I bought a Panasonic GH-1 Micro Four Thirds mirrorless camera in 2009 when it first came out because I could see it had many significant advantages over entry-level dSLRs whilst still having adequate image quality.

Panasonic decided very early that their was limited future in the consumer level dSLR and decided to cease production of them and instead, embarked upon developing the revolutionary Micro Four Thirds system and introduced their 1st of these mirrorless cameras in 2008.

Olympus in 2010 re-affirmed this by apparently deciding that the future of entry-level dSLRs is limited and will most likely be replaced by mirrorless cameras, they have not produced a new entry-level dSLR since and instead have concentrated on creating super fast autofocus for their mirrorless Olympus Pen cameras – the E-P3, E-PL3 and their new mini Pen. Olympus have not abandoned the dSLR market but will concentrate on producing mid-level and semi-pro dSLRs.

This year Sony has really progressed their mirrorless offerings with their NEX-7 model just beig announced, although they still offer entry-level dSLRs.

Now the share market investors of Canon and Nikon are becoming concerned as news that mirrorless cameras now account for an unprecedented 40% of the dSLR market in Japan – up from only 5% of sales in 2009!

Global sales of mirrorless cameras are up 500% in 2010 to 2 million units and account for 16% of the global dSLR market, and expected to hit 23% this year.

Sony is expecting sales to reach 13 million units in 3 years.

Canon sold 5.9 million dSLRs in 2010 and has 45% of the dSLR market with Nikon having 30% of the market in 2010.

The brilliant new mirrorless models from Panasonic, Olympus and Sony are sure to change that very soon!

Nikon is expected to announce a 2.5x crop mirrorless system perhaps this year, while Canon seems to be working on a 2x crop system similar in size to Olympus and Panasonic.

Canon and Nikon still have not entered the mirrorless market, even though mirrorless cameras are cannibalising their lucrative, formerly dominant, entry-level dSLR market.

According to this Bloomberg report (from which the above data is derived), last year, Mizuho Securities Equity Research analyst Ryosuke Katsura wrote that the mirrorless technology may be the biggest “paradigm shift” in the SLR industry in six decades.

Thanks to Rob Galbraith for the heads up on this report.

Bottom line – if a Panasonic GH-1 is good enough for me to take on my travels and leave my heavy Canon 1D Mark III home, then it is not surprising to expect mirrorless cameras to subsume the entry-level dSLR market as well as cannibalise the compact camera market.

A further example, this article on macrophotography just posted on dpreview.com shows the author using a Canon dSLR to photograph insects – but he is using it as one would use a mirrorless camera in Live View mode – he would be much better off with a mirrorless camera in the first place for this type of photography.

Canon and Nikon appear to be just playing their usual game – let the innovators spend money on R&D on “fringe technologies” and test the market, and if the new technology works, initially criticise it until they can introduce it into their own cameras.

We have seen this when Olympus introduced the sensor dust removal system, live preview LCD, flip out LCD screens, “art filters”, “scene modes”, and when Panasonic introduced HD video capabilities – these are now all pretty much standard on Canon and Nikon dSLRs.

Technologies which Canon and Nikon are yet to adopt include mirrorless cameras, EVF’s in dSLRs, built-in image stabilisation, ultra-fast contrast detect AF, etc.

This catch-up in technology has worked well for Canon and Nikon, but until now, they have really not had to compete with electronic giants such as Panasonic, Sony and Samsung, and now that cameras have become primarily electronic consumer items, Canon and Nikon may see a tough decade or two ahead.

Nevertheless they will be hoping their upgrade pathway and compatibilities will be enough to sway mirrorless users to their systems. For instance, they would focus on ability to use same flash system, and potentially the same lenses (albeit big and bulky on a mirrorless camera) throughout their range of pro dSLR, sports pro dSLR, mid-level dSLR, entry-level dSLR and smaller cropped mirrorless camera.

Their decision not to create a APS-C sized mirrorless is, to me smart – it differentiates their mirrorless from their dSLR better and maximises the compact size afforded by smaller cropped sensor lenses.

This is where Sony and Samsung have, in my opinion, chosen poorly with their APS-C sized sensors – there is little advantage to a mirrorless if you still need large heavy lenses – unless perhap if you put a full frame sensor in it and create a true Leica-like experience.

A further risk with both Canon and Nikon is that their pro dSLR market which they currently dominate in 35mm full frame size will also be increasingly cannibalised by larger format dSLRs such as Leica S2, Mamiya, Pentax, Hasselblad and Phase One, perhaps leaving them with just the pro sports market intact.

If you want to see why mirrorless cameras are taking over entry-level dSLRs- see here for a comparison between a Panasonic G3 and a similarly priced Nikon D3100 dSLR – the Nikon wins on 3 parameters only (phase AF for fast moving subjects, remote TTL flash and presumably noise at high ISO), the G3 wins on every other parameter but in particular, image quality with non-pro lenses at similar price really shows the benefits of the Micro Four Thirds system.