Where will High End Audio Land?

[UltraFast69]

It’s hard not to think about our future post Covid.

Restarting things where we left off IMO is doubtful, and I’m an optimist or at least thought I was.

Will a global market correction force some makers to reduce in size, lower prices, or even produce gear to sell?

Will the used market become loaded with surplus?

I hope everyone the best, but also know that hope is good for Sunday’s.

Thoughts?


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[Phil A]

I think you have made some great points - https://www.forbes.com/sites/stephan.../#ae39d346ef09

There definitely will be some hit to most, if not all, luxury markets. There probably won't be many types of businesses that get impacted to some degree. Some may go away, others may consolidate. One would think (at least in theory) that luxury goods that result in spending more quality time at home might not fare as bad as some other things (e.g. travel). Time will tell and lots will depend on getting the crises under control and a solution like a vaccine. I don't expect many things to be 100% as they were for quite a bit, but we'll see.

[Mike]

It’s hard not to think about our future post Covid.

Restarting things where we left off IMO is doubtful, and I’m an optimist or at least thought I was.

Will a global market correction force some makers to reduce in size, lower prices, or even produce gear to sell?

Will the used market become loaded with surplus?

I hope everyone the best, but also know that hope is good for Sunday’s.

Thoughts?


Sent from my iPhone using Tapatalk Pro

Good question. Have you had a chance to watch the latest Steve Gutenberg video with Kevin Deal? Kevin is exactly right. 100% bang on. These old codgers that keep saying high end is dead, couldn’t be more wrong. They keep dreaming of the “good old days.” Well, high end audio is alive and strong, but the model and the world in which it operates has changed.

High end audio is not dead, it’s thriving, just as Kevin says, except it’s changing. And that’s what people don’t understand. The model has changed. Some in the industry completely understand it. Some don’t.

For those of us that have been around high end audio in the 70’s (or even before that), do you remember getting talked down to and ignored by your local dealer? Do you remember getting treated like “maybe we will let you buy this piece”? Why was that? One word: Territories. Dealers “owned” a certain territory for a brand and only they could sell that brand to someone in that territory. So, what was their incentive to be nice to you? You wanted the latest whiz bang amp from that company? Tough luck, put up with their shitty attitude and buy it. You can only buy it from them.

When territories are removed, it comes down to RELATIONSHIPS. It comes down to consulting. It comes down to giving the best advise to the customer even if it means telling them not to buy something.

Some manufacturers figured this out a while back. Some, like Wilson, have changed with younger, more modern management at the helm. And some, have still not figured it out.

Let me give you an example. I have a customer visit me from New Jersey. He auditions all kinds of stuff because he loves my brands. I sell him a pair of speakers, an amp, a preamp, a turntable and cables. I would recommend the ARC REF 3 phono, but oh no, can’t sell ARC in NJ, there is a dealer there. So instead, I can sell him 20 other Phonostages and ARC loses out. It happens all the time. What some companies haven’t figured out is that they aren’t playing on a level playing field. If 50 of your closest competitors don’t have territories, but you do, you’re at a huge disadvantage.

And what about the Internet? Many companies see the internet as the root of all evil. But others have embraced it. In the past 8 weeks, which ones do you think did better? The ones that said you can only buy from your local store which was closed or the ones that allowed online sales at 3am? The internet is a GOOD thing. Why? Because it allows people to spontaneously buy things AND it eliminates the one thing all manufacturers hate: discounting. If everyone sells online at MAP, then it once again comes down to service. I have never sold so many HDMI cables as I have in the past 8 weeks. People would call me, ask about the Carbon HDMI Vs Diamond HDMI and then hang up and buy on my website. Easy peasy. They get order confirmation, tracking info, etc. all automated. Sales have been good the past 8 weeks for us.

So like I said, the industry is changing. Hell, I saw an ad the other day for a service that lets people buy a car through a vending machine! And we know people buy all sorts of things - including cars - online, every day.

Since I started, the industry HAS come a long long way. But there is still room to further progress.

High end audio is doing very well, but as Kevin says, it has changed and those that change with it, will survive - and that goes for manufacturers and dealers.

https://youtu.be/p3VfGFrOWeU


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[W9TR]

Luxury markets tend to rebound more quickly than others so I see a bright future for audio and video.

Mike’s points about territories and exclusive distribution are spot on. I will look for the right products and especially great service, irrespective of where they are physically located.

Take that a step further and you’ll see that the current distribution network has limited ‘value add’ so will be the next thing to go. Savvy companies will figure out how to service their customers across international borders. The ChiFi companies have already figured it out.

[Shadowfax]

For those of us that have been around high end audio in the 70’s (or even before that), do you remember getting talked down to and ignored by your local dealer?

Good post Mike.

For the line I quoted in my experience, it was because I was 18-20 and did not have cash falling out of my pockets. I would go to our local B&M, Soundex, on Saturday mornings to browse or to buy something. I had to wait for an hour or beg someone to help me. They were too busy selling $20K Oracle TTs to people, or having them trade in the $20K one for the $30K one the next week. So my couple hundred dollar purchase was barely worth their time to deal with me.

[puroagave]

Good question. Have you had a chance to watch the latest Steve Gutenberg video with Kevin Deal? Kevin is exactly right. 100% bang on. These old codgers that keep saying high end is dead, couldn’t be more wrong. They keep dreaming of the “good old days.” Well, high end audio is alive and strong, but the model and the world in which it operates has changed...

