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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

Showing 9 responses by macrojack

macrojack
1,303 posts
 
The other shoe has already dropped. It will hit the floor soon.

We are a small band of delusional eccentrics and our numbers have been declining for at least 15 years. At this point the industry survives by selling new models to the same audience ad infinitum. However, finitum is on the horizon and the same old crop of patrons is aging, losing hearing, losing interest, bankrupting, changing focus and declaring that enough is enough.

Everything has its time and audio's time is passed. We can still enjoy what we have and, if interested, avail ourselves of the impending used equipment glut.
No use crying over spoiled milk. It was fun and it can continue to be fun. Just don't look for the good ole days to return. That's all over.
macrojack
1,303 posts
 
Marketing efforts are applied to enterprises that suggest a strong future with aggressive growth potential. No well-endowed corporation will view high end audio that way. As John our prophet said, "The dream is over".

There is a chauvinism on display here in the stubborn insistence that hope exists for the audio we knew to somehow rally and make the encore real. It can't. The encore is in your minds. You are rowing upstream. When I stated earlier that the high end was hanging on by its fingernails, I was referring to you diehards who refuse to acknowledge what you know in your hearts to be true. The string has played out. There is nothing left but the mourning. That's what Saint Ronnie said. "It's mourning in America". He set this up. He knew it was coming. Of course, he probably never was aware of anything as trivial as our hobby but he did set us off in the direction that finished us off. It's not too late to name a speaker after him.
macrojack
1,303 posts
 
High end audio is hanging on by its fingernails. Momentum and the tenacity of old coots is all that keeps it going at all. Many of our manufacturers will be following Richard Brown, Terry Cain and Jim Theil within the next decade and our consumer ranks will dwindle along a parallel with them.

I know this is bleak sounding and I'm sure I'll be accused of pessimism but ordinary life expectancy statistics bear me out. As much as we don't want to accept the fact, we aren't young anymore and we are not being replaced by the same ambition, opportunity and excitement that buoyed us through our heyday.

In the 1970s it was fashionable to own a stereo system and the typical middle class household went shopping and bought one. In the go-go 80s, under Reagan and the penny stock surge, high end audio came into being as a separate category. Yuppies arrived on the scene and Krell and BMW became symmetrical status symbols. This trend continued as those of us who really did enjoy the music acquired wealth and applied it to our hobby.

Nowadays, prices have soared due to the need of manufacturers to fish deeper in the same pool with every new model. And many customers have dropped out. We are putting our kids through college or fighting to keep our home or paying 2-3 times as much as we used to for health insurance, or have no health insurance with which to fend off the ravages of couch potato lifestyle. Many of us are broke or have chosen to distribute our shrinking disposable income differently or not at all. Eventually, you come to realize that there are things in your world that matter more than replacing that preamp you've had for 16 months just because something else has bought itself a better review.

It won't be long before most of us read the handwriting on the wall and stop pretending that the good times are coming back. They aren't.

High end audio is one of a few industries that hasn't been completely subsumed by corporate tsunami of the 21st century. Stay tuned.

As an aside that lends perspective to the times we live in, I'm watching the Fourmile Canyon fire in Colorado carefully. I lived there from 1986 to 1997 and my boys were born in our cabin there. Many of my former neighbors are still there and they have been evacuated. I've seen a few of them interviewed on television. They are shaken and they are anxious about whether or not their home is still standing. And they're worried about losing their photos and artifacts and heirlooms. Nobody seems too worried about their bicycles, stereo systems, big screens, RVs, etc. They are grateful that, while 170 homes have burned to the ground and 3500 people were forced to evacuate, there are no serious injuries, no fatalities and no one missing.

Maybe the biggest threat to the high end audio industry in 2010 is the re-ordering of our priorities.
macrojack
1,303 posts
 
Johnk - I see our market turning inward with an emphasis on recycled treasures as widow upon widow cycles big rigs back into circulation. The few of us who are still buying will mine that resource. Many will do nothing because they cannot reclaim the funds they have in their current holdings.

Much of the most vaunted gear will go off shore where better economic policies have protected their consumers. Starting in January, we are doomed. Tea, anyone?
macrojack
1,303 posts
 
I think all this started with the popular acceptance of home theater. It was at that point that the emphasis shifted from music to sound effects. Little thumpy subs and cacaphonic mixes steered us away from real music.
macrojack
1,303 posts
 
We're a cult, guys. We hold to obsolete ways. We insist that others would follow us if only they would take the time to listen. If they choose to ignore us, we forgive their pitiful ignorance and redouble our efforts to show them the light. We seem to be unaware that we are the ones who are oblivious.

