Event Horizon 2020 - the year everything changes?
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  1. #1
    Member docvail's Avatar
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    Event Horizon 2020 - the year everything changes?

    I had to look up the meaning of "event horizon".

    Apparently it specifically refers to the theoretical boundary around a black hole, which acts as a barrier to light, but generally has come to mean any "point of no return".

    Personally, I don't like that definition.

    "Horizon" typically refers to the distant point at the end of our field of vision, where earth and sky meet, which is as far as we can see, literally, but metaphorically, it's also come to mean the limit of our perception.

    I like the idea of an "event horizon" representing our inability to see beyond a specific event's occurrence sometime in the future - the event being so monumental, consequential, and unprecedented that we don't really know what comes after.

    As in, what happens after 2020, when ETA will be allowed to stop selling movements to third parties?

    Whether or not that will actually happen is itself a subject worthy of much debate and speculation, especially in light of the industry's health (or lack of it) in recent years.

    In my view, I think it's better to consider 2020 as a future point in time when we're likely to see SOMETHING impact the industry. It could be ETA cutting off sales to 3rd parties, or, it could be ETA *NOT* cutting off supply.

    But it seems to me that most people who consider ETA's actions are really only handicapping the possibility that they WILL cut off supply, as they've been saying they want to do, and what happens after.

    However, I think it's equally important to consider what happens if they do NOT cut off supply.

    Why?

    Blame it on my true passion - poker.

    Poker is a game of incomplete information, involving intentional deceit on the part of the players. In order to be a successful poker player, one must be able to analyze opponents' actions in context, and decipher their true intentions. The best players are those who can effectively combine mathematics, game theory, psychology, imagination, and improvisation.

    When I heard that ETA wanted to cut off supply of movements to third parties, the first thing I wondered was WHY?

    I understood that ETA's parent company, Swatch Group, gave an explanation, and that many people were repeating it, but I didn't buy it, and still don't.

    https://www.nytimes.com/2011/12/10/b...to-rivals.html

    From the NY Times article, the often repeated explanation:

    "The company insists that its goal is not to strangle competitors. And it argues that its withdrawal will require rivals to raise their spending on manufacturing, thereby strengthening the quality and competitiveness of the Swiss watch sector as a whole.

    'In no other industry do you have one company supply all the critical parts to the people who then compete directly with it,' Nick Hayek, Swatch’s chief executive, said in an interview this year. Swatch said it had no further comment on the issue."

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    Uhm, pull the other one, Swatch Group.

    Never in the history of industry has any company willingly given up an effective monopoly, of its own accord, and with no outside prompting, in order to benefit their industry as a whole, with nothing but the most magnanimous intentions.

    I can think of a lot better reasons for these actions - in context - reasons which would better explain WHY Swatch Group would want to cut off supply - or make people *think* they wanted to cut off supply, perhaps more likely.

    When I'm faced with a difficult decision at the poker table, I try to consider all the reasons why my opponent might be doing one thing versus another, then consider which reasons would be the most devastating, and diabolical.

    My opponents are trying to do as much damage to me as they can, after all, so I tend to put the greatest weight on those reasons which would support those outcomes which would be most profitable for them, and least profitable or most devastating for me.

    Why would ETA want to cut off supply, if not to help the industry, as they say? Why would they willingly give up their effective monopoly? I can only think of a few explanations:


    1. They are truly interested in seeing their competitors grow stronger - unlikely to be true, no matter what they or anyone else says.
    2. They want to create artificial scarcity, which supports higher movement prices - sensible, but could potentially backfire if competitors actually do step up to fill the void.
    3. They think cutting off 3rd parties will cut down on competition for Swatch brands - very much like the above, it's sensible, but could backfire if competitors step up to fill the void.


