The economics of high end audio gear

Myles usually has good data on these types of things. Hopefully he will weigh in here.


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Julot said:

So I'm looking to raise money to develop our operations. I find it hard to gather any information about the economics of "audiophile" gear (from Rega to dCS, basically):
1/ Macro: market estimates in various countries, type of targets, observable trends...
2/ Micro: success stories of manufacturers and dealers, sales and profit models, competitive edges...

Could anyone point me in the right direction? A source of existing research, retailers or manufacturers willing to share some insight?

Thanks in advance.

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What operations?

A very small French manufacturer called Icos (more in the introduction thread). From 1973 to 2006, "we" made mostly active amplification systems that made music lovers happy. For the last eight years, we've mostly made stereo components -- CD players, converters, amplifiers. The goal now is to resume making and selling active triphonic systems in a direct distribution model, starting with our immediate traditional market (France and Germany)

Julot...there is very little to no data for US companies because most high-end audio companies in the US are small privately-held businesses that do not release any information about their financial performance. The few companies that are public are housed in a small division in much larger publicly traded electronics conglomerates and so the financial information at the brand or product level is limited. Here I am thinking about Harman International which makes the bulk of its revenues from car audio sales but it also happens to own AKG headphones, Harmon Kardon, Lexicon, and Mark Levinson electronics as well as JBL, Infinity, and Revel speakers among other brands. But all these brands among others are aggregated under a small reporting division and so no easy way to disaggregate their numbers. No other high-end brands that I am aware of that are part of publicly traded companies that release financial information in the US. This has been one of the challenges of analyzing/studying this industry is the lack if data given that most companies are small, private and unwilling to share information. It's even more so when talking about the distribution end, where a high-end audio dealer typically has one shop and employs a few people at most and is getting increasingly disintermediated by internet sales. They certainly don't like to share any info about their economics. Your best source of info will likely be first hand from having conversations with a number of importers/dealers in the US to get a feel for required mark-ups that importers/dealers will need to represent your brand. You can have multiple conversations and look to triangulate what you're hearing from different importers/dealers and from there it's up to your negotiating skills to get the best deal for yourself. Hope this helps.

Julot said:

A very small French manufacturer called Icos (more in the introduction thread). From 1973 to 2006, "we" made mostly active amplification systems that made music lovers happy. For the last eight years, we've mostly made stereo components -- CD players, converters, amplifiers. The goal now is to resume making and selling active triphonic systems in a direct distribution model, starting with our immediate traditional market (France and Germany)

Click to expand...

Hello Julot,

Do you have a website?
What is a triphonic system?
What do mean by "direct distribution"?

Cultivate good dealers in your own market first. Good dealers are usually run by good people and vice-versa. The most important factor in choosing dealers and distributors is "enthusiasm". This comes from a love of the hobby and an appreciation for what you as a company have to offer.

You don't necessarily want (or need) every dealer. You want the right dealer. Take your time. It is easy to hire and difficult to fire.

Don't make decisions based upon short term sales or profit but rather on long term development of your products, relationships and customer base.

Go to shows and develop relationships with other manufacturers. You will find that many are willing to help you.

If you see Grant or me at a show, come and talk to us.


Caelin Gabriel
President
Shunyata Research

@cmalak: thanks. It helps, as it confirms what I've been observing so far and what my information gathering strategy has been, eg in joining this forum

@cgabriel, thanks. We have a website (ICOS Bienvenue and also ICOS Vertrieb Deutschland - High End Systeme - Verstärker und CD-Player für höchste Ansprüche an Qualität und Design) but it requires some serious overhaul as you'll see.

By triphonic I just mean there's a subwoofer and two speakers -- total five drivers, two of which used to be JBL LE-8. The current model looks like this (we'll be launching a new one in the spring):


By direct distribution I meant direct sales, not going through dealers here in France. It's a less expensive model based on private and public events until we can afford a permanent showroom. It also lets us reach clients that are harder to reach through dealers who only cater to a limited number of potential clients.

We are going to Munich in May. Will you be there?

Yes, come see us.


Caelin Gabriel
President
Shunyata Research