Sunday, April 13, 2014

Super-lens at super-price

Often considered almost at opposite ends of the market, Sigma and Zeiss have both come out with a high-quality normal lens at F:1.4.
Both lenses are really, really top-shelf, with many elements and exotic glass types, and both of them are among the sharpest lenses ever made for general consumption.

OK, great, so Sigma can make really high-end stuff too*, that's interesting. But here is what makes it really interesting: The Sigma lens is one-quarter the price of the Zeiss! USD one thousand as opposed to four thousand! If I were an exec at Zeiss, I would be kicking the furniture now.
That price is very aggressive indeed. I think this is one of the lowest prices I have ever heard of for a lens of this class. They surely can hardly make any profit on this, they must be gunning for the market share.

Review Zeiss Otus 55mm 1.4
Review Sigma 50mm 1.4 Art
The build quality was exceptional, but what really got our attention was Sigma's off-handed remark that they weren't looking to surpass Nikon and Canon, but rather the $4,000 Zeiss Otus 55mm ƒ/1.4 monster.
The Sigma 50mm ƒ/1.4 Art is quite large and bulky with a total of 13 elements in 8 groups, including 1 aspherical and 3 super low dispersion elements. 

They are full-frame lenses of course, and the Sigma's supported AF Mounts are: Canon EF, Nikon F, Sigma SA, Sony A.
I hope Sigma will start making such lenses for Micro Four Thirds. Although for my sake they can skip the normal lens, I don't really know why anybody would want one these days.

The Sigma monster:

The Zeiss monster:

They are both very big lenses, and both really well made, and both beautiful. The Zeiss perhaps mostly so, but 300% premium's worth? Doubtful.

This shakes things up quite a bit... not the least: why are we paying Leica and Zeiss 4 to 6 thousand dollars for a lens, if Sigma can make it in the same quality and sell it for 75% less?
Also, what impact will this have on prices for quality lenses of the future? On the one hand this seems a devastating hit, but on the other hand, traditionally, the prices of luxury products ("Veblen goods") have proved magically durable. Most people who would buy a $4k lens buys it as much for the prestige as for the product. And a Zeiss lens will impress his friends and colleagues much more than a Sigma lens. And many of them will surely be able to convince themselves that there has to be some difference in quality that's worth it, otherwise why would it cost so much more?

*By the way, Sigma's weakest point has been their quality testing, too often their exemplars showed greatly varying quality. But reportedly they have made great efforts to change this.


Kelly Trimble said...

It’s a stormy Sunday night here in Missouri, so I am going to feel free to rant a little bit. Part One:

I'm gonna disagree just a little bit with your diagnosis of why people would pay a 300 % premium for the better regarded brand. There may be part of the market buying the Zeiss lens for the prestige, proving to other photographers that they can afford it, but I think what may be happening is that the buyers are treating lenses as Giffen goods rather than Veblen goods. The effect is much the same in that demand increases as price increaes, but the reasoning behind it is different, having to do with indifference curves, income effects, and substitution failures.

Another more interesting explaination, however, comes from the branch of economics known as 'property rights' which touches on the concepts of limits or impediments on information in the market. Most economic theories have as a basic assumption that all market participants are fully informed as to the utility of and substitutes for the entire vector of product choices in the market. That is not the case, so sometimes a poorly informed market participant will get his information as to the relative quality or utility of a product through the pricing mechanism, allowing better informed producers to manipulate their prices to influence behavior.

Here is an example. In our town, we have many live performance theaters. My family used to own one. Visitors to our tourist town did not have good information as to which live show was better without having first seen all of the shows. They got a lot of information from advertising, where the ads built desires for a particular entertainment product while giving the impression that the product was of a certain quality. They also got a lot of information from other consumers, but they learned quickly that the people who have seen a show are not always the best judges of the quality of a show because people's tastes vary so much. What we found was that consumers were getting their information as to the relative quality of live performance shows largely through ticket prices. If you are standing in front of two live performance theaters, one is showing the Baldknobbers Family Jamboree, the other showing The Shepherd of the Hills Outdoor Drama, you have money in your pocket, and your vacation ends tomorrow, and you have no other information on which to decide to see, but one is priced at $10.00 per ticket and the other is priced at $40.00 per ticket, as crazy as it sounds, most people will buy the $40.00 show, and most of the people who buy the $10.00 show will walk out of it wishing they had gone to the $40.00 show. And they are not being snobs-they simply assume that if people are willing to price their show that much higher, it must really be that much better.

More to come in part Two.

Kelly Trimble said...