    On the other hand, why would ETA want people to THINK they wanted to cut off supply, when in fact, they may NOT want to? I can think of some pretty diabolical reasons:


    1. They want to trick their competitors into revealing their own capabilities, capacities, and plans.
    2. They want to trick their competitors into over-investing in new production capacity, to fill the void, so that ETA can crush them by creating a glut of lower-cost movements on the market when it will do the most damage.
    3. They want to create opportunities to scoop up the assets of struggling competitors on the cheap, in the wake of the devastation their deceptiveness creates.


    ETA and Swatch Group fought hard - very hard - to get court and government approval to cut off supply to third parties. It certainly looks like they're serious, or at the very least, like they want people to believe they're serious.

    And, from what I can see, people have mostly believed they were serious - MECHANICAL - Who will succeed ETA?.

    A lot of people and companies are scrambling to figure out how to fill the void ETA will supposedly create when they stop selling their movements outside the Swatch Group. Millions of dollars have been invested - tens, maybe hundreds of millions of dollars - and are still being invested in the effort.

    Yet, for all that effort and investment, we're really not all that close to having enough good alternatives. In fact, we're pretty far away, really.

    Sellita was, and may still be struggling to be completely independent from ETA, and many in the industry do not consider Sellita's movements as equal in quality.

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    Neither Soprod nor Eterna has either the capacity or the pricing to meet market demand.

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    STP and Ronda have yet to prove themselves. Every other Swiss company is either way more expensive, or quite underwhelming, or some combination thereof.

    I'm not aware of any "truly" Swiss movement supplier with a ready supply of movements which can effectively be compared to the ETA 2824-2 in a performance-for-the-price sort of way, and many Swiss suppliers would still be dependent on Nivarox, also a Swatch Group subsidiary, one with an even bigger monopoly than ETA, for balance springs.

    Swatch Group is metaphorically, if not literally, holding all the cards.

    And what is the result of all that effort and investment on the part of all these people and companies?

    Wait for it, because this is my favorite part of this story, the part where I figure out what my opponent at the poker table is REALLY doing...

    https://www.reuters.com/article/us-s...-idUSKCN0Z61FZ.



    BUSINESS NEWS
    JUNE 20, 2016
    Swatch backpaddles on phasing out watch movement deliveries

    ZURICH (Reuters) - Swatch Group SA (UHR.S) said on Monday Swiss competition authority Weko was examining if the world’s biggest watchmaker could supply MORE [-emphasis mine-] mechanical movements to its customers than was set out in a 2013 agreement on phasing out deliveries...

    Rivals built up production capacity after Swatch got the green light to phase out deliveries, a development that together with weak global demand for luxury watches led to an oversupply of movements.

    “Weko is currently examining if a certain liberalization of the mutual agreement is possible given the structural change that has taken place in the area of mechanical movements,” Swatch Group said in reply to an inquiry from Reuters.

    Swatch said liberalizing movement delivery rules would let it better meet the needs of ETA’s third-party customers. Weko confirmed a review was under way.

    “I think it is to do with the lower production the industry is going through and Swatch Group probably wanting to improve its capacity utilization by supplying more movements to third parties,” Kepler Cheuvreux analyst Jon Cox said: “If business was more brisk and there were more demand for watches overall I doubt it would be looking to do that.”

    Watch movement makers told Reuters at an industry event in Geneva last week that weak demand had led to a glut of mechanical movements and that Swatch had signaled readiness to again deliver more movements to the industry.

    “Yes, there is overcapacity in mechanical movements. You find copies of ETA movements everywhere,” Laurent Besse, head of watch movement maker Soprod, had said.

    Sebastien Gigon, of small movement maker Technotime, said if ETA with its pricing power was again supplying more movements this would pose problems to rivals who built up production on the assumption ETA would stop deliveries by 2019.

    “I’m thinking of Sellita, but also Soprod and people like ourselves who took big risks to develop our own movements to fill the gap that Swatch was going to leave,” he said.

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    Sellita, which is privately owned and the only competitor able to offer watch movements at comparable prices to ETA, last week declined to comment or provide any details on its business.

