Is a firmware update a new product?

In September Panasonic did something indicative of just how much connected devices have changed marketing, sales and consumer expectations. It charged $99 for a firmware update for its top of line GH4 still and video camera.

Given the price tag, Panasonic’s move begs the question: Does a firmware update that adds critical functionality equate to a new product that can be charged for?

In the camera world firmware updates are widely discussed with owners lobbying manufacturers for changes. Intrinsic to this lobbying is the belief, and the reality, that software changes can significantly improve hardware. Camera hardware performance is highly governed by software and firmware updates can change core functionality.

The power of the market was on display most recently when consumers demanded a firmware update from Sony that impacted how Sony’s flagship camera the A7R mark II, which is intended to take on market leaders Nikon and Canon, processes raw image files. Less than 60 days after the camera was released, Sony gave in and announced it would release an update.

But Panasonic’s move is different. The $99 firmare update doesn’t fix anything. Rather, it adds something called V-Log, which effectively uses improved software and algorithms to provide greater dynamic range. What that means is the GH4 can capture a greater range of light to dark before the shadows become black and the highlights become blown out whites.

Many owners of the high end camera expressed displeasure at having to pay for the firmware update. After all, they’d never had to. I mean, who has ever had to pay for a firmware update for a consumer product? And both Panasonic and competitors have routinely used firmware updates to add functionality like better shutter speed, alter image quality, and provide quicker autofocus. All for free.

The GH4, at around $1500, is a prosumer camera, and Panasonic is betting that such an audience is sophisticated enough to see the value of V-Log and thus willing to pay for it. It would be hard to imagine a company charging for a firmware update on a $500 camera.

Still, Panasonic’s move points to an important shift in IoT related to how consumers view a product. Put simply, they no longer view the release date of the product as the end of product development. And as more and more products gain connectivity, consumer expectations that products will continually be improved with wireless software updates will only strengthen.

The poster child and early adopter of this philosophy has been Tesla. Over the summer it announced that it would use its next software update to improve its autosteer and auto parallel parking features. The Tesla Model S resembles more of a consumer electronics product than an automotive vehicle, and a big reason for that is that it has embraced the modern design ethos of continual improvements through software. The added benefit for brands embracing this philosophy is that it gives them a means to further engage their customers after the product sale.

It’s this last point about continual engagement that should give pause to those in consumer IoT. If you can continually improve a smart lock’s functionality by say, improving latency, or the algorithms intrinsic to a learning thermostat to save more energy, you have a way to improve customer satisfaction and loyalty.

Will consumers pay for these improvements? I think that’s unlikely, but not impossible, particularly if the update really provides significantly better functioning or a must have feature.

One coda on the Panasonic story. In 2011 it launched its GH2 camera, which wound up becoming well loved by many videographers. Why? Well, a big reason is that a smart programmer actually hacked the firmware to drastically improve the bitrate of the video recording, providing better video quality. He was effectively saying, I know this hardware can be pushed harder, and I’m going to do just that.

Panasonic may have learned their lesson this time around. Improve the firmware or someone else will. If they can charge for it, all the better.