There's the sensor AND the back screen. Of course you COULD make the back screen smaller, but since they like to brag about the back screen's size and resolution I doubt they'd want to do that. They'd probably rather just make the whole camera as tall as the hump is now!
I guess there are those out there that consider a back screen more important that a quality, well place viewfinder.....
I rarely use mine...nice to have on the occasion you need to chimp....but I find I need that less and less as the years go on....
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