Listening Again

I have made a commitment to do this once per week going forward. It seems the blog always gets put on the burner the furthest away and stays there.

We've been an online company now for about 3 months. I'm not sure what it all means yet, but it has been a very pleasant experience to date. We are learning new things almost hourly about communications. And our connection with people who listen to music avidly is like the old days, its not just about the gear, people want to talk about what they are listening to.

Speaking of which, I got to spend a couple of hours in our engineering sound room the other day listening to music played through a new Classic model we are working on. This is what I love most about this job (if you can call it that), watching a new product go from concept to reality. Nudging the voicing along for hours, then days and sometimes months, until you look at each other and nod... its ready.

We actually have several new designs in progress, and some more on the drawing board in lots of new categories. Some will make it to market, some won't. It's how it works for us, it has to not only sound good, it must also meet the application, cost and market requirements. Keep an eye out for spy photos, they will start appearing soon. The best part though? I get to listen to them all.

Finding Our Way Home

Its been several months since I have posted anything new.  Sorry for the silence.  There are so many rumors about NHT on the street, let me set this straight.  NHT is not bankrupt, not closing our doors, etc.  

We did however shut down our traditional sales operations.  The backend of the business including our customer support has continued on.  We needed change desperately in so many areas it was time for a reset.   In retrospect, we chose the right time to do so as the economy slowed.

We are coming back soon, with a new direction for conducting business.  We have several new and exciting products in the works too.  Stay tuned, we'll tell you more in just a few weeks.

Thanks for your patience.  Peace and prosperity to all.

Red, Blue, what ever you do - Vote

The upcoming election is the most important in decades.  Me?  I am one of those "socialists" that Sarah talks about.  Whomever you are and whatever you believe, take responsibility for it and vote.  Its good for the country.  Then go listen to some music, its good for your soul.

Bull in a China Shop...

Consumer electronics are coming to the end of the age of deflationary pricing, and also the end of affordable, innovative cosmetic design.  Because of circumstances in China, the last 10 years have been an industrial designer's dreamland.  We have been spoiled, and we take it for granted.  Cool designs will still be possible but at increasingly higher prices, well out of the reach of most of us.

I recently returned from the Shenzen area of China where most of NHT's manufacturing partners reside.  Shenzen is only an hour from Hong Kong by ferry.  I am told that the area was historically marshland and fishing villages.  30 years or so ago, the Chinese government opened the area to foreign investment offering low cost leases for factory locations and now the population is 60 million and growing.

In most places in the world, very little changes over the period of a year or two.  China is not like most places and the changes are constant and remarkable.  Where there were jumbled, unpaved roads, there are now wide, tree lined boulevards.  Traffic lights and road signs abound, and more importantly the local populace is paying attention to them as if they are rules instead of loose guidelines.  Bicycles and feet were the main form of transportation for most workers two years ago, now its motor scooters and cars.  Highways and toll roads have appeared connecting the area to other major urban centers.  The typical office worker has gone from dull, company supplied uniforms to modern fashion that rivals most places in Hong Kong.  The government has recently introduced reasonable minimum wage laws with benefits, and consumerism is growing rapidly as the standard of living increases.

The amazing thing about China is the speed at which it caught up in manufacturing and design capability.  By 2001 you could find some of the finest craftsmanship the world has ever witnessed, and on a huge scale.  It was intoxicating.  Factories were going up in a matter of weeks throughout the province.  You could discuss an idea for a new part in a morning meeting and it was not uncommon to find a prototype, still warm from manufacturing, on the conference room table upon returning from lunch.  For the first time in years we were no longer bound by cost constraints.  Any design, no matter how complex, was possible to produce and often at mass market prices.  It was so easy.  We got lazy and complacent.

In 2008 the hammer fell.  Costs in our industry increased by 30% or more this year. Consumers have not even seen the impact of this yet, but soon will.  A substantial part of the sudden increase is due to the rising standard of living in China, but it also came from the rising prices of the world's dwindling natural resources.  Some believe manufacturing companies will move to the next low cost, underdeveloped country.  I think not.

In my opinion there are a specific set of circumstances that made China the powerhouse it is and those same circumstances are also the reason we have run out of practical places to go next.

Western Europe and the US watched Japan's prowess in manufacturing efficiency emerge over a period of 30 years.  As the standard of living rose in Japan, the crown moved to Taiwan where efficiency met lower cost labor.  This lasted 15 years or so, then it all moved to China where the investment and skills of the automated world met the largest, untapped and under paid labor pool.  This combined with the existing logistic infrastructure in the Pacific Rim and the proximity of Hong Kong, the world's largest free port, makes China the perfect location.

Certainly there remain countries with abundant low cost labor.  However most of them have little or no infrastructure in place to support mass manufacturing and are geographically difficult to get to.  The investment required would be many times the amount used in building China.  And don't forget that our declining and increasingