New Leica M in September 2016? The speculations.

[Adam]

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I see that you have access to Leica's balance sheet.   Despite high prices they were technically bankrupt less than 15 years ago. They have managed to escape thanks to the capital injection by Dr Kaufmann and later Blackstoke and by -as a consequence- introducing new successful products. Now that they are finally writing black figures and consolidating the company they are accused of profiteering. Nice.

You can have very high profit margins and still go bankrupt. Basic math, which you should know: you spend more than you make. :rolleyes:

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[Peter H]

Upgrading electronics is not magic, I did it for years on PC's and the systems were way more complex than existing cameras. But Leica is not going to have a modular body because they make more money selling new ones.

 

- Leica could release paid upgrades to existing M 240 bodies. Doubt if the SL sensor plus support needs more power or space than what the M can provide with slight modifications. 

- Leica could work with sensor manufacturers to create new sensors with better parameters that fit existing M240 cameras. The upgrade would probably be cheaper than a new body, but the profit margin would be meager.

- Finally, Leica could offer a transparent upgrade program for existing owners, like software upgrades, where you purchase new models at a discount.

 

But it will not. Leica is in large part owned by Blackstone - an equity group run by ex Lehman Bros whose job is to secure an annual revenue stream of about 7-8 billion. As long as customers are rich enough to flock to the latest SL,Q, M, T, S or whatnot that is so eloquently branded to targeted groups of users (also on this forum) then we will not see any modular solutions, or long lasting value.

 

Built in obsolescence is the norm, but it is not fully justified by technology, but primarily by profit.

 

 

 

There's an assumption here that to maximise profitability you must minimise the value to the customer down to the point where you can no longer get away with it. And there's some validity in this, but it's not the whole story by a long way, and is not in itself a reason for non-modularity.

 

Let's look at the assumption that the reason Leica doesn't make a modular body has nothing to do with technology and everything to do with profitability. That would mean that they've examined  pricing and demand projections and decided that a modular body and a programme of regular, charged upgrades (to customers who are locked in to a considerable degree) would not support an equivalent margin and adequate profit comparable with the usual practice of a new body every 3 or 4 years. In this, they must either be right or wrong. If right, it is we the customers who are in effect deciding that we'd rather save money and buy a new body every few years than pay the necessary price for a modular programme. And if they are wrong, they are wrong, meaning we would pay up, and they would sustain their profits. The other way they could be wrong is that we wouldn't need to pay more because it would prove to be such a popular move that prices wouldn't need to rise. But the risks in making any decision of this sort are considerable and I wouldn't blame them for not taking the plunge. Realistically, however, it is unlikely to be purely a pricing/profit decision in the way you describe it because the greatest risk factor outside of demand is that technology still changes to the point where the modular body becomes obsolete before the customer has had the benefit of its projected advantages.

 

In the end it's down to the company's assessment of the value they can offer and what we'd pay for it, not the company's excessive lust for profit. They have to make a proper evaluation, like every responsible company, and try at the same time to do what will be most popular with their customers, because that is where their profits come from.

 

I think your argument errs on the simplistic side, and the modular/non-modular decision such as it is a decision at all has virtually nothing  to do with Blackstone who are not in the business of assessing the sensitivity of demand for prospective high-end cameras of different body styles. 

[jaapv]

You can have very high profit margins and still go bankrupt. Basic math, which you should know: you spend more than you make. :rolleyes:

You can -they had not.

[IkarusJohn]

Let's look at the assumption that the reason Leica doesn't make a modular body has nothing to do with technology and everything to do with profitability. 

 

 

Excuse the snip; I agree with your post, but I find this dichotomy a little singular. 

 

There are other reasons.  

 

First, what is this "modularity" and what does it entail?  The assumption here has often that means full modularity, where a more modest ability to upgrade key, vulnerable components is more realistic.