    Several movement makers, including Vaucher Manufacture and Dubois-Depraz, said they had already cut jobs or could do so soon due to the difficult economic situation.

    Swiss watch exports dropped 9.5 percent during the first four months of the year, reflecting dwindling sales and high stock levels in No.1 market Hong Kong.


    Oh. muh. gawd.

    Swatch group now wants to start supplying MORE movements? And that's going to suck for their competitors? Because they took big risks to fill the void ETA was supposed to leave in their wake?

    Who could have seen this coming???

    Uhm, only every decent poker player on the planet.

    So...does this mean that there's no reason to be concerned about what happens after 2020?

    No, not at all. In fact, quite the opposite. We need to be very concerned, I think.

    If you think the industry is in bad shape now, wait until ETA gobbles up or stamps out most of their Swiss competitors, all of whom are likely on shaky legs today, and could have their legs cut out from under them within the next two years.

    The Japanese? I love Japanese movements. I'm a huge fan. But when the price of Oil goes up, so does the price of Natural Gas. So to do Japanese movement prices go up when Swiss movement prices go up, and, when that happens, it's often the case that quality goes DOWN, from what I've seen, and had confirmed by others.

    More competition is good for the market, it forces manufacturers to deliver quality products at fair prices. When there are only a handful of suppliers for a key component, the suppliers don't feel nearly as much pressure to perform.

    The Chinese? Mehhhh...we have a big disconnect between our expectations and their capabilities. I wouldn't hold out hope for a Chinese Connection to save the day.

    So...what's on the other side of this particular Event Horizon?

    If I had to guess, I'd say fewer Swiss movement manufacturers, not more. Or, if there are more, or merely "enough", they may be "Swiss" in name only, and not really a threat to ETA in any way. I think that could mean higher movement prices for both Swiss and Japanese movements, and probably Chinese movements as well, without any increase in quality.

    If movement prices go up, watch prices go up, generally. But, it could actually be worse than that.

    If Swatch can put most of their toughest movement competitors out of business, then they COULD effectively cut off supply to 3rd parties, and there wouldn't be many, if any good alternatives. Imagine if the only brands with access to ETA movements were Swatch-owned brands, which had artificially lower movement costs, by virtue of being Swatch-owned.

    Imagine if Hamilton, Tissot, Certina, Mido et al were priced 20%-30% below all comparable competitors. Imagine what that would do to all brands not owned by Swatch. Imagine a Steinhart without any Sellita, for example.

    You see why I think ETA never really planned to cut supply, at least not without ruining their competitors first, and certainly not because they wanted to "help" strengthen the industry, right? This isn't an effort to prevent a monopoly. I see it as a potential effort to ensure the survival of one.

    Read that 2011 quote from Nick Hayek again: “'In no other industry do you have one company supply all the critical parts to the people who then compete directly with it,' Nick Hayek, Swatch’s chief executive, said in an interview this year. Swatch said it had no further comment on the issue."

    Kinda puts a comment like that into a different context, when you consider everything that's happened since, no?

    Nick's right. You don't see that in any other industry, and before long, you may not see it any more in the watch industry.

    Well played, Nick.

    Well. Played.

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    Last edited by docvail; July 19th, 2018 at 07:12.
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  2. #2
    Member elconquistador's Avatar
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    Re: Event Horizon 2020 - the year everything changes?

    I agree with much of what you have said, but I have to admit your getting in the head of your opponent reminded me of this.

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  3. #3
    Member mythless's Avatar
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    Indeed, well played. I could be curious to see the survival rates and birth rates of micros in 2020 when (if) this monopoly occurs.
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  5. #4
    Member docvail's Avatar
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    Re: Event Horizon 2020 - the year everything changes?

    Quote Originally Posted by elconquistador View Post
    I agree with much of what you have said, but I have to admit your getting in the head of your opponent reminded me of this.

    Sent from my Moto Z (2) using Tapatalk
    Recently I've been watching ESPN's coverage of this year's World Series of Poker, after ignoring it the last few years. It sort of sucked me back into thinking about poker, after not playing much recently, not nearly as much as I used to.