KD used the example of the kid that bought headphones worth more than his car, yada, yada. That was then, post covid 19 could the same kid do it again if he is one of the 30 million Americans filing for unemployment? In late '07 when housing market collapsed and the credit crunch happened, it took my business 18 mos to feel it. it didn't affect me until '09 when my income fell 70% below what I earned in '08. To the OP's point, the economy is more like a slow moving train it doesn't stop on a dime its takes a while for it to come to a halt. Something else Kevin said that got my ear, he has a PG on his lease. You don't ever agree to personal guaranty as a tenant unless you're a start-up, overly leveraged and/or your financials aren't strong.

enough of the chicken little talk I remain a pragmatist, its how I advise my own clients. That said, financial well-being is a state of mind. When your neighbor is laid off its a recession, but when you lose your job its a depression!

[the professor]

As with any downturn . . . Some businesses will thrive and some will die.

I really think that High End Audio will thrive.

As more people will not be going out to stadiums, movie theaters, plays, music venues etc. people will spend more money for things at home.

[the professor]

As with any downturn . . . Some businesses will thrive and some will die.

I really think that High End Audio will thrive.

As more people will not be going out to stadiums, movie theaters, plays, music venues etc. people will spend more money for things at home.

[Mr Peabody]

Interesting view Mike. Not many would travel so far to buy something, on the other handwhen spending 6 figures, what's a plane ticket. The 1% will always have the money to do things like that. So maybe a definition of "high end" needs to be set.

With that being said, I did business with a local store, I am loyal but I do require a certain amount of respect and service. One time I ordered a set of Dynaudio speakers, only $900.00, it was a long time and I never heard from the store, I wasn't going to call them every week, so I looked online found a store that sold them, gave the store a call and placed the order with them. I told them I have a dealer but I either buy from you or someone else, it won't be the local store. So they sold them to me. Sometime down the road the local store finally called to say they had the speakers, maybe they saw them laying around somewhere. I told them I didn't need them anymore.

Remembering that experience gives what Mike was saying about territory some merit. It will take dealers not under cutting each other though for that to work.

I hope the best for everyone but this is a unique situation and I don't think we can count on history for guidance.

[nicoff]

My take is that the strong companies will survive. But I don’t foresee them thriving by any means.
High end audio is not ‘essential’. There are many other more basic needs than spending tens of thousands of dollars on new equipment.
Looking at it from a demographics standpoint, older folks may become more cautious spending their money regardless of whether they are living on a fixed income or not. (My perception is that most audiophiles are older folks).
Younger folks may experience a job loss or slower growth in their career. Both will contribute to putting the brakes on non essential items.
I believe that if the economic uncertainly remains for another, say, six months, many high end firms (even if they have good products) will not make it.

[aKnyght]

waaaay too early to tell where things land... imo, this largely depends upon the size of the second wave in the fall or earlier.

at the extremes: if there is a repeat of the spanish flu experience then it is lights out. if there is no significant second wave, then the path forward / outcome will be determined by the economic damage already in progress -- which is not insignificant and not yet fully manifest.

it is important to note that those that lived during the great depression had much different spending habits than that of those born after. this frugality borne of living through hard economic times was lifelong.

the smart companies (and individuals) will use the time now to prepare for the possibility of significant second wave. These companies will be the survivors after this hoax ...errrr, i mean global pandemic passes.

[Mr Peabody]

I lived in a rural area many years ago, our neighbor was an elderly man and though it was just him and his wife they still put up food in canning and freezing. Way more than they would ever use. Just a throw back from the Depression. He used to clean out his freezer and give us a bunch of fruit and vegetables they didn't consume the past winter.

waaaay too early to tell where things land... imo, this largely depends upon the size of the second wave in the fall or earlier.

at the extremes: if there is a repeat of the spanish flu experience then it is lights out. if there is no significant second wave, then the path forward / outcome will be determined by the economic damage already in progress -- which is not insignificant and not yet fully manifest.

it is important to note that those that lived during the great depression had much different spending habits than that of those born after. this frugality borne of living through hard economic times was lifelong.

the smart companies (and individuals) will use the time now to prepare for the possibility of significant second wave. These companies will be the survivors after this hoax ...errrr, i mean global pandemic passes.

[Mr Peabody]

Would you say those who are owned by holding companies have an advantage over those who are independent?

[tube-vds]

Because the concert industry is dead, and will be for many, many more months/years - (which is the real disaster...), the High End industry might become new chances of bringing "the live event" in your room.

[UltraFast69]

Because the concert industry is dead, and will be for many, many more months/years - (which is the real disaster...), the High End industry might become new chances of bringing "the live event" in your room.

Interesting


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[Dizzie]

Would you say those who are owned by holding companies have an advantage over those who are independent?

Hard to say. Holding companies are bean counters. Independent companies have passion and determination and maybe are not smart enough to know when to give up.

[Mike]

Hard to say. Holding companies are bean counters. Independent companies have passion and determination and maybe are not smart enough to know when to give up.

Or double down.

[Dizzie]

Honey, I spent both of our stimulus checks and the refund from our cancelled European river cruise on a new gee-wiz-bang MKII.

"There are eight million stories in the naked city. This has been one of them."

Posted as something to think about. Many people will be hurt economically but others will be in great shape and possibly change where they spend their discretionary funds.

[Shadowfax]

Would you say those who are owned by holding companies have an advantage over those who are independent?

Unrelated to Audio, our company had a world wide All Hands Meeting yesterday to tell us about all the things they are taking away from us or asking us to voluntarily give up due to our friends in China. They also showed us what other Big Pharma companies are doing to/with their employees and we are in better shape. Because we are privately owned, they have $800 Million in Cash to play with and if we were a Public Company, we would be in the red while shareholders would be making out better inn the long run.

So that question can apply to almost any sector, not just audio.

It sure will be interesting to see where all this shakes out.