 

Second, to do this would require a reorganisation of Leica to ensure design and manufacturing met the requirements of such a capability, and Customer Service would need significant investment to handle the potential demand. 

 

Third, is it what Leica buyers really want?  Or does it just sound good on paper?

 

Fourth, the cost would be high - new electronics, stock and labour and capacity to do the upgrades - making and selling a new camera would be easier, what Leica already does and probably more profitable. 

 

I can well see why Leica ditched the idea after the M8. But that is a very business as usual approach, and does not reflect the considerable warranty and reputation cost of the M8 LCD, M9 cracked sensors and corrosion. I have no doubt Leica would rather just sell a new camera than fix the old ones, even at a discount. But, to their credit, they have developed a new sensor for the M9 - something I didn't think they would do for a moment. I imagine the supplier wore a fair chunk of that cost. 

 

So, while the previous ceo's perpetual upgrade programme may have been another factor which cost him his job, it may not be such a silly idea. Leica is a niche camera maker, selling to people who can afford to buy into their way of seeing the world (where a pure examination of numbers would say the Sony is always the better buy). To accept that while a full capacity production churning out new cameras every 3 years might be profitable, it is not environmentally sustainable and is sooo 20th century. 

 

I was intrigued, and impressed, with Apple's disassembly robot announced yesterday. German cars have had to be recyclable for over 30 years (can't recall what recyclable means in that context, but I remember that my Series 2, 16v GTI was made out of a restricted number of plastics, all of which had to be recyclable). As a German company, surely Leica must pause for thought at all those M9 cameras ditched for want of an affordable replacement sensor (yes, I'm guessing, but I doubt Leica took the time to disassemble and recycle my M9 - I expect it joined Jaap's LTM parts in a skip). 

 

If Leica embraced this approach, my view is it would appeal to its customer base, and more. Doubt they'll do it, though. Hats off to Apple. 

[Peter H]

John, I agree it is unrealistically singular but that is how it was presented in Adam's post which I took issue with.

 

If it worked, I think modularity would be very popular indeed and would enable Leica to increase prices even further both on the bodies, since the lifetime claim could be made with considerably more substance, and on the upgrades which would offer measurable benefits to those already heavily invested in the modular body.

 

But I don't expect it to happen because I think the risks are too great. Predicting the direction that technological instruments like digital cameras, even M series cameras, will take for further than two traditional life-cycles must be enormously hazardous and the risks to a long-lived and crucially important line like the M would simply be too great for any sensible company to take. Unfortunately.

[Adam]

You can -they had not.

 I see that it is you who has access to past and present Leica balance sheets and financials. No wonder you were trying to be sarcastic about my musings on the topic

 

I am not a Leica insider, but common sense tells me that when you manufacture low amounts, your profit margin needs to be high since you selling little. Compared to other 35mm camera bodies, the M is a luxury product - these have high profit margins because of artificial scarcity, limited editions, etc. It could be that Leica is barely braking even, in which case they are doing it wrong, and this is bad for us since it might go under. 

[Adam]

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There's an assumption here that to maximise profitability you must minimise the value to the customer down to the point where you can no longer get away with it. And there's some validity in this, but it's not the whole story by a long way, and is not in itself a reason for non-modularity.

 

I think you are looking at it from the wrong end of the stick. What I said is that there is no technological obstacle in having a modular body. Size, available components, etc. are just red herrings. Once we dispense with that, we are free to speculate as to why there is no modular body. My suspicion is money.

 

Let's look at the assumption that the reason Leica doesn't make a modular body has nothing to do with technology and everything to do with profitability. That would mean that they've examined  pricing and demand projections and decided that a modular body and a programme of regular, charged upgrades (to customers who are locked in to a considerable degree) would not support an equivalent margin and adequate profit comparable with the usual practice of a new body every 3 or 4 years. In this, they must either be right or wrong.