    The commentators paid particular attention to a UK player who was eliminated early this year, but who apparently made a deep run and big impression in the 2016 main event, William Kassouf.

    It seems he created quite a stir, alienated many other players, and earned himself more than one official rebuke from tournament organizers, for his incessant table talk, what Brits apparently call "speech play".



    I was intrigued. I found some videos of key hands he was involved in, then found analysis by an expert on Poker tells, who did a thorough breakdown of Kassouf's various verbal tells within the context of those key hands.

    It would be fascinating to me anyway, but it's particularly fascinating because it was so extreme, and reminded me so much of this Swatch Group situation, which never seemed to make any sense at all (at least not to me) the way most people described it, and only made sense (at least to me) the way I was looking at it.

    Kassouf's verbal assault on his opponents was relentless, and at first blush, didn't seem to provide any obvious clues about the strength of his own hands. The wide-spread consensus among people watching in real time seemed to be that his speech play was very successful in getting his opponents to do what HE wanted them to do.

    The thinking was that he essentially was so offensive and annoying that he was able to get opponents to lose focus, give away information, or be goaded into making bad calls when they were way behind in the hand, when he was stronger than they believed.

    And yet, a skilled expert in verbal tells was able to make a convincing case that he actually gave away more information than he gained from his opponents, and laid out a set of guidelines any reasonably observant and disciplined player could use to not simply nullify the tactics employed by an opponent like Kassouf, but actually capitalize on them.

    The conclusions the expert drew were exactly what you'd expect them to be - signs of strength were actually signs of weakness, signs of weakness actually indicated strength, taunting was intended to provoke an ill-advised confrontation when he had a strong hand, whereas a conciliatory tone was intended to avoid confrontation when he was weak.

    The key wasn't understanding what the signs mean, it's recognizing the signs when you see or hear them. Once you know what to look for, the signs become unmistakable.

    Like I said, the best poker players are those who effectively combine both the analytical/computational, and behavioral skill sets, but most tend to be more left-brain or right-brain in their approach. I'm so-so when it comes to poker math, but I'm like freakin' Kreskin when it comes to reading opponents for tells. Chalk it up to a lifetime observing people and trying to figure out what they're up to.
    Last edited by docvail; July 19th, 2018 at 07:16.
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    Re: Event Horizon 2020 - the year everything changes?

    Seiko are going sell a whole lotta NH15s
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    Re: Event Horizon 2020 - the year everything changes?

    Does make me wonder if Swatch will get so huge that they will start buying up some of the Japanese brands.
    I know people were complaining about Invicta owning Glycine, but I think Swatch owning Citizen would be another thing.
    Regardless as a consumer all I can do is sit, speculate, and post the occasional watch pic.
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  8. #7
    Member docvail's Avatar
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    Re: Event Horizon 2020 - the year everything changes?

    Quote Originally Posted by ConfusedOne View Post
    Does make me wonder if Swatch will get so huge that they will start buying up some of the Japanese brands.
    I know people were complaining about Invicta owning Glycine, but I think Swatch owning Citizen would be another thing.
    Regardless as a consumer all I can do is sit, speculate, and post the occasional watch pic.
    I doubt Swatch would be able to buy Citizen, as Citizen is a huge, publicly traded company, like Seiko. Yes, sometimes public companies merge or get acquired, but I think that would be a difficult transaction to initiate and complete. The two companies are pretty comparable in size, yet likely radically different in culture and operations.

    But I do think we'll continue to see consolidation in the industry, with big companies rolling up smaller competitors and struggling brands.

    Candidly, it's scary, at least for me. It's not good for a small number of huge, vertically-integrated companies to be the main suppliers of an entire industry's core component.

    Notice that most non-movement components are being manufactured in China right now. No big deal, to anyone, so long as we can get movements made in Japan or Switzerland. The Swiss and the Japanese aren't concerned about Chinese-made cases. A case can be made anywhere, but without the movement, it's just a case.

