Leica has had a difficult time over the past couple of months. For one, the company’s successful partnership with Huawei has come under threat because of the international political situation. But, perhaps of more importance for the crucial Chinese market, the negative publicity generated by the unauthorised Brazilian video has cast a shadow over the company’s future in Asia.
Furthermore, the surprise substantial discounts offered on two current cameras, the SL and the Monochrome, have caused some disquiet among dealers and Leica owners. Many believe that Leica has harmed its reputation by undermining the used market in this way. This could dent enthusiasts’ willingness to spend thousands of pounds on a camera when cheaper, more disposable products are available.
These setbacks could not have come at a more difficult time for Leica as the company embarks on a process of restructuring in order to face up to what CEO Matthias Harsch calls the “second digital revolution in the camera market”. There have already been signs that change is underway.
The Giessener Anzeiger reported on June 14 that up to 100 of the 800-strong jobs in Wetzlar, mainly in the development and marketing departments, are to be lost. At the same time, according to the company web site, new positions are being created to expand software engineering capabilities in the field of image processing, connectivity and iOS/Android application development.
In an interview last week with German financial newspaper, Handelsblatt, Leica’s CEO Matthias Harsch said that the company is changing rapidly to meet the new challenges in the digital camera market. He told Handelsblatt that the future lies in the optimisation of images through algorithms called computational imaging: “Artificial intelligence is definitely a very hot topic, which will accompany and influence the industry for a long time,” he said.
According to Harsch, Leica sleepwalked through the start of the first digital revolution, with the then Leica boss Hanns-Peter Cohn dismissing it in 2004 as “just an interlude.” This misreading of the situation led Leica almost to the point of bankruptcy. Then investor and camera enthusiast Andreas Kaufmann turned the company back onto the road to success, skilfully combining tradition and brand image with the new digital world.
“Leica is a remarkable success story,” Harsch told Handelsblatt: “In 2008 the turnover was €100m, today it is more than €400m. Now, however, Leica faces similar challenges to those experienced during the emergence of digital cameras.”
According to Harsch, Leica has already learned a great deal in the four years of working with Huawei: “This experience can be used for the further development of our classic cameras. In the future, there will be not just one but several sensors on classic lenses to optimise images. You do not have to be a pro today to take good pictures.”
He cited the Leica Q which he compares with the Porsche 911: “In the 1970s the sports car was the preserve of the experienced driver. Today, thanks to the assistance systems, it has appeal to every average driver.”
Apple is the model
In the future, Harsch says, software and cloud services will become more important to Leica.
He told Handelsblatt that his model is Apple. That company has built an ecosystem around its devices from iCloud to Apple Music, to Apple Pay. “Leica wants to shape the digital ecosystem of photography,” says Harsch. “Software and services will become more important.
The move from being an
According to Handelsblatt, the restructuring is fully supported by Blackstone, the principal outside investor. Blackstone has held around 45 per cent of Leica since 2012 but has been trying to sell its holding since 2017.
However, as reported in the Wetzlarer Neue Zeitung, not all is sweetness and light in the relationship between Leica and Blackstone. In particular, the newspaper says, the high rental costs paid to Leitz-Park GmbH, owned by Dr Kaufmann’s family trust, have caused for concern.
Second digital revolution
Despite the many challenges, Matthias Harsch remains optimistic for the future of Leica as it embarks on this second digital revolution.
Worldwide, Leica has more than 100 own stores at a time when the market for traditional cameras is shrinking:
“We fill the gap with Leica Stores to continue to provide optimum service,” he says. There is even the possibility of a home-grown Leica phone, something with Andreas Kaufmann has been dreaming of for some time. Says Harsch, “The camera function in smartphones is a core part of our future business. The younger generation, especially, is discovering photography through the smartphone and the switch to higher-quality system cameras becomes easier. If customers are already familiar with the Leica brand, they will make the connection.”
“Thanks to their smartphones, people have never taken as many photographs as they do today, he concludes”
My view is that Leica’s market is still very much enthusiast focused. Clearly, however, the company is seeking to expand beyond the traditional market to attract smartphone upgraders who fancy a “proper” camera but expect to have all the new features available. Apple’s portrait mode, which simulates a narrow depth of field, is perhaps the best example of where things are heading in digital image processing.
However, Leica must be careful not to throw the baby out with the bathwater. If traditional users feel alienated by features they do not want, there is a strong risk of losing core customers.