 

That is what companies do, in fact they hire other companies to do that kind of research for them. The decision is neither right or wrong, rather which outcome

 

has a larger probability of being profitable. There are no absolutes, and strategies can be reversed, as they often are.

 

If right, it is we the customers who are in effect deciding that we'd rather save money and buy a new body every few years than pay the necessary price for a modular programme. And if they are wrong, they are wrong, meaning we would pay up, and they would sustain their profits. The other way they could be wrong is that we wouldn't need to pay more because it would prove to be such a popular move that prices wouldn't need to rise. But the risks in making any decision of this sort are considerable and I wouldn't blame them for not taking the plunge.

 

 

The only decision a customer makes is to buy or not. At this point there is evidence that there is a enough people willing to pay existing prices for current bodies. Of course, there is risk in moving to a modular system. What is the risk? Financial, meaning less profit. This is what I said.

 

 

 

Realistically, however, it is unlikely to be purely a pricing/profit decision in the way you describe it because the greatest risk factor outside of demand is that technology still changes to the point where the modular body becomes obsolete before the customer has had the benefit of its projected advantages.

 

 

Not sure how you came to that conclusion. The same technological obsolescence risk comes with owning a new non modular body.

 

 

 

In the end it's down to the company's assessment of the value they can offer and what we'd pay for it, not the company's excessive lust for profit. They have to make a proper evaluation, like every responsible company, and try at the same time to do what will be most popular with their customers, because that is where their profits come from.

 

I think your argument errs on the simplistic side, and the modular/non-modular decision such as it is a decision at all has virtually nothing  to do with Blackstone who are not in the business of assessing the sensitivity of demand for prospective high-end cameras of different body styles. 

 

Profits come from sales not popularity. My argument dispensed with the idea that modular bodies are technologically unfeasible and tried to address other possible reasons. Blackstone might not know a lot about cameras but they know a lot about making money - they invested in Leica not because of Cartier-Bresson or because Leica is popular with some crowd or other. They did it to make money, and knowing these people they will make sure Leica has profit margins now, or in the near future, or they pull the plug. Even if it means bankruptcy.

 

Again, if technology is not the barrier to modular bodies, then what is?

[Peter H]

..............

 

I am not a Leica insider, but common sense tells me that when you manufacture low amounts, your profit margin needs to be high since you selling little. ......

 

 

In this context it's about return on capital as you know.

 

So margins are not determined by the volume of production but by the relationship between profits and capital employed. A large company (one with a large amount of capital) and a small one (small amount of capital) can operate equally successfully  with similar margins. 

 

Again I think your analysis of Leica's pricing policies is built on unsafe assumptions.

 

 

................................

Again, if technology is not the barrier to modular bodies, then what is?

 

Technology is the barrier. That is exactly what I'm saying. 

 

That's where we disagree, as we do  on virtually everything else in your previous post in which it appears you accidentally misinterpret almost every single thing I say. I must be writing exceedingly unclearly this evening.

[Adam]

John, I agree it is unrealistically singular but that is how it was presented in Adam's post which I took issue with.

 

If it worked, I think modularity would be very popular indeed and would enable Leica to increase prices even further both on the bodies, since the lifetime claim could be made with considerably more substance, and on the upgrades which would offer measurable benefits to those already heavily invested in the modular body.

 

But I don't expect it to happen because I think the risks are too great. Predicting the direction that technological instruments like digital cameras, even M series cameras, will take for further than two traditional life-cycles must be enormously hazardous and the risks to a long-lived and crucially important line like the M would simply be too great for any sensible company to take. Unfortunately.

 

The PC market functioned pretty well in that 'risky' environment. Mind you, technological advances in PC architecture were much greater and much more unpredictable than in cameras.

[Adam]

In this context it's about return on capital as you know.

 

So margins are not determined by the volume of production but by the relationship between profits and capital employed. A large company (one with a large amount of capital) and a small one (small amount of capital) can operate equally successfully  with similar margins. 

