Tuesday, May 27, 2008

got them consolidation, fragmentation, liquidation blues

One of my favorite blogs is the Audiophiliac.  Steve Guttenberg is the culprit and while I am not a high-end guy in practice, I agree with a lot that Steve has to say.

In late April, D&M Holdings Inc., announced that their brands Denon, Marantz, Snell Acoustics, Boston Acoustics, Escient and McIntosh were up for sale.  Steve voiced concern that these brands, most of whom have a long history and quality reputations, may change for the worse depending on the intent of potential new owners.  I have to agree with him.

There have been a significant number of brand roll-ups in our industry by large corporations and/or investment groups over the last 10 years.  Historically, many of these consolidations have not been successful.  They seem to take place as market segments approach maturity, as they appear to be lucrative investments.  Even with those that have gone reasonably well, the new parents have rarely been able to maintain the focus and innovation of the companies they have acquired.

Brands like NHT and McIntosh have been fortunate.  We've managed to survive, largely because the original group that held onto the founding principles remained intact.  But we still changed, and if we're honest we would tell you that it has not been for the better.  

In most cases however, the acquired brands become shells.  Frustrated employees move on.  Sooner or later, the consolidations are broken up and sold off in pieces. Many smaller (and an increasingly number of larger) brands do not survive the fragmentation process and simply disappear.

As sad as this repetitive cycle seems to those of us that are familiar with casualties, I suspect this process may be part of a broader market mechanism that allows Consumer Electronics to reset.  Shed some of the old for the new.  Usually this happens in small pieces but every once in a while, it seems the whole industry turns over.

In my opinion, we are in the middle of another great "brand flip" in audio.  It happened during the 60's when most of the important companies were either American or European.  Our friends in Japan and the rest of Asia took the business by storm and broadened the market substantially.  Now yet again, new brands are proliferating at a remarkable rate, this time from the global high tech sectors.

"Brand Flips" are more than just new names doing the same thing better or cheaper.  They are an indication that consumer desire has shifted on a large scale.  Consumers are looking at new companies for new solutions.  And the new companies are enjoying the growth.  This could explain why D&M is letting go and I would expect that there will be many others like them in the not too distant future.  Its not anyones fault, its not mis-management, nor greed.  The world is moving on... you know, evolve or die.

There are always positives and negatives.  There are always survivors who can adapt and change successfully with the times.  The positive aspect of all the new brands and applications is the reaffirmation of energy and health that our industry needs. Passion, innovation and dedication don't disappear, they transfer to the next generation of companies.  

And while losing brands that seem like old friends is difficult, its important to maintain perspective about audio gear makers.  The real product of our industry is the art form (music, film, spoken word), the hardware is just the current delivery service.




5 comments:

Anonymous said...

Hello,

I'm interested in purchasing an Xd system from one of your dealers. Will you continue to support this system with crossover codecs, maintenance, etc., even though you are discontinuing the line? Thanks for the information,

Claz

Ryan said...

Another great post. I can't help wonder what this means for NHT, and especially how the product line will evolve. Any new insights?

Chris Byrne said...

Yes, we will be supporting the product. I mentioned this in an earlier blog. Unlikely that we will advance the current version but we have parts and tech support available.

cB

Chris Byrne said...

Ryan - stay tuned. This year is a back to basics year for us. You will start to see new products in early 09. Thanks for asking.

cB

Andy said...

Hello, long time NHT customer here....currently have a VT-2 main sound system & also a new owner of M-00 desktop system. Has there been any thought given to resurrecting the 3.3 in some fashion?
perhaps as a limited run. I'd buy a set, well, immediately. Or let's say a 'return to basics' might include a 'return to the old school'....maybe a full line of speakers in the style of the 3.3/2.9 etc.