
All choices made out of business perspective and that's fine.
I also highly doubt there will be much camera retailers left in a few years.
I am almost embarrassed for the author for his sloppy error in the first paragraph. Namely he asks, “So, why were they bought by the private equity fund Japan Industrial Partners . . . ?” No, Olympus was not bought by JIP or anyone else for that matter. Had he actually read the MOU, or noted accurate reports on the matter, he would know that discussions are under way concerning a sale by Olympus to JIP. It might happen. It might not. No one knows that for sure. Once I spot a sloppy error like that it is difficult to give credence to the rest of the reporting and analysis.
GM and Fiat were deep into public talks for them to merge and it didn't happen. Nissan and Fiat were later deep into public talks for them to merge and it also didn't happen. United and Continental went through three separate public merger talks over more than a decade before it finally happened. These things aren't necessarily sure things.
None of what you say mitigates the error in the words used by the author. Olympus has not now been bought by JIP. Might happen. Might not. As Michael L notes, "deals" get teed up and go nowhere. If someone is going to take the time to write an article for FStoppers they should state facts. The interesting questions is what might happen should JIP not elect to enter into a purchase agreement and complete the purchase.
This is a bit like splitting hair. The author might have been in a hurry, but the poll at the end of the article clearly covers all options correctly. The sale to JIP is possible. May even be the best option. If the image division is not sold, it will likely be disbanded: some employees will find a job within the company in another area, most will be on the street. I experience this scenario myself (not in the camera business). If the division is sold to JIP, many if not most employees will have a chance to keep on working together within their area of expertise. I also experienced this scenario in my career. Thanks goodness I am now retired.
The sale or even talks with JIP means many things. It means they were dishonest in continued marketing as a new roadmap indicates a future. It also means that when it goes through, as it will since the Olympus CEO refused to even consider resolution, they will somehow either make a "good" profit", PE expects much more than the market, or they will fold. So this is more than disappointing as the future for the system is only about the ability to make PE returns. Very unlikely in my opinion unless they lower quality. Stuff is already made in china.
So we see why Panasonic went full frame. The technology is just not there for m4/3 which makes staying in business impossible.
JIP will not invest in going FF or Medium Format, it's was too big an investment.
Not moving to higher resolution, proving they can do it, is their downfall.
There is hope, a new company, I think in Israel is the first to start printing transistors, so can m4/3 offer 40 MP with good dynamic range? If not it's all over for "pro" level Olympus.
I see several reasons for the failure of Olympus camera division. One is indeed the rapid advances in mobile phone cameras (which reflects on all camera manufacturers).
Second is the drop in size and price of the full frame cameras and lenses. This is a touchy subject for the m4/3 users, but as a person who has both a full frame and a m4/3 system, the image quality is noticeably better from the bigger one. And if one just compare the latest Sony 7 series bodies, the new Samyang primes and the new Tamron zooms to the m4/3 gear, it quickly becomes apparent, that one of the main advantages of the smaller system is nearly gone.
Third reason is the neglect of video. Only lately Olympus made a concerted effort to give their models good video AF and things like flat profiles. In the same time, Panasonic produced a videobeast like GH5 years ago, with the same sensor Olympus is putting in their M1 cameras. Up until 2020 professionals around the world use GH5 and will keep on doing so while virtually no one is thinking of Olympus, when video comes to mind.
Another reason is price. Olympus gear is not cheap, especially for what it offers. You want a standard 50mm? Their 25/1.8 is 300 dollars and ONLY because it was dropped from 400, that was it's typical price for years. You want a 24mm wide angle? The 12/2.0 is 700 (!) dollars, and it was 800 for a long time! Sure, there are people who would match their good-looking, well build small Olympus cameras with good-looking same-brand lenses regardless of price, but how many are they?
And finally - a lot of people say that Olympus failed because "bet on the wrong horse" in m4/3. I do not believe this to be true. M4/3 is perfectly viable if Olympus and Panasonic were selling it differently. No need of expensive f/1.2 lenses and big sports cameras like the weird M1X. All they had to do was to pack all the tech in packages as small as possible, make some tweaks towards specific needs and pitch them to street photographers, vloggers and tourists.
There is one funny guy on YouTube that is chasing "the perfect camera" for vlogging. Olympus are pretty much the only company, that has everything needed for a perfect vlogging camera. Why there is no such model, when the explosion of YouTube and other platforms offered so many opportunities years ago?
P.S. Sorry for the long post :)
The market decides - and in this case the decision is clearly correct. The only surprise in Olympus demise is that they weren't sold to Panasonic, but then Panasonic probably understood the market, financial and technology that Olympus could bring to the table and decided they didn't need it - or could buy it cheaply from JIP or whoever got stuck with Olympus. "it's small and doesn't weigh very much" doesn't count very much when newer (better) full frame mirrorless offerings aren't that much bigger or heavier with much better lens selections. So Olympus joins Minolta, Konica, Contax, Yashica, Voigtlander, Petri and others at Kodak's round table of demised brands and they can wait for Pentax, Hasselblad and a few others to join the session.
Being a loyal customer for over 15 years, I am more than disappointed with Olympus. Not having followed this news, if it was even available earlier, it came as a shock.
Their investment in what I believe are technological marvels, especially the lenses which for their size can produce incredible length, the goal of all telescope makers, along with the consumer costs of the products indicated to me a successful invested business.
A new roadmap for what will be very expensive lenses.
Amazing videos hitting my email.
New software such as the Olympus workspace.
Looking back these were big indictors of their misstep:
The E1MX was a very strange release, big, more features, same resolution.
The CEO harping on their desire to focus solely on action, to the disregard of resolution.
JIP will see if this technology can be sold for a profit of a certain size. If that level cannot be made they will sell off the assets. That's the role of Private Equity firms.
So in my opinion purchasing anymore Olympus products is out of the question.
Their behavior was unethical and still is as they are still hitting me up for purchases but looking back, again, all their discounts were not for a new higher resolution camera but to rid themselves of inventory.