 

Again I think your analysis of Leica's pricing policies is built on unsafe assumptions.

 

 

You are right, except Leica needs to produce return on capital because of its ownership structure.

 

Technology is the barrier. That is exactly what I'm saying. 

 

That's where we disagree, as we do  on virtually everything else in your previous post in which it appears you accidentally misinterpret almost every single thing I say. I must be writing exceedingly unclearly this evening.

 

Well I do not see any evidence for that conclusion. In fact modular complex electronic devices have been successfully used and sold for years.

 

I tried to understand your points without any malice, if I failed then my sincere apologies. It was not my intention to misinterpret. 

[IkarusJohn]

... But I don't expect it to happen because I think the risks are too great. Predicting the direction that technological instruments like digital cameras, even M series cameras, will take for further than two traditional life-cycles must be enormously hazardous and the risks to a long-lived and crucially important line like the M would simply be too great for any sensible company to take ...

 

I'm not so sure.  You assume that Leica needs to predict where technology is going, where actually in this sector it sets the direction.

 

Unlike your request for greater transparency about where Leica is going with its products, technological advances are very transparent at the supplier level.  Leica will be courted by suppliers outlining what they can achieve now, and what is in the pipeline.  One of the reasons they do not launch themselves at the technological bleeding edge (cf Sony) is that they know what is coming and they want to concentrate on providing the best combination they can.  Many here disagree with their assessment, but it is an assessment which has stood them in good stead since the M3 (with the odd hiccup).

 

So, I don't see the market risk as you do (hence my reference to the M-A).  Leica controls the production decisions, and this is not really such a huge leap for them - the problem, I suspect, is the impact on their established corporate structure (Customer Services would be lucky to cover its own costs with the number of warranty issues over the last 10 years) and convincing themselves that its customers would pay the price needed to make it work.

 

Cheers

John

[Peter H]

I'm not so sure.  You assume that Leica needs to predict where technology is going, where actually in this sector it sets the direction.

 

Unlike your request for greater transparency about where Leica is going with its products, technological advances are very transparent at the supplier level.  Leica will be courted by suppliers outlining what they can achieve now, and what is in the pipeline.  One of the reasons they do not launch themselves at the technological bleeding edge (cf Sony) is that they know what is coming and they want to concentrate on providing the best combination they can.  Many here disagree with their assessment, but it is an assessment which has stood them in good stead since the M3 (with the odd hiccup).

 

So, I don't see the market risk as you do (hence my reference to the M-A).  Leica controls the production decisions, and this is not really such a huge leap for them - the problem, I suspect, is the impact on their established corporate structure (Customer Services would be lucky to cover its own costs with the number of warranty issues over the last 10 years) and convincing themselves that its customers would pay the price needed to make it work.

 

Cheers

John

 

 

A tiny and by its nature imperfect and speculative example: Imagine Leica wishes to build an advanced hybrid VF into a future M. Will it require a joystick on the back? Almost certainly yes, otherwise it will be very unattractive compared with most current cameras, and will prevent the VF from realising its potential.  So this tiny but important feature (certainly important in marketing terms) would need to be part of the body at inception, yet ten years ago it would have been very easy to overlook it, if it even occurred to anyone as a possibility.

 

Obviously I can't think of perfect examples of what will be considered indispensable in ten years time. And that is the point: no one can, not even those at the very forefront of technological development.

 

It is a huge risk for Leica because it exposes the M, their core camera, to an unnecessary type of obsolescence hazard that they've been bending over backwards to avoid for the last decade, and which very nearly brought them to their knees.

[marchyman]

You can have very high profit margins and still go bankrupt. Basic math, which you should know: you spend more than you make. :rolleyes:

 

 

High revenue, perhaps.   High profit margin implies profit: the return after all operating expenses have been met; total revenue less total expenses.  There is no profit in spending more than you make

[Rus]

This maybe a bit of an odd request...and certainly not likely to be granted : I really want to have the shutter re-cock lever installed on a digital M body...

