Today we have something special for you – a guest blog from one of our regular readers, Calum Dickson. Calum is an accomplished wildlife photographer who happens to also be an engineer with more than a passing interest in the economy. Like the rest of us, he was surprised at the prices currently being quoted for new products. However, instead of just spouting off about Canon ripping off consumers like most people are, he sat down to do some calculations and see if the flak they are currently attracting is really justified. Without stealing Calum’s thunder I’ll let you get on with what he has to say….
A strange title and combination for a blog post I’ll admit, but they are all related as we will see later in this blog. Let’s start with the most interesting bit, the cameras.
In the past 12 months Canon has unveiled a whole host of new cameras and lenses to try and help the photographic community achieve image nirvana. The web is awash with commentary on the new offerings. In a nutshell most people would love to own the new kit but the consensus of opinion is that the prices are crazy, with some people even suggesting that Canon are ripping the consumer off!
Take for example the newly announced and eagerly anticipated 5D MK3; it has a LIST price of £3000 compared to its predecessor the MK2 which had LIST price of £2300 at launch in November 2008.
That’s a £700 price rise in a little over 3 years. Canon is definitely profiteering right?
Well let’s use a bit of stiff upper lip for a minute or two and do some more investigation.
Canon is a Japanese company and its cost base is therefore in Yen not Pounds. Pounds are irrelevant as it has to pay the majority of its R&D, Purchasing, Manufacturing, and Shipping costs in Yen.
So if we look back to the 5D MK2 we know it had a LIST price of £2300 in November 2008. In November 2008 £1 would buy you 148.728 Yen (http://www.x-rates.com/d/JPY/GBP/hist2008.html). Armed with these two figures we can calculate the Yen LIST price for the UK to be 342074.4 Yen for Nov 2008.
Now fast forward to February 2012, adding inflation to the price as we go. Give or take inflation has been around 3% for the past few years. So we will add 3% to the Yen price for 2009, 3% for 2010 and another 3% for 2011. That’s 1.03×1.03×1.03X342074.4 = 373793 Yen.
Time for the reveal, let’s change our 373793 Yen price tag back into pounds. The exchange rate in February 2012 123.965 Yen to £1. That’s 373793/123.965=£3015
Wait a minute the EOS 5D MK3 is actually almost the same price as the 5DMk2 would be taking into account the effects of inflation and currency exchange. What’s more, so as not to bore you with the maths I haven’t even added in the extra 2.5% VAT that George Osborne added to fill the government’s coffers.
Now you know the maths you can do the sums for yourself. If however you’d rather be out taking photos here are a few more examples using the recent kit.
|Item||Launch Price||Date||Exchange Rate at Launch
|Price Today accounting for inflation and Exchange rate||New product
|580 EX II||£380||June 2007||239.7||£827||600EX-RT||£679||-£148|
|EF500 F4L||£5680||July 1999||187.915||£11,137||EF500 F4L MK2||£9000||-£2137|
|24-70 F2.8L USM
|£1140||Nov 2002||191||£2360||EF 24-70mm f/2.8L II USM||£2,229||-£131|
In every case the new kit is slightly cheaper!
So if Canon isn’t ripping the consumer off what is really going? Well that’s where the Banks and the financial crisis come into the equation.
Banks and the Financial Crisis
The Bank of England has been using a policy of Quantitative Easing to keep enough cash flowing in our economy and to stimulate industry. But what exactly is quantitative easing and what does that have to do with the price of cheese or cameras?
It’s quite simple really, Quantitative Easing is modern corporate jargon for devaluing your currency. There are more pounds available but each one is worth a little less. So if you want to buy British cheese there is no difference, but if you want to buy French cheese the pound is worth less euros and so you have to pay more, the same with Japanese cameras. The reciprocal is also true if you are Japanese and you want to buy British goods right now is a fantastic time to do it.
Mervyn King is using quantitative easing to help British industry to keep jobs and actually try and expand to take up the slack caused by government redundancies. The price we pay for this is higher costs for imported goods and foreign holidays.
So how do we get out of this financial mess, get cheaper foreign goods, cheaper holidays and have a competitive UK manufacturing industry?
If we knew the magic formula to that, I wouldn’t be writing this blog now, but what is for certain is that UK industry on its own will never generate enough wealth for this country to move us forward. We need the cash cow that is the city of London to get its financial udders back to brimming full.
It might just be the time to stop looking backwards and berating the bankers. Perhaps now we need to learn the lessons and move forwards with renewed confidence, we need these people to help the economy.
Unpleasant as it might sound paying large bonuses to the city of London might actually mean cheaper camera prices for you and me!
EOS Network: Certainly food for thought and something that makes a lot of logical sense. Of course we’d like prices to be lower, but the truth is, sometimes it’s out of the hands of the manufacturers and in the hands of the banks and bankers.
What do you think? Light up the comments with your thoughts.