The Hub: Just how bad is it in high end audio?


A warning: those seeking heart-warming anecdotes and mindless cheer to accompany their morning coffee should perhaps save this piece for later in the day. Following our last Hub entry concerning the closing of high end audio's best-known dealer, Sound by Singer, we will take a look at the big picture in the audio industry... and it ain't pretty. Think bartender, not barista.

In past entries of The Hub, we've discussed the origins of the audio industry, some of its giants, and the glory days of the '50's through the '80's. Sad to say, these days are not those days.

Why is that? In addition to the societal factors that have diminished the importance of hi-fi, general economic trends have taken their toll on the high end.

Consider: Since the crash of the sub-prime mortgage market in 2007, 1 in 50 homes in America has gone into foreclosure. Blue chip companies like GM and Chrysler have gone into bankruptcy. Reports of major corporations slashing tens of thousands of jobs have become almost commonplace. Car sales are down to record low levels. Housing sales are almost nonexistent in many major markets. Is it any surprise that sales of big-ticket items like high end audio components are also way down?

The question is not IF sales of new audio gear are down, but HOW MUCH they're down. Oddly enough, coming up with an accurate assessment of the damage to the high end audio marketplace is surprisingly difficult.

At $175 billion/year, the consumer electronics industry constitutes one of the largest and most robust sectors of the economy, as seen in this Consumer Electronics Association press release. However, the CEA also reports that sales of component audio have dropped from $1.3 billion/year in the US five years ago to about $0.9 billion/year today. So: in the US, the audio industry makes up a mere one-half of one percent of the $175 billion consumer electronics marketplace. What the average audiophile would consider high end makes up a fraction of that fraction.

In addition to being just a small crumb from the crust of the consumer electronics pie, the scale of the high end is difficult to ascertain due to the nature of the companies in the industry. Quite a few high end manufacturers with a worldwide reputation and presence have fewer than a dozen employees. Some are larger than that, but many more are even smaller, 2- or 3-man operations. Nearly all audio manufacturers are privately held, and thus are not required to report their sales or staffing. Nearly all are small enough to escape the attention of the Bureau of Labor Statistics or the Bureau of the Census, which compile most of the data regarding American manufacturers.

What about audio retailers? As is true of manufacturers, most dealerships are small and privately owned. Knowing that Best Buy has an astonishing 180,000 employees and exceeds $49 billion in sales tells us less than nothing about Bob's Hi-Fi in Winnibigosh. There's almost no hard data available on independent audio dealers, but few say that they're doing well.

As we become inured to reports of disasters in the economy, individual happenings tend to be forgotten. To refresh our memories, here are some key events in the reshaping of the consumer electronics marketplace. Not all these companies were directly involved in audio, much less high end audio, but are still relevant to our discussion:

January, 2009:
Circuit City closes its remaining 567 stores. 34,000 employees lose their jobs.

January, 2009:
Bose lays off 1,000 employees, about 10% of its workforce.

April, 2009:
Ritz Camera closes 300 stores.

February, 2010:
55-year-old D.C.-area A/V chain MyerEmco closes all seven of its stores.

April, 2010:
D & M Holdings shuts down its Snell and Escient brands.

May, 2010:
Movie Gallery closes 1,906 Movie Gallery, Hollywood Video and Game Crazy stores. Over 19,000 jobs are lost.

June, 2010:
Ken Crane's, a 62-year-old California A/V chain, closes the six stores remaining of what had been a ten store chain. 75 workers lose jobs.

Clearly, times are tough. The best available data indicates sales in the audio industry have fallen off by at least one-third, over the past few years. Many working in the business feel the drop has been far greater than that. One manufacturer puts it very plainly: "a lot of the dealers and manufacturers are zombies. They're dead; they just don't know it yet."

A dealer with decades of experience puts it even more brutally: "The best we can hope for is death, for a lot of the manufacturers and dealers. Maybe then we could get some sensible people who don't hide their heads in the sand."

Our next entry of The Hub will review some of the changes audio dealers and manufacturers are making in order to survive in today's challenging marketplace. We will also talk with folks in the industry who see signs of a turnaround, and are working to bring in a new generation of audiophiles. The question we leave with this time is: "What do we do now?"
audiogon_bill
"09-09-10: Papermill
Folks,
I remain convinced, that if a person is given a choice, the will gravitate to quality, high end sound."

I disagree. IMO, most people will gravitate to brands they know, ease of use, flashy bells and whistles every time. Sound is not at the top of the list. The choice for most consumers is between pretty good sound (big box stores) and really good sound (Hi end B&M). It's just not worth the effort to them.
Apple killed high-end audio.

Back in the 80's when I went off to college, every kid had or wanted a stereo. In our dorms we were introduced to the various brands. Some of your buddies might have had some exotic gear. I'll never forget helping one guy move his Klipsch speakers. They weighed probably 150 pouns each.

Fast forward 3o years. My 17-year-old who'll be leaving for college next year listens to just about everything on an iPod. I've invited him to check out his music on a real system and he's not interested.

It's not any kind of father-son rift, he just doesn't care. His buddies are all the same way.
Well, the tough times now may be a memory in 5-8 years. I wouldn't call the demise of high-end audio quite yet. There is SO MUCH 10-30K amplifiers and speakers out there now, it's really a prestige arms race as much as it's about sound. Adjusted to inflation, top gear is far more expensive than ever before. If companies slightly lower their standards, and shave off 15-25% of the price of these premium products, they and the dealers may be able to hold on until a recovery emerges.
Respect the past but embrace today. I often read posts on audio sites like Audiogon and think to myself, "How old are these people? My gosh, they think and talk like no one my age and I'm not exactly young." Ya'll need to start thinking in a "Beats By Dr. Dre" mentality (metaphorically speaking).
@Geneoshea: How did Apple "kill high-end audio"? Please explain?

@Mrtennis & Sebrof: There are people who want quality, but they also want simplicity. Audiophiles don't make things simple. That's not a bad thing, but it's not want most people want.