Big business news in the watch industry this week; if you’re new, subscribe to Rescapement Weekly here.

Earlier this week, popular microbrand Ming Watch surprised its avid followers by dropping a new Slate version of its popular 17.06 model, limited to just 200 pieces. The watch, powered by an ETA 2824, sold out in just minutes, prompting outrage from collectors who couldn’t get one and accused the company of intentionally restricting supply. This then caused the company to post a blog entry entitled “Appreciation, Apologies and Realties.” The post sought to explain the limited production of the watch, pointing especially to “supply constraints, particularly when it comes to ETA movements,” and 18-24 month supply chain lead times. Ming went on to explain its production numbers for this model were essential locked in mid-2018 due to limited access to ETA movements. For Ming, and many other young brands, this is the reality: with no manufacturing capabilities and limited capital, they’re reliant on third-party manufacturers to supply the key components of their products.

Then on December 15, news broke that the Swiss Competition Commission (Weka) is preparing to ban Swatch Group, which owns ETA, from selling ETA movements to third parties in 2020. This is just the latest turn in a saga that dates back to 2002, when Swatch Group first threatened to stop selling ebauches to third parties. Back then, Swatch Group thought it untenable that it was supplying movement components to brands that competed with some of Swatch’s own brands like Omega, Tissot and Hamilton. The dispute dragged on for years, when, in 2013 the parties finally reached an agreement whereby Swatch could gradually decrease the number of ETA movements it sold to third parties through 2019. Then, in 2020, Swatch Group would be free to sell (or not sell) its movements to whomever it pleased.

Well, it seems things haven’t gone quite according to plan. See, both Swatch and its competitors were supposed to benefit from that 2013 deal: come 2020, Swatch would finally be able to operate freely in the market again without having to manufacture a government-directed number of movements for other watch brands. Meanwhile, Weka thought that gradually reducing ETA’s dominance in the movement market would allow competitors to come in and create a more competitive landscape.

According to reports though, Weka commissioned a study of the market landscape last year to see if the plan had worked. While not public (yet), it seems as though the findings of this report are what prompted Weka’s ETA ban. In other words, ETA’s position is still likely too dominant and Weka feels there’s not enough competition in the supply of Swiss movements. Hence the 2020 ban.

This is a complex situation: there are many moving pieces and the results of the forthcoming ban will be felt across the watch industry for years to come, not to mention the domestic Swiss politics and economic considerations at play. It sounds as though Weka is prioritizing the long-term health of the movement supply business over its short-term prospects. With ETA blocked from supplying movements in 2020, the supply crunch that have left brands like Ming scrambling and unable to meet customer demand is likely to continue. But, the long-term hope is that movement suppliers like Sellita and Soprod will fill the vacuum left by ETA’s absence. To be sure, smaller brands like Ming with less resources stand to lose the most in the meantime. Larger brands that have relied on ETA movements may fair better by continuing to shift to their own in-house production or finding partnerships to build the economies of scale still needed to manufacture low-cost mechanical movements at scale — Tudor and Breitling stand as examples here.

Add to that factors outside of Switzerland’s control, and it becomes clear how the decision could impact the watch industry as a whole. For example, as I commonly cover in monthly reports on Swiss export numbers, the low end of the watch market (often powered by movements from ETA) continues to decline as customers flock to smart watches. Meanwhile, Seiko’s Miyota continues to produce cheaper mechanical movements that are increasingly recognized and respected among consumers, even though they lack the vaunted “Swiss Made” labelling.

This is also emblematic of a larger issue in our modern economy: in many industries, power is concentrated with a few monopolistic companies. There are many causes, but technology is one of the most important. Large companies build the technology platforms, then smaller ones leverage these platforms to carve out niches of whatever’s left. For example, a generation prior, it would have been difficult for a company like Ming, with a shoestring budget and no manufacturing capability to gain an international following and win a prestigious award after just a few years in business. But, combine a cool design, some social media marketing, and watch forum momentum, and the result is a brand selling out its latest model in two minutes. And this isn’t to knock Ming — I love their watches and the 17.06 Slate is one of the best looking yet. But, let’s not forget that the escapement ticking inside that is built by a monopolistic Swiss conglomerate with designs on pulling the rug out from under companies like Ming.

Likewise, this isn’t to knock Swatch. They’ve dedicated years of research and development, as well as the capital to manufacture these movements, and are now being “forced” to sell them to competitors. Oh by the way, Swatch subsidiary Nivarox is required to continue supplying its mainsprings (i.e. the escapement components) to third parties until 2023, and it’s got an even bigger monopoly there then it does on the fully-assembled ETA movements causing the current kerfuffle.

This is a developing story and we’ll continue to report and analyze it, but read here for our initial report on the ban.

Other News

Quick Hits from the December Auctions

If you haven’t heard, the Marlon Brando Rolex GMT sold for nearly $2 million at Phillips’ Game Changers auction in New York this week. All said, 5 watches broke the $1 million threshold, the first time that’s happened at a watch auction on American soil. Meanwhile, Jack Nicklaus’ Rolex Day-Date sold for $1.2 million. And, in a moment of boredom, I wondered: why wasn’t Phillips publicizing its estimates for the Brando and Nicklaus watches?

More on Swiss Made Movements

QP Magazine went inside Sellita, the one-time ETA movement assembler, to see what the company is doing to ramp up production to meet increased demand for its movements.

About that Hodinkee x Leica LE Camera

A week after announcing it’s now an authorized Leica dealer, Hodinkee released a limited edition Leica M10-P “Ghost Edition” camera for $14,995. It’s limited to 250 cameras (and as of this writing, has not sold out 4 days after launch), and comes with the camera and a 35mm lens. As with everything Hodinkee does nowadays, the release has caught a lot of flak, but it’s really not that crazy a partnership or price point. The normal version of the M10-P costs $7,995, while the 35mm lens runs $6,095, or $14,090 for the set, making the “Hodinkee premium” about 6 percent. So it’s not an insane price point by Leica’s already expensive standards (for example, another limited edition M10-P from Leica has a similar premium); and, by the way, it’s not technically a Hodinkee premium — the limited edition can be bought through Leica’s non-Hodinkee channels as well.

Regardless, it’s funny to hear watch collectors shout and scream about an “expensive” modern camera that still has manual elements thereby allowing photographers to feel connected to the photography of generations past. All while wearing our hunks of stainless steel from the 1970s that have even less practical day-to-day use. The bigger story is Hodinkee’s continued leaning in on becoming a lifestyle brand akin to goop or Mr. Porter. Because the only thing that goes with that ghosted-bezel Sub is a “ghosted” camera, right?

Personally, I don’t begrudge anyone for disguising their consumerism as a “lifestyle”, but that might also be because another Hodinkee limited edition from this week caught my eye (and wallet).

Speaking of the good life…

In-depth on every $1 million Rolex ever sold at auction.

Ticks & Tocks

🤵 The watches of James Bond, and why they matter. 💀 RIP: The brands we lost in the 2010s. 💰 Time is money: How watches became financial assets. 🎬 Did you catch Ryan Reynolds wearing a Chopard in his new Netflix movie? 📈 Watches of Switzerland reported earnings for its first six months since going public: sales rose 17%, with especially strong 42% growth in the U.S. 🚶‍♂️Why Mike Posner Walked Across America (must read).

Thanks for reading!