With the acquisition of 43.9% of the shares of the Leica Camera AG by BCP Lisa Germany GmbH, a company indirectly controlled by investment funds advised by the Blackstone Group LP the famous camera maker finally has severed all links to the romantic past. The Leica Camera AG is widely seen by aficionados of the Leica camera as the direct descendent of the original Leitz Werke. Many Leica observers cherish the nostalgic view of a proud, but somewhat staid manufacturer of photographic niche products of impeccable quality and precision. The two main indigenous product lines currently in production are the M-system, a 35mm coupled rangefinder camera and the S-system, a large format single lens reflex camera. Both systems are highly valued not only because of their undeniably high quality, but also because of their unique standing in today’s photographic world for upholding traditional values of simplicity of use and a product strategy that stands up to the ubiquitous application of planned obsolescence.
This approach has its peculiarities: the products have a slow development cycle and a low production volume which implies an expensive price tag.
In a recent interview the Leica CEO noted that Leica needs a broader product range and a higher production volume to lower the selling prices. A higher production volume is required in order to achieve an economically viable return on investments (new equipment, a new factory that is being built in the Wetzlar Park). One might add: the traditional Leica clientele in the western economies is saturated with the current product offerings and this market is anyway too small to support an aggressive expanding strategy of new products with a much shorter life-cycle. The main future markets will be the emerging economies where Leica has yet to acquire a strong brand image. It seems evident that the M- and S-lines cannot be the engines for a sustained growth and at the same time provide the basis for an expansion of the product range to satisfy future consumer demands in new emerging markets.
The implementation of a strategy of a constant influx of new products, new manufacturing technology, shorter product cycles, and expanded production targets and new markets will demand large sums of money which ACM is currently not able or willing to supply. But there are also a number of risks involved in this strategy. The new products may fail to excite the markets, the turn-around may be longer than expected, the investments may be calculated too modest and so on.
Between the lines of the several press releases one may descry a change of direction. Investment funds are not interested in tradition or emotion or fondness of heritage: they want simply a substantial return on investment and the Leica brand name is more important than the current product line. Hedge funds are notorious for ruthlessly scrapping non-profitable or non-promising parts of the business. ACM could assume that the current sales volume of the M and S-systems might not be sustainable in the long run and does not generate enough profit to finance the expansion program indigenously. ACM still holds a controlling majority in the company, but has evidently concluded that the ambitious goals cannot me realized on its own.
For a long period Leica could assume that their business model: niche market, exquisite products, premium price, would work and could secure the company a long term future. But this business model does no longer function: what the car industry, the motorcycle industry and the camera industry are discovering is a new model for the business, especially for the so called German Mittelstand: these are the famous German family companies of excellent products of world renown.
The new business model is based on the fact that every three years the complete product line must be renewed (read the Leica press reports: “this year we made x% of profit with products introduced this year!” and the new products demand a high volume of marketing. This requires large amounts of money and to furnish this non-productive investment the company needs to be rather big. In the past a Mittelstand company could survive on Euro 100 to 200 Million, but a viable Mittelstand company however needs a yearly turnover between Euro 250 and 500 Million, preferably a bit higher. Investments in a three year-model cycle, an big increase in marketing and the penetration of new market areas is not part of the classical DNA of the Leica Company that lived on product cycles measured in decades and did not produce any remarkable marketing effort.
The focus on branding new products, new markets and profit implies that the transformation of the classical engineering company to a market- and profit-driven technology company is now complete. A new generation of managers is taking their place in the company and the new investor will certainly complement this with an influx of personnel of their choice.
Speculation on the course of the company and the future status of the current product line is for now futile. With a stated focus on new products and new markets the importance of the actual user base will no doubt diminish.

Canon 1D x

The announcement of the new Canon 1D x indicates that the pixel race is finally over. The Canon claims are as usual framed in hyperbole, but this is customary for all major competitors and smart observers can look through the façade. The Canon pixel size is 5184 x 3456 and the current Leica M9 size is 5212 x 3472; dimensions that are equal. Canon claims that this size is sufficient for extremely big enlargements. Leica users can affirm this claim. It is evident now where the Canon engineers see the future: extremely sensitivity (common sense would ask what is the function of an ISO value of more than 200.000) and extremely fast speed of processing (12 images/second) and HD-video capabilities. There are rumors that Nikon is contemplating a sensor with 36 Mp and Canon is supposed to produce a sensor with >50 Mp. The new 1D x sets the limit at much lower values. I cannot image that Canon engineers would be allowed to produce a camera with specifications that are obsolete within a few months. In fact a sensor with 20 Mp would be the biggest one most users would be able to cope with. I also assume that the Canon lenses are optimized for this level of pixel resolution.
What is evident is that the Leica decision for the M9 is a sensible one, but the CCD is indeed limiting the potential. A realistic ISO value of 50.000 and a Noctilux f/0.95 would open up more possibilities for creative work than a sensor with 50Mp would do at much lower sensitivity.
In the past of AgX photography there was a discussion about which photographic tool would be best for what goal and assignment. Medium format versus miniature format. Canon seems to understand that the focus on miniature format implies a different approach than simply adding more pixels into the same area. The history repeats itself: Kodak for a while promoted the use of Techpan for commercial imagery and produced some stunning images, but the market assumed that this level of detail is not necessary. One might assume that the Canon engineers reached the same conclusion: sometimes less is more, as every Leica knows.

New edition of the Leica Compendium

There is such a demand for my Leica Compendium book that a third printing is necessary. It will become available end November 2011 and is printed in very limited numbers.