    I was happy to see Fossil-owned STP and Ronda enter the entry-level mechanical movement game, but so far, they have yet to get and keep their $hlt together, based on what I've seen and heard.

    Without viable alternatives to entry-level movements from ETA, you're left with more expensive Swiss movements from the likes of Soprod or Eterna, steadily-getting-more-expensive Japanese movements, and crap-shoot Chinese movements.

    It should concern customers, too. Retail prices currently reflect weakness in demand and over-supply. That situation could dramatically change over the next few years, especially if Swatch is able to consolidate Swiss manufacturing.
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    Re: Event Horizon 2020 - the year everything changes?

    Quote Originally Posted by docvail View Post
    I doubt Swatch would be able to buy Citizen, as Citizen is a huge, publicly traded company, like Seiko. Yes, sometimes public companies merge or get acquired, but I think that would be a difficult transaction to initiate and complete. The two companies are pretty comparable in size, yet likely radically different in culture and operations.

    But I do think we'll continue to see consolidation in the industry, with big companies rolling up smaller competitors and struggling brands.

    Candidly, it's scary, at least for me. It's not good for a small number of huge, vertically-integrated companies to be the main suppliers of an entire industry's core component.

    Notice that most non-movement components are being manufactured in China right now. No big deal, to anyone, so long as we can get movements made in Japan or Switzerland. The Swiss and the Japanese aren't concerned about Chinese-made cases. A case can be made anywhere, but without the movement, it's just a case.

    I was happy to see Fossil-owned STP and Ronda enter the entry-level mechanical movement game, but so far, they have yet to get and keep their $hlt together, based on what I've seen and heard.

    Without viable alternatives to entry-level movements from ETA, you're left with more expensive Swiss movements from the likes of Soprod or Eterna, steadily-getting-more-expensive Japanese movements, and crap-shoot Chinese movements.

    It should concern customers, too. Retail prices currently reflect weakness in demand and over-supply. That situation could dramatically change over the next few years, especially if Swatch is able to consolidate Swiss manufacturing.
    So you're saying I should definitely jump on this next batch of subs in the fall? I am planning to anyways, but am looking forward to seeing what's coming.

    I do see this as a chance for someone like Miyota to step up a notch and charge more for their movements as they have established themselves as quality and definitely the biggest bang for the buck. If all goes as ETA plans, they could easily add quite a few more bucks to their bang and still be competitive.

    I appreciate this insight, as I wouldn't have thought about any of this and find the whole thing very interesting, especially the poker comparison. Spot on.

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    Re: Event Horizon 2020 - the year everything changes?

    Quote Originally Posted by Amadean View Post
    Seiko are going sell a whole lotta NH15s
    And charge twice as much for them.

    That's not a pleasant thought.
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  11. #10
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    Re: Event Horizon 2020 - the year everything changes?

    Hmm. So, this is sort-of good news for seiko and citizen/miyota, as their movements will become even more in demand.*

    Interesting to hear that both sellita and STP aren't doing so well. I can understand Soprod - few watches seem to use those movements. And Ronda's mechanical wonder still hasn't materialized (maybe they figured something out and cancelled that particular avenue?). But Sellitas are used in a bunch of swiss "macro" brands (oris, CW et al), and STP seems to find usage in several micros every now and then, as well as in Zodiacs.

    I had the impression, at least from the usage-numbers, that at least Sellita was on firmer ground (even if there is debate on whether they can match eta quality).

    *- three things about their (Japanese) watch movement making I don't fully get.
    1: Why is Orient making their own, *exclusive!* low-end movements when they have connection to Seiko?
    2: Why isn't Casio spinning up a movement manufacture?
    3: Why isn't Citizen (and/or seiko) making some of their solar movements available? They'd have instant monopoly on the whole area and likely cut out Ronda/ETA quartz sales quite a lot.
    NTH Santa Cruz

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