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
And Ultimate Electronics before that.

Great thread. A huge paradigm shift is needed, or the blood letting will continue.

I know many dealers who are thriving. However, they have embraced new media and distribution, and provide systems centered around such.

Peace,

Lee
A lot of good responses here. However the State Of The Union so to apeak rests with the dealers and manufacturers. I would like to hear from some of them in this thread such as Al Goodwin of Goodwins High End, Larry Weinstein of Hollywood Sound, Galen Carol, Gene Rubin, Audio Consultants, Hawthorne Stereo and some others I may have missed. Over the 53 years of doing buiness in this hobby I have done business with all of them and continue to do so, so that says a lot to me, with what they have to offer.

On the manufacturing side input from Nelson Pass, Keith Johnson, John Curl, Conrad Johnson, Paul McGowan, Coda or any high end manufacturer that could contribute.

Many times in this post we have taken a broad swipe on the folks that deliver the end product to the market place.

It is my hope that some of those folks will chime in and give us their opinion of the State Of The Union so to speak.

Lets face it we are all in the same boat and it must be rowed in the direction ot mutual benefit. If not then this endeavour will be on serious life support for a very long time.
I'm not speaking on behalf of a dealer but Brooks Berdan of Brooks Berdan LTD. in So. Calif. is actually in the process of expanding his store. They are nearly doubling their floorspace, adding among other things, several additional sound rooms and a large museum of vintage, classic gear. So it appears one store is doin something right.
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.
People have little disposable income, even things considered necessities in the past are experiencing a slump. The current string of closures for dealers and manufacturers will continue, those that survive will be ones that find ways to adapt to the demands of the new consumer or consolidate the shrinking market for the traditional ones.

I have never set foot in a high-end shop that catered to or brought in young customers new to the hobby. That alone signals much of what is to come.