Too many new manufacturers/products?

[Adrian Low]

Had an interesting conversation with some clients. When I first got into the high end industry (1986 or so), there was a handful of manufacturers in each category and there were clear leaders at most price points. Anyone remember the B&K ST140 amp for about $550?!! Great amp for the price. The big amps were from Threshold, Krell, Levinson and a few others. It seems like every month there's a new manufacturer (6Moons is great for reading about them).

As a dealer and confirmed addict, I read as many articles and reviews as I can, and I literally get a headache sometimes. Is there really a market for all these new products, not to mention the "old guard"? Lots of posts about the demise of stores in North America. Friends in China tell me the market is much worse this year compared to last. Where are all these products going? Taste can only account for so much; after all, we don't all buy different things. And note that many of the new manufacturers make decent products that look pretty well finished. That means significant capital investment. Is that why the prices of many of these pieces are so high?

Just some thoughts that rattle around in my noggin...

 

[Yamaki]

Well, in my simple view, we are seeing an evolution of products in quite a few markets and my thoughts are:

1. Innovation - in 1986 very few people were streaming media so that's a new market.

2. Digital music - Very few people knew what a DAC was, let alone have a stand alone DAC in their system. Digital media was, for all intents and purposes, a CD. I know it seems like it has been around forever but the iPod was introduced in 2001.

3. Specialization and diversification - The supplier base continues to evolve. At first, the brand names that made it started with specialization (they were good at one or two things), then many firms became vertically integrated (McIntosh being one example offering a full line of components). Now, it's reversing a bit. Today's consumer market is all about specialization. More areas of competition result and more companies jumping into the commercial fray. With respects to diversification, I think we are seeing a bit of a contraction in the market. Fewer firms are offering a full line and have retreated to their core business or core products they started out with. They expanded their offerings in the 80's and 90's because they had that toehold and brand recognition. With specialization becoming prevalent and more firms "jumping into the commercial fray", the retreat was on.

4. Fickle consumers - Yes, we are fickle. Many jump on the latest and greatest as a matter of habit and purchasing preferences. Some of us stick with who and what we know but are willing to expand into new products or new technologies once they are proven. Consider the huge expansion in a few short years of automobiles, iContraptions, consumer goods in general, yadda yadda yadda... This evolution and expansion of consumer choices has impacted many producers in many markets and will continue to do so. Remember, everyone is looking to invent the perfect mousetrap and become rich as a result.

5. Boredom factor - If nothing ever changed and there was only one model of TT or car or jacket or house....it would get damn boring.

Just my .02 on the subject...

 

[Mike]

Adrian - the splitting of the pie into smaller and smaller pieces isn't helping the industry as a whole. It also seems that new companies THINK they need to charge exorbitant amounts to get attention, passing, by many multiples, the old guard.

Add to this the shrinking world where products from all over globe are now the norm in showrooms and shows and you have an ever decreasing pie. In addition, consumers today have more to think about when putting together a system than they did 20-30 years ago, including cables, multiple sources, isolation, power, etc.

It is no surprise that some people feel the way they do. Heck, I remember my Father toting me around to shows and it seemed there was only CJ, McIntosh, Klipsch on one end, Sony, Marantz and Pioneer on the other and maybe a handful of others. Going to the shows today is mind boggling to see all the new companies, flavor of the month DAC or exotic table.

 

[the professor]

I think that we are so very lucky to have so many great manufacturers these days.

I love it! I do agree, having so many does give me a headache sometimes.

 

[Adrian Low]

Well, in my simple view, we are seeing an evolution of products in quite a few markets and my thoughts are:

1. Innovation - in 1986 very few people were streaming media so that's a new market.

2. Digital music - Very few people knew what a DAC was, let alone have a stand alone DAC in their system. Digital media was, for all intents and purposes, a CD. I know it seems like it has been around forever but the iPod was introduced in 2001.

3. Specialization and diversification - The supplier base continues to evolve. At first, the brand names that made it started with specialization (they were good at one or two things), then many firms became vertically integrated (McIntosh being one example offering a full line of components). Now, it's reversing a bit. Today's consumer market is all about specialization. More areas of competition result and more companies jumping into the commercial fray. With respects to diversification, I think we are seeing a bit of a contraction in the market. Fewer firms are offering a full line and have retreated to their core business or core products they started out with. They expanded their offerings in the 80's and 90's because they had that toehold and brand recognition. With specialization becoming prevalent and more firms "jumping into the commercial fray", the retreat was on.

4. Fickle consumers - Yes, we are fickle. Many jump on the latest and greatest as a matter of habit and purchasing preferences. Some of us stick with who and what we know but are willing to expand into new products or new technologies once they are proven. Consider the huge expansion in a few short years of automobiles, iContraptions, consumer goods in general, yadda yadda yadda... This evolution and expansion of consumer choices has impacted many producers in many markets and will continue to do so. Remember, everyone is looking to invent the perfect mousetrap and become rich as a result.

