the viability of hi end companies

it amazes me that there are so many companies selling audio components, given the small customer base, and poor economic conditions.

obvious the marketing approach is a factor, but if one depends upon sales of components for a livelihood, i am surprised that so many companies exist.

it seems the trend is direct marketing on the internet , low overhead, and sales providing a second, rather than primary income, as the way a company can survive. it still is a surprise that so many companies sell cable, digital components, amps, preamps and speakers.

one would think that the number of such companies would be shrinking rather than expanding.

any thoughts ?
Scale. my sense of the industry is in tough times the juggernauts have economies of scale and can manage cash flow if they're good to see thru the tough times. small businesses with 3 people to feed can do well if they sell 10 pieces of equipment all year for 50K each. net of parts, rent, labor, they can make it. its the mid-sized company that is neither big nor small enough to survive on 10 sales that has 20-50 guys on staff and needs a few million in revenue to make the numbers stack that is getting acquired by PE firms or merging, or just plain struggling.
I think about that often as well, and I imagine a lot of struggling, dedicated guys, working hard, hoping for the best, and living without health insurance.
I never figure out how they survive. I was just at a big audio banquet with about 400 people. This was for an audio club but most of the people there were manufacterers and distributors. When I asked a retailer at the show why doesn't he ever host the club. He said "These people never buy anything" So if the people from an audio club never buys anything, who is supporting all these people making product?
Well, alot of the more established companies are hurting themselves because they stubbornly refuse to embrace the internet and accept that their business model must change. The companies continue to protect the brick and mortar dealers even though most of the dealers do not service the 2 channel audio community. The manufacturers should be selling direct via the internet and their prices should be greatly reduced to reflect the lack of dealer markup.

The biggest argument I hear against this is "how will you hear our products without dealers". This is laughable since the majority of audiophiles cannot hear the products now! The so called dealers rarely have demos setup. The majority at this point are home theater dealers and only order product for an existing job. Many don't even have store fronts anymore.

I suggested to several of the speaker manufacturers that they post high quality videos (done with high end mics) on youtube demo'ing their products and was scoffed at. Why? Guitars are sold this way, check it out. Sure, youtube might lose something in translation, but it would still be an excellent source for getting to know the products. Yet none of them do it. All the music we listen to is recorded and played back on our system, why can't the speakers and other components be marketed this way?

But no, most of the companies will have to be dragged kicking and screaming into this new business model.
I also think about this often. Look at an Orion Blue Book or an old Audio Magazine Equiment Directory and see how many companies are still in business. Stereo companies have always come and gone. You can blame it on the economy, however, these companies are faced with an even bigger problem. We, stereo enthusiasts, are a dying breed.
Direct marketing on the net may be the wave of the future. But for now most hi-end manufacturer's sell through there dealer network only.
The hi-end salon that I deal at always seems busy and it's common to see 5 digit plus components going out the door.
Taters, he's right, they don't buy anything. They are all buying from audiogon or under the table with dealers.

Tmsorosk, that's the attitude that is killing the industry. I don't know where you live, but if you think brick and mortar high end dealers are doing good business your position contradicts all the facts.

The vast majority of dealers today are either 99% focused on home theater and have little to no demo space, only ordering product when they have a job OR they are are small dealers running out of their house as a side business and are cutting under the table deals to all their customers. It's ridiculous for the manufacturers to continue to ignore reality.

I've seen numerous cases of people obviously selling dealer inventory as "like new" on audiogon to skirt the dealer agreements which strong arm the dealers into fixed pricing.
Good posts and insightful perspective. Reality is what it is.
I read fairly recently that there are over 200 turntable manufacturers in the world- over 200!!! Many of these are high end and quite expensive. It truly must be economy of scale. If a high end company sells only several $150,000 turntables annually with a very small staff, it can probably survive. These companies are likely provide equipment to select dealers, who demo it for awhile, then sell it on the used market.

What is surprising to me is that this niche hobby has lasted so long, with so many competing companies making different types of gear, for a very limited customer base.
Great points Jaxwired,
Your findings parallel mine and, I assume, most of us here.

The only successful model I've seen that sells high end, besides internet sellers, is Acoustic Image, in Studio City (just north of LA). Elliot Midwood sells directly out of his home, where he holds demos and receptions for the LA/OC Audio Society and I consider myself lucking enough to know him.

He used to have a salon on Ventura Blvd when times were good but scaled back to his home when things went bad. It's because of people like him that one can be afforded a real view into high end products.

There are others like him out there but they have to and should be sought out if we want, at least, this model to survive. Even if one can't afford high end products, they can steer you to great quality product and demo it for you as well.

As for good, old fashioned brick and mortar types, there still Shelly's Audio out in Woodland Hills who still sells great gear for those who have sensible wallets but still want great sound. But they compete with internet sellers with a customer base that knows their product and who can undercut them on the price. Here's to hoping they can hold out.

All the best,
Gotta be a tough business these days! My hat off to those who manage to succeed and carry on.
Only need to sell 10pr of !00 K speakers a year world-wide to clear 500 K in a 3-4 person company where owner gets 80% of profit.
Who buys $50k products from two or three people operations?
"Who buys $50k products from two or three people operations?"

i suppose there is probably 20 out there somewhere if one can find them.
jaxwired, I don't think my attitude has much influence on the industry. My position is based on observations. As far as where I live, it's western Canada and yes things are booming here and always have been.
Nonoise, Elliot hasn't hosted a meeting in over a year. I haven't talked to him lately so I don't know what's going on with him. I have purchased gear from him in the past and he has always been very nice. I'm not very Impressed with Shelleys. They used to really cater to the 2 channel market but not anymore. At one time they carried Plinius, Audio Research, Sonus faber, Spectral and other high end brands. Now there mainstay is Mc Intosh and they are catering to the home theater crowd and custom installs.
Have you noticed how many of these companies have come out with a new top of the line product in the last 5-7 years that is at least twice the price of their previous top of the line product? Practically every single one of them.

These companies are selling fewer units but taking higher margins. That is how they stay afloat in this top down economy. There are plenty of folks out there with FU money.
Any business venture, especially something on the line of a hi end niche market, begins with vision and passion. You feel you can offer that better "mouse trap". And in so doing you don't listen to the nay sayers of the bad economy or falling markets. No, you don't have you head in the sand, so you may keep you day job. But you dream and then work too make it come true
I agree with most of what folks have put forth. Like many have expressed, including Roy, I also question the viability of high-end audio companies.

Of this list of highly-respected North American manufacturers, how many would survive were the one person in charge cease to serve in that role (retire, become incapacitated or worse) tomorrow - AtmaSphere, Audio by Van Alstine, Avalon, Ayre, Basis, BAT, Blue Circle, Canary, Coincident, Deja Vu, JPS, Lamm, Magico, Mapleshade, Merlin, Nordost, Purist Audio Designs, Quicksilver, Rockport, Rogue, Sanders Sound, Silverline, Sonist, Soundsmith, Synergistic Research, Totem, Tyler Audio, VAC, Vandersteen, VPI, Walker, YG Acoustic, and Zu.
It's been that long? It didn't seem so when I last went to see him but I've always been bad at judging time. As for Shelly's, I'm sorry to hear they now concentrate on HT. I haven't been there in many a year but know they're still there. I bought my first major stereo gear from them. It was Rotel separates.

Looks like the internet is here to stay, which is not a bad thing.

All the best,