EPIC and the change in RED from Consumer pricing to Professional Pricing

By Charles Haine  |  30-Jun-2011

The RED Epic-M, originally announced to be $40K, is now up to $58K. Addmittedly, it does more than the RED ONE, which cost only $17K, but does it do 3 1/2 times more? And also, don't camera's always come out every few years that do more and stay the same price? For instance, a top of the line Canon DSLR from right now costs about what a top of the line Canon DSLR did when the RED ONE came out 4 years ago, but does way more for that same price. Camera's are fancy computers, and computers keep getting both better and cheaper.

So, what gives?

In a nutshell, RED is switching from pricing at the consumer level to pricing at the professional level, which is an overall a good thing.

If you are unfamiliar with the distincition, consumer's purchase products for their own personal use, and professionals purchase products for business use. Compare something like sunglasses, say, which you buy to wear, versus a contractor who invests $350 in top quality tools.

Consumer businesses depend on volume to survive, while professional business's depend on margin, meaning a high mark-up. Think about a product like a digital camera, or a non-apple cell phone. The manufacturer profits a very small percentage on each unit sold, but makes their profits on tremendous volume of products moved. Motorola sold millions of RAZR phones per year, so even if they only profited $10 per phone, that could ad up to quite a bit of money.

However, when that phone breaks, what happens? It's hard to get Motorola on the phone. A replacement involves a trip to the store, and often waiting a few weeks while you mail your current one in for warranty repair. Would you want your business, your livelihood, to depend on something like that?

Compare that to the carpenter's tools. Sure, their $350 DeWalt drill-driver costs 10 times as much as the little black & decker, but it's worth it. Even though a huge amount of that (I'm guessing, but maybe as much as 75%) is just pure mark-up profit for the manufacturer.

First off, because the professional tool is designed to undergo day-in, day-out rigor, and a customer service infrastructure is built-in (and paid for by that increased cost) to support you when your tool breaks down. If you're on a job, and your gear goes down, it costs you money. As a contractor, you might loose the job altogether if your tools can't handle it; as a DP, you might loose hours of set time dealing with finicky equipment.

But more importantly, it's worth it because that tool pays for itself. Since you use it in work (and in some fields, like film and medicine, bill directly for your tools use), the tool not only pays itself off but then generates money for you. It costs more money, but because you can rent it out, in the long run it's a profit center.

Nobody rents out consumer goods (ever tried to rent a RAZR? Just buy one on craigslist for $20). But professional goods can earn you money, so it makes sense that they cost more. They are built stronger, and have a corporate level of support, that requires a higher cost, but it's the right cost.

This is why I'm excited that the Epic-M costs $58K. Because it's a signal to me that RED is switching to a Professional business model, as opposed to a consumer model.

The REDONE wouldn't exist without the brilliant idea to create a dgitial cinema camera around a consumer business model. It was a revolution for the industry, whose effects large and small are still being felt and will be for time to come. But, now that the revolution has occured, especially considering the economic climate, it's time for RED to go after a professional, not a consumer, market.

RED as a consumer company was a blessing, but it was also a curse. Without their consumer model, they wouldn't have worked so hard to bring a camera to market that did everything they advertised for only $17K (or $22K with the new sensor). It was truly ground breaking.

But once professionals got their hands on it, there was some friction. I remember one RED event where a professional asked a very reasonable question, and it sounded like the RED rep was shocked and annoyed. I couldn't figure out why, it seemed arrogant, then it hit me:

This was a company founded by a sunglasses maker. If I walked up to Jim Jannard while he was at Oakley and said "I hear you used Polycarbonate OxyCetylne-12 in your lens's, but that doesn't properly block all UV at irradiated angles (I made all that up, by the way)" he'd laugh in my face. That's not how consumers deal with products; I'd come off like a conspiracy theory nut, and he'd be right to be annoyed by me. Try asking someone at best buy about anything, really, and when you go into too much detail they get uncomfortable. Detail isn't for consumers, it's for Pros.

Jannard once described his perfect client, Steve Soderburg, as being someone who never complained, was always grateful and excited for whatever the camera could do. That's not a professional, that's a consumer. Soderburg is powerful enough within his field, and well financed enough, that in a weird way, he's kind of a consumer again. He can adapt his projects to the camera, and spend money in post to clean up problems if they occur. He is as much his own boss as anyone gets to be in the film industry.

But for the rest of us, we're not that powerful, we have clients of our own who have needs from us, and hire us to deliver on those needs. We ask questions and want detail and need support not because we're suspicious, but because we're turning around to our own clients and staking our name and reputation on the equipment that we invest in. We CAN'T be like Soderburg, as much as we might want to be, because our living depends on understanding the camera's and being able to deliver professional results with them.

I hope that the $58K price point is a sign that RED is acknowledging that if you are making digital cinema camera's, you are delivering a professional product. Whatever the margin was on the RED ONE (they might have lost money on them, for all I know, and made it back on the accessories), I hope it's a very healthy one on the Epic. Because professional products deserve a healthy mark-up, to pay for build quality (though the RED one was well built, no complaints there), and to pay for customer service and support that enable it to be a true professional tool.

Also, because of the economy, the volume on this camera is going to be lower. Even though the economy is recovering, loans are harder to get than they were in 07/08, and will remain that way for a very long time. A lot of people took out loans in those years in order to purchase the RED ONE who simply won't be able to get a loan to upgrade to the Epic, even if they wanted to. So, if RED is going to survive as a profitable company, it will have to do it in a lower volume, higher margin business.

This is all guesswork, for all I know RED made more off every RED ONE than it is making on the Epic. But I for one am happy to see pricing for the Epic-M that reflects a professional business model. With the opening of their store in Los Angeles, we've already started to see a higher level of customer service from RED, and I believe we're going to see more of that going forward as the Epic increasingly becomes the standard for motion picture, especially Stereo, production.

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