 

just like how it is on the Epson R-D1 series.....    

[IkarusJohn]

Hi Peter,

 

Of course that's right, but you're reading the suggestion as meaning that every innovation has to be retro compatible. That is completely unrealistic. But that new camera would hopefully be future compatible. You're also assuming that every innovation will be included in every M camera. Hence my reference to the M-A. The rumoured M-D is a better example.

 

While you are keen to ensure that future innovation is included a n future M cameras, there is also a place for a rangefinder in the traditional incarnation - the M-262, perhaps.

[AlanJW]

The reality is Leica has built in upgradability for years.   Nearly all their lenses can be upgraded with a new body.  Really, what other company has provided a path fo lens owners that has lasted this long?  And they market it it too,.  Look at the advertising for the SL;  it is touted as compatible with dozens of Leica lenses.  Nikon has the F mount but Leica goes back way further than that.  And, realistically, this is all the compatibility/upgradeability we are likely to see.  You can plead all you want for interchangeable sensors, etc. but these cameras are integrated systems, where the components (hopefully) work with each other.  They are computers with a hole in the front for glass.  Think about the desire for the M to use a new EVF.  It wasn't that the newer EVFs couldn't fit.  It is there wasn't enough computing power in the camera to drive it. You old Mac will not run the newest OS X and your 10 year old computer won't run Windows 10 either.   We will never see "upgradable" camera bodies.   Enjoy those lenses. 

[Adam]

High revenue, perhaps.   High profit margin implies profit: the return after all operating expenses have been met; total revenue less total expenses.  There is no profit in spending more than you make

Yep, got  carried away - high revenue  not profit. Thanks for the correction!

[IkarusJohn]

... Think about the desire for the M to use a new EVF.  It wasn't that the newer EVFs couldn't fit.  It is there wasn't enough computing power in the camera to drive it. You old Mac will not run the newest OS X and your 10 year old computer won't run Windows 10 either...

 

Okay, let's think about that. 

 

When the M(240) was first released more than one poster here pointed out that the Maestro processor was old hat - not up for the job at the time of release. That was Leica's decision, that lead to an indifferent EVF; another conscious decision by Leica. 

 

If (when) the next M is released with an EVF at least as good as the SL, one would assume that the body form factor will be the same as the M(240) (bear with me), so those who want the new EVF should be able to say to Leica, look here, I don't want a new camera, I want this one, but I want to be able to use the new EVF. Leica says, sure send the camera in, and we'll upgrade the processor for $x,xxx.xx. We can do that because we've maintained the body dimensions, and we know the new processor will fit.

 

Roll in the technical experts who say that won't be possible - cobblers to that; its Leica who specifies the dimensions and performance spec of the processor. 

 

We could go round in circles for a while. I guess the underlying point is that, if there was a will, there'd certainly be a way. This is a conscious decision by Leica, and nothing more. 

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[Adam]

The software analogy has its limits. I bet you would be miffed if in order to do even one OS upgrade you would have to buy a new computer.

 

In the PC market you had modular upgrades, you get a new graphics card, a bigger Hard Drive and your machine's life would be extended for a few more years.  That did not mean that a new PC wasn't better.  But there was a choice, and the life cycle of products was longer for those who were happy just to upgrade. Those who always wanted/needed the newest and fastest machines bought a new one.

 

I don't think anyone would suggest that a modular upgrade would be the equivalent of a new model. But there is a market for selective improvements. But I guess I am in the minority here.

[CheshireCat]

Ricoh's been there, done that. Here's the result:

 

http://www.l-camera-forum.com/topic/221839-demise-of-the-ricoh-gxr/

 

This modular thing is nonsense. And naive is thinking that a modular Leica will let you spare money.

Hardware is just a small fraction of the price of a new camera.