Young people, maybe because we have provided them with no sense of security, are very mobile in their minds and lifestyles. You have thousands of dollars and hundreds of pounds in hardware. They have an I-Pod and ear buds. You have thousands of discs. They have a hard drive. You own a house. They will probably always rent. You had a career, often at one job. They expect to be traveling and hopping from one work opportunity to the next, always remaining somewhat mobile.

Times have changed and high end audio has not. Any adaptation that our hobby makes to the ways of the next generation, will necessitate moving away from what we hope to protect. Current trends are evolutionary, not the result of intelligent design. We are seeing the future and insisting it is a blip, an aberration, to be tolerated until the natural order is restored. Due to our jingoistic insistence that our remembered youth will rise again, we remain blind to the truth that the ship has sailed. What we cherish is the garage tinkerer aspect. Digital crapped on that a bit in the 1980s but we responded with aftermarket upgrades, modifications, and cosmetic redos. When that played out to some extent, we revived analog and began sponsoring garage tinkerer turntable makers. We ignored plainly superior designs from Japan because they came from large corporations which ran contrary to our tinkerer/inventor mythos. We elevated these guys to celebrity status and lionized those who were bold enough to lead the charge toward the Absolute Sound.

Now I hear us talking about large companies and mass marketing techniques as the way to reverse our decline. It won't work because it isn't in the spirit of the dream we continue to grasp tightly in our closed minds.

Naturally, there are those entrepreneurial individuals who want to keep it alive until they've wrung the last nickel out of it, but they are running out of ears. Too many of us are folding our cards and standing pat. What we have, after all, is the stuff of dreams. Let's just live out our last however many years and enjoy the present such as it is, rather than lamenting the consequences of inevitable change.

macrojack
1,303 posts
 
Bill - When I was a kid there were exotic car dealers, Ferrari, etc., here and there in unlikely small towns. Eventually, as the economics changed and common folk became excluded from participation, such dealerships became limited to concentrated and/or wealthy locations. Now the exist in only a few of our largest cities.
Something similar is happening in audio. I read about audiophiles all the time who lament the fact that there are no dealers at all near where they live. Others complain that the inventories are just too limited if they do have a store within a fur piece of home. I see this situation worsening.

I also think that is why the audio shows like RMAF are popular. Not only is it like Sturgis for audiophiles, it is also the best opportunity most of us are going to get all year to see a wide selection in one place. It doesn't hurt either that the vendors are friendly and welcoming to all. Throw in some beer and you're looking at audio's best hope of pulling through. The dealers are not irreplaceable in my mind. I replaced them back when Carter was President.
macrojack
1,303 posts
 
Springnr has brought a question to my mind and perhaps each of us should ask himself the answer. When I respond to the question posed in the title of this thread, am I addressing the high end hobby at my house or the overall health of the high end audio business model?

I'll go first. The hobby at my house has lapsed to a great extent in recent years but still gets daily use. I still enjoy my system but I haven't had the motivation to pursue perpetual improvement. Some of the reason for this is the difficulty that can arise from trying to resell. It makes me more cautious about acquisition in the first place. Likewise, I feel I have reached a level of sophistication in my system where improvement would require a much larger outlay than I am willing to commit. So I say, good enough is good enough.

Concerning the high end audio business, I can only say that we got what we asked for. I buy used on the internet, I buy insider deals from friends in the business and I swing a trade here and there. I don't buy in stores and I found that I always lost money buying factory direct. No one will pay me as much for my used piece as they can buy a new one for, naturally. Notice that I don't buy anything from stores. They made their bed long ago as far as I'm concerned. They told me over and over again in no uncertain terms that I needed them more than they needed me. I got the message. Too many times I was treated like a know nothing by a know too little intellectual shrimp who thought that he was an expert by dint of having been hired. The arrogance and ignorance factors disqualified retail dealers for me back when I subscribed to Audio Mart. How long ago was that?

So, as far as I'm concerned, we did this to ourselves by creating an adversarial environment and pretending it was the gentlemen's club.
Greed and opportunism have been basic to this hobby from the outset in the late 1970s In the 80s the prices climbed, the margins stayed intact, and the entrepreneurs noticed. Soon the sizzle took over and the steak was stolen. Now that the dizzy pursuit has paused due to money shortages, we are bemoaning the collapse of a house of cards.
They were bound to come down though the first time the boat rocked.

The desperation of high end audio has no effect on my life whatsoever and the guys who chased me out of those stores back when have long since moved on to selling cemetery plots, life insurance or used trucks.

So there you have it. High end audio will survive but the sharks will likely be starved out of it.
macrojack
1,303 posts
 
Home theater is why 2 channel was in decline.

Audiophiles are like pipe smokers in that a few still exist and ever so infrequently someone young comes along and enlists himself. Both have to be realistically viewed as dying breeds however.
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