Leica is the stuff of legends. Some of the greatest photographers of the past century - Cartier-Bresson, Capa, Salgado, Doisneau, Erwitt - have taken some of their most famous images with a Leica camera.
But legends have a way of ending badly. Analogue photography is being swept aside by the digital revolution - and celebrated names such as Leica, Kodak and AgfaPhoto are threatened or struggling. Now Leica and Agfa are saying they need cash just to survive the coming months.
They are under attack not just from the big Japanese camera makers - Canon, Olympus and Nikon - but from a host of hi-tech firms, many of them new entrants to the photography market. These include Sony, Hewlett- Packard (HP), Sanyo and Casio.
One of the first digital cameras sold to consumers was the Casio QV10, a very basic model retailing for around £800 in 1995. Nowadays, you can buy something much better for one 10th of the price. Mobiles and personal digital assistants (PDAs) can also take snaps, and many will soon provide good-quality pictures. The new Nokia N90 boasts a Carl Zeiss lens, a two-megapixel camera and can re- cord videos. It can also send what it records, almost instantly.
Camera sales are falling in Japan, where one in two households have dropped film in favour of digital. In Europe, only one in four households have gone digital, but prices are falling continually as the market approaches saturation.
"We expect a 10 per cent price decline in the UK this year," says Hiroyuki Matsushita at Sony UK. "We change our range every year to offer something new, something more."
Even the strongest brands are suffering. Olympus, the world's fourth-largest maker of digital cameras and a market leader in the UK, has just announced its first-ever loss and a 30 per cent reduction in production costs. Tsuyoshi Kikukawa, Olympus's president, says: "The cost cuts will have to stay ahead of the 15 to 20 per cent decline in [worldwide] digital camera prices this year."
Digital models are far easier to assemble than their analogue counterparts, although admittedly only Leica spends 11 hours assembling a camera in Germany (the M7 with 1,400 parts). Kodak's digital Easyshare is more typical of the industry: designed in Japan, assembled in China. Such production methods have helped non-traditional camera suppliers enter the market. But the Japanese makers, which supply four-fifths of the world market, intend not to license the next-generation technology to Chinese assemblers. In this way, they can reduce competition and improve margins.
This will not be easy. HP, Casio and, indeed, Sony never made film cameras but have seized the digital opportunity. Within a decade, Sony has become the number-one camera manufacturer in Asia, number two in the US and number four in the UK after Canon, Fuji and Olympus.
Earlier this month Leica, which created the first small film camera in 1913, finally took up the digital challenge with the official launch of the Digital-Modul-R. Like all Leica models, this single-lens reflex camera is almost entirely handmade in Germany. As ever, it aims to be the best of the best; its list price is €4,500 (£3,200).
For decades Leica has occupied an exclusive, high-priced niche in the photography market. Having virtually invented modern photography and photo-reportage, the company has insisted on not following new trends - such as single-lens reflex, auto-focus or digital - until they are so well established, they can't be overlooked.
But despite its undoubted cachet, Leica lacks a clear strategy - something noted by Hermès, the French luxury brand owner and 31 per cent Leica shareholder. It may not contribute to the €50m cash injection that the camera firm has requested of its shareholders.
Patrick Thomas, a director at Hermès, says: "We will only help Leica if its middle- and long-term strategy convinces us."
Leica has to unveil its thinking in the next few days. Without Hermès' support, it could disappear.
The receivers have already been called into AgfaPhoto, the German-based firm that produced the first colour film in 1936. A last-minute rescue package has been agreed thanks to a €50m cash injection from former owner Agfa-Gevaert, the Belgian group. This should see Agfa, the world's third-largest film manufacturer and processor, through the summer. But here too, the future strategy is unclear.
Kodak, the world's largest film maker, and Fuji Film have been much quicker to adapt. This year Kodak became market leader in US digital cameras, outselling Sony and Canon, and number three worldwide. In January, it announced it had stopped producing film cameras.
Daniel Carp, Kodak's recently departed chief executive, said last month: "We expect 2005 to be a crossover point in our 125-year history. For the first time, digital revenues will exceed traditional ones. The increase in digital earnings will be higher than the decrease in traditional earnings."
However, profits are under pressure in the darkroom at Kodak, whose first-quarter loss persuaded the equity and bond markets to downgrade its debt to junk status. A restructuring programme involving 15,000 job losses has been announced, but the company's high-margin, highly protected film market is disappearing fast.
Traditional film sales are still important to Kodak but they are plummeting - they are expected to drop by 30 per cent this year in the US. Investors fear profits will remain hard to achieve. Mr Carp has now handed the reins to Antonio Perez, hired from Hewlett-Packard for his digital know-how.
The darkroom is fast disappearing. All printer makers - such as HP, Canon, Epson and Dell - are highly active in the new digital market, as are retailers. In the US, Wal-Mart has pioneered the uploading of pictures to the internet so they can be picked up within an hour from a local store. This is a business traditionally controlled by Kodak, Fuji and Agfa, the first two of which have responded by creating easy-to-use "printer docking stations" that require no PC. But they face intense competition from Sony, Epson and several others.
"Consumers still want printed pictures," says Mr Matsushita at Sony UK. "Direct photo printers is a key area we are entering."
Unlike Olympus, Canon and Nikon remain profitable. They have succeeded by concentrating on the middle and top end of the camera market.
Kate Robinson of Nikon UK says: "Eighty per cent of professionals use digital cameras, but we have had the most amazing reviews and steady sales of the F6 film camera."
So there may still be some opportunities here for Leica, provided it is ready to seize them. Certainly, the premium market for digital SLR cameras, often costing more than £600, is expected to take off in Europe this year. This should bring significant growth to Canon and Nikon in an area where overall unit sales are still rising but overall value is falling. Cameras remain a buyers' market.
And some of the grand old names are not selling well.Reuse content