5. Boredom factor - If nothing ever changed and there was only one model of TT or car or jacket or house....it would get damn boring.

Just my .02 on the subject...

Excellent perspective. I especially like your thoughts on specialization and diversification (or "diworsification " apparently attributed to Warren Buffett).

 

[Adrian Low]

Adrian - the splitting of the pie into smaller and smaller pieces isn't helping the industry as a whole. It also seems that new companies THINK they need to charge exorbitant amounts to get attention, passing, by many multiples, the old guard.

Add to this the shrinking world where products from all over globe are now the norm in showrooms and shows and you have an ever decreasing pie. In addition, consumers today have more to think about when putting together a system than they did 20-30 years ago, including cables, multiple sources, isolation, power, etc.

It is no surprise that some people feel the way they do. Heck, I remember my Father toting me around to shows and it seemed there was only CJ, McIntosh, Klipsch on one end, Sony, Marantz and Pioneer on the other and maybe a handful of others. Going to the shows today is mind boggling to see all the new companies, flavor of the month DAC or exotic table.

So true. Just received 2 emails today from Italy and China soliciting dealers. Both unknown brands, both appealing to the high end consumer. Shrinking world is right.

You mean your father was an audiophile! Dang! no wonder you have it bad. Mine too. He had Marantz and McIntosh, JBL, Akai, Thorens etc...but he was a music lover first. He loved classical music, and vocals like Nana Mouskouri, Venna Boys Choir and the 1000 strings of Mantovani

 

[Adrian Low]

I think that we are so very lucky to have so many great manufacturers these days.

I love it! I do agree, having so many does give me a headache sometimes.

I'm grateful and excited to see the choices, but I also have to admit that in a lot of cases, I don't see enough differentiation. Sort of like a buffett with the same food haha!

 

[Design Audio Video]

What would the so called box swappers do if it were any different?

 

[Tomelex]

I think the internet more than anything else has opened the world up, and allows for more niches, within niches, if you know what I mean. You ought to be able to get just about exactly what you want nowadays....the only issue is if the quality is there and or the value for money.

 

[CPP]

I think with 'Too many new manufacturers/products' , consumers have to decide if they trust these manufactuers to stand behind their products which means warranty service even if a consumer lives abroad , updates to meet customer complaints and the timely introduction of design changes to meet market demands and newly introduced software or design components.

 

[still-one]

I think that we are so very lucky to have so many great manufacturers these days.

I love it! I do agree, having so many does give me a headache sometimes.

I disagree with you. I skipped RMAF this year but thinking back to 2013 I remember walking from room to room seeing all of these relatively new manufacturers with entry point MSRP's that stunned me. I think they have huge B..ls asking the consumer to pay these prices for someone who has; 1) no track record 2) a non existent distribution network 3) no service history and unknown parts supply ..............

As others have noted the pie for hight end audio is pretty fixed. As more players enter each manufacturer has fewer and fewer units to amortize their fixed costs over. There are very few even partially integrated companies so the orders to the supply base are smaller driving their costs up as they scramble to fill orders and retool after short runs so variable costs are rising too.

 

[FlexibleAudio]

It's arbitrage of the Type-A hunting instinct. Human traits that determine financial success in many cases are related to an unrelenting drive to perfection. This leaves a small population of hunters with adequate resources to chase the perfect outcome. Mix these hunters with a quarry that in the case of audio is measured subjectively through personal taste and other's opinions (reviews) and you have the ultimate profit opportunity for clever entrepreneurs.

Markets saturate when excessive financial returns are available to participants which in turn generates excess supply. Its certainly tempting for an entrepreneur to consider a market where: 1) wealthy buyers participate in order to satiate a primal instinctual drive; 2) success is measured by opinion; and 3) price and value are relegated to a secondary or even irrelevant buying criteria.

By no means am I saying all audiophiles are being arbitraged in this way but $100,000 amplifiers and $200,000 speakers that offer only the slightest gain in performance, cache and perfection to me are nothing more than the biggest mastodons in todays jungle. Some hunters will pay all most any price to bag the best they can. This creates some pretty high profit margins at the highest end of our industry. This brings in start-up suppliers who flaunt bigger and better pachyderms for the chase.

 

[briguy]

I argued this in another audio forum and was kinda browbeat by the "more-choice-is-always-good" crowd. My argument was that the industry would be better off with more consolidation. The thought being that fewer firms making more revenue could reinvest in R&D in order to bring about better products. It might also lead to better products at lower price points.

There were some good criticisms of this which I won't rehash here. I'm still of the opinion that some consolidation would be good for the industry.