Part Two:

Another factor to consider is that consumers often do not price individual product components when trying to obtain a certain level of utility. They will price an entire collection of components, and often will judge the purchase decision of an individual good based not on its individual price and utility, but on its marginal cost versus its marginal utility. Going back to the live performance theater example, we found that people were judging prices based on the entire cost of the experience. Somebody sitting in their home in Oklahoma City made a decision to come to Branson instead of Vegas or Austin or Myrtle Beach or whatever when they added up what it was going to cost to travel, how long the trip would take, how much gas they were going to burn, how much wear they were going to put on their car, the cost of every motel room, every on the road meal, how much shopping they were going to do, and everything else, and then added the cost of the theater ticket on top of all of that. A weekend trip to Branson from Oklahoma City for a group of four people could cost a thousand dollars. So the ten dollar show would cost them $ 1,040 and the forty dollar show would cost $ 1,120, or only seven or eight percent more, but the prices told them it was 300 % more show.

Every year we would look at the data, plot demand curves and project next year's prices, and the numbers would tell us that to maximize revenues we needed to increase ticket prices, and every time we increased ticket prices, attendance went up substantially.

Now here is another wrinkle to that model. People will value their own time at a certain price in the model. They don't do it explicitly, probably subconciously, but putting a value on the customer's time was the only way the arithmetic worked when doing these price models.

Relate that to the lens. They are not buying just a lens. By the time they have bought the lens, they have bought a camera that costs a few grand, a bunch of peripheral crap, such as batteries that fit only that camera, chargers, cards, photoshop/lightroom/etc., computers, a desk, monitors, a printer, tripods, a few grand worth of studio lights, probably several other lenses, and done several thousand experimentation shots involving hundreds of hours, maybe a college degree in photography, probably some $500 workshops involving $1,000 of travel, building to house a studio (owned or rented) a couple of ex-girlfriends and maybe a marriage or two. Back in the film days, it was said that a full professional studio photographer had spent as much on equipment as your average dentist, varying between $ 40,000 and $ 500,000, depending. Today that may be different, but still somebody shooting a high-end DSLR professionally has spent $ 15,000 to $ 30,000 on equipment and maybe more if you factor in all of the stuff associated with getting the person to a certain point in a career.

So let's assume that the guy has spent $40,000 on equipment and discovers that he needs a high-high end 50mm prime lens. Even a professional is not going to have enough information outside of brand names to judge the relative quality of the Sigma vs the Zeiss lens. He will get part of his information about relative quality from the fact that the Zeiss lens costs four times as much as the Sigma. With the sigma lens, his ability to take a certain shot costs $41,000-and it costs $44,000, or about seven and a half percent more, with the Zeiss lens.

They know that if they buy the cheaper lens, they might not get quite the results they were hoping for, and they know they are going to wish they had bought the more expensive lens; whereas if they buy the more expensive lens and they get shitty results, at least they know it wasn't the lens.

More in Part Three

Kelly Trimble said...

Part Three:

In my experience, when photographers buy expensive stuff, it isn't out of snobishness, like somebody buying a Rolls Royce to prove that they can buy a Rolls Royce, although there is some of that going on, particularly among wedding guys. I've had some photographers tell me that they will buy the more expensive stuff because they have customers come in that know a small amount about photography and it is easier to project to the customer that you are a true professional when you have high-dollar name brand lenses. Imagine your customer expecting you to explain why he is paying X-thousand bucks to shoot whatever and you are using some shitty Sigma lens??? But when a photographer buys expensive stuff, it's usually out of a quest for better quality and maybe a lack of confidence in their own abilities as a photographer. They don't know what level of quality they need for the work they are doing, so they bankrupt themselves buying the best quality gear they can get. And since they have imperfect information as to what the technical characteristics of the gear may be, they simply buy the most expensive. Such as the $4,000 Zeiss lens. And then they have to build the price of that expensive lens into the price of what they are doing for the customer (or 'client').

When I started in business, I found that there is such a thing as being 'over-capitalized'. As you proceed in business, you encounter a series of problems and challenges that you must overcome to obtain customers and to deliver a product to those customers. There are two ways of approaching each of these problems: you can grab a big wad of cash and throw it at the problem to make the problem go away or solve itself, or you can use some ingenuity, develop a new talent, or devise a whole new process using the resources you have to solve the problem or to develop the capability needed. If you have plenty of capital, you may not have much entrepreneurial time, so you will tend to throw money at the problem, you will buy more equipment, hire more staff, spend money on media advertising, or whatever. If you don't have the capital, then all you have is yourself, and you are forced to come up with a better solution than currently exists using your own time and effort to develop a new capability. When you spend money to solve a problem, that cost has to be built into the price of your product and eventually, even though you may have all the money in the world, you cannot compete with the guys that had no resources, but did a lot of DIY and creative stuff to deliver a product at a price (and sometimes quality) that the over-capitalized guy cannot match.

More in Part Four.

Kelly Trimble said...

Part Four:

In my photography, I do probably do 90% of what I deliver with two lenses, a Nikon lens that cost about $1,000 about seven years ago and a Sigma lens that cost about $450 about five years ago. I got the Nikon lens because at the time it was the only lens on the market that would do wide angle interior shots without much distortion. That was a case of needing the more expensive lens to meet an actual known technical requirement. The Nikon equivalent of the Sigma lens was $ 1,400. I do almost all of my aerial photography with the Sigma lens. I have often wondered if I might get 'better quality' out of a higher cost peice of glass, but the Sigma lens does what my customers need. Also, if the camera gets sucked out of the window of the airplane (it happened once about fifteen years ago) I won't cry (as much) over a $450 lens as I would over a $1,400 lens. I have a competitor (of sorts) who shoots aerials with a medium format camera costing probably $50,000 with lenses. He rents a cargo plane, usually removes the passenger door, hires a pilot, requires an assistant to handle the gear, and basically needs half a day or a full day to shoot almost anything. Then he has to do a lot of post processing. If he needs to do something requiring a perspective close to the ground, he has to rent a helicopter. I fly myself in a Cessna 150 I own myself, and there have been some properties I have photographed being in the air literally less than five minutes, and away from the office less than an hour. There has been some fantastic looking stuff that he has done, some has even won awards. But if a customer needs a couple of isometric shots of an industrial building five miles from the airport, and he needs it this afternoon, and he needs it for $500 bucks, my competitor can't touch it with his $50,000 worth of equipment. I can do it on my way back from lunch with my $3,000 worth of equipment. And since I have done probably 70,000 aerial shots over the years, and he has done maybe a few hundred, my stuff usually ends up meeting the needs of the customer better.

There is some equipment I have paid thousands for and hardly ever use. There are other items that I paid what seemed like a lot at the time, but use everyday. I swear by my Sigma lens. I use it almost everyday, certainly every week. I've made money with this Sigma lens. If I needed a high end super-fast 50mm prime lens, I would certainly look awfully close at the Sigma lens (I have a cheapie Nikon 50mm prime lens that does what I need). I have a lot of respect for the Zeiss lens, and I own several Zeiss lenses (mostly older lenses), but somebody would have to show me that I have a real need for one before laying out four grand.

The end. Sorry for the rant, but I was bored.

Alex said...

Just thought I'd mention some fun camera tech I've seen recently

1) Ricoh Theta 360/spherical camera.
2) Poppy 3D for iPhone.
3) FLIR consumer grade thermal camera for iPhone
4) GoPro Dual Hero 3D system.

I've not played with the FLRI, I have played with their industrial grade cameras before, which was fun. The others I've had hands on with and they all seem to do a very good job.

Eolake Stobblehouse said...

Thanks, Kelly, I will read your big comment on my iPad, there seems to be some interesting thoughts.

Ken said...

There has been some research by economists on price perception using Belgian chocolates. Basically what they did was sell identical boxes of Belgian chocolates (with an unknown brand) at various places and varied the price. What they found was putting the price up to a certain point increased sales. What is happening is that if people see the price as too low they assume that the product is rubbish, because generally cheap chocolate is rubbish. Increase the price and eventually they decide that it is worth buying. There is a certain amount of logic too it, because people expect that if you charge a higher price and don't deliver you won't make many sales and will go out of business.

What interests the economists is that it applies to things that really shouldn't like currency prices and stock prices. People enter the market and buy things that have risen in price because that must be a good buy. End result is they often buy at the peak of the market and then everything crashes.

Eolake Stobblehouse said...

Yes indeed.

Graham said...

I'd like to thank Kelly for his articles here, and for the amount of information he reveals about how a professional photographer thinks (I hadn't even heard of Giffen goods before!).

It's interesting that he mentions live performance theatre because I believe Branson, Missouri was Andy Williams's home town. I'd have thought he'd have had the market for live theatre sewn up in the area?

Also, I was impressed with the openness and honesty of Kelly's site message;

(Kelly if you're female I apologise, Kelly is a unisex name in the UK so your gender isn't obvious from your name).

Kelly Trimble said...

Kelly is an old Scotch-Irish traditional family name in the Trimble family dating back to the 1700s. I am a guy, but I get a lot of junk mail addressed to Ms Kelly Trimble and my first day in college I had been assigned to a girls dorm. I was assigned a pink robe at my high school graduation by the company that supplied them (instead of black) etc.

Andy Williams died last year. I did the appraisal on the theater for the estate. Theaters are in the doldrums right now. Last I heard, Andy's widow was working a deal with one of the Osmond brothers on the theater. There are more live performance theater seats in Branson than there are on Broadway, or the west end.

Sorry for all of the rants, but I need an outlet sometimes where I don't have to worry much about ANYBODY in Branson reading it and getting offended about what I might say.