 

[Myles B. Astor]

It's arbitrage of the Type-A hunting instinct. Human traits that determine financial success in many cases are related to an unrelenting drive to perfection. This leaves a small population of hunters with adequate resources to chase the perfect outcome. Mix these hunters with a quarry that in the case of audio is measured subjectively through personal taste and other's opinions (reviews) and you have the ultimate profit opportunity for clever entrepreneurs.

Markets saturate when excessive financial returns are available to participants which in turn generates excess supply. Its certainly tempting for an entrepreneur to consider a market where: 1) wealthy buyers participate in order to satiate a primal instinctual drive; 2) success is measured by opinion; and 3) price and value are relegated to a secondary or even irrelevant buying criteria.

By no means am I saying all audiophiles are being arbitraged in this way but $100,000 amplifiers and $200,000 speakers that offer only the slightest gain in performance, cache and perfection to me are nothing more than the biggest mastodons in todays jungle. Some hunters will pay all most any price to bag the best they can. This creates some pretty high profit margins at the highest end of our industry. This brings in start-up suppliers who flaunt bigger and better pachyderms for the chase.

....

 

[KeithR]

Adrian - the splitting of the pie into smaller and smaller pieces isn't helping the industry as a whole. It also seems that new companies THINK they need to charge exorbitant amounts to get attention, passing, by many multiples, the old guard.

+1

 

[Myles B. Astor]

+1

Well then it's the wrong business model. All these companies you're talking about? You see them at one or two shows never to be heard from again. Maybe one or two make it. So I just see this in large part as an overreaction.

 

[RichardAusten]

I would add that a lot of companies wind up under a conglomerate - B&W buys Classe and or Rotel or whatever. Some brands are high end lines of major companies like TAD and Audio Refinement was the entry level line put out by YBA.

Add the tremendous amount of re-badging going on of gear made by Chinese plants with company logos on the front then you start to see that you are not necessarily buying a machine that is much if any different that some other company's product in the next store.

If you look at the nuts and bolts of it many companies share the exact same parts and buy off the shelf parts from Transformer world and DAC chips by XYZ and put them in a box and put their own label on the front.

I have a Chinese amplifier from a Company called Line Magnetic - they began as a Western Electric restoration company restoring the great amps and speakers of the past and moved into manufacturing of other companies wares. The dealer in Hong Kong showed me an amp that looked very much like a $3,000 Italian tube amp but in black without any of the nice Italian looking paint and finish. Yup - it's the same amp made by LM for that Italian company. Except it was $600 not $3000. It was interesting to see Triode and Co valve amps being made by Line Magnetic. To be fair - at least they have handled this situation properly and there is no LM version of the Triode amp under another name for a lower/different price. But that's not always true.

I've grown to be a bit of parts guy - I like to know that I am not paying $5,000 for Philips $399 Laserdisc player like the folks who trusted reviews of Theta Data Universal players. Those kinds of things make me take long long looks at new up and comers with massive price tags. What exactly are they bringing to the table.

As a consumer I want to consider my resale value as well as my initial price tag. Buying the newbie company out of China is riskier than buying my Audio Note. 10 years later I can sell my OTO for more than I originally paid for it. If I buy a new or Chinese newbie company - in 10 years I might not get 1/4 the money. So whole the established amp (in the OTO) was perhaps deemed by some to be pricey compared to a Chinese amp that is 3/4 the money - after ten years the Chinese amp actually wound up costing significantly more money. But the OTO has been around 20 years and the price keeps going up. That helps the ole re-sale vale - Once a product is ever discontinued and replaced the old model's value drops like a stone.

And with higher priced gear I personally want an established product that has stood the test of time.

 

[Steve]

It's arbitrage of the Type-A hunting instinct. Human traits that determine financial success in many cases are related to an unrelenting drive to perfection. This leaves a small population of hunters with adequate resources to chase the perfect outcome. Mix these hunters with a quarry that in the case of audio is measured subjectively through personal taste and other's opinions (reviews) and you have the ultimate profit opportunity for clever entrepreneurs.

Markets saturate when excessive financial returns are available to participants which in turn generates excess supply. Its certainly tempting for an entrepreneur to consider a market where: 1) wealthy buyers participate in order to satiate a primal instinctual drive; 2) success is measured by opinion; and 3) price and value are relegated to a secondary or even irrelevant buying criteria.

By no means am I saying all audiophiles are being arbitraged in this way but $100,000 amplifiers and $200,000 speakers that offer only the slightest gain in performance, cache and perfection to me are nothing more than the biggest mastodons in todays jungle. Some hunters will pay all most any price to bag the best they can. This creates some pretty high profit margins at the highest end of our industry. This brings in start-up suppliers who flaunt bigger and better pachyderms for the chase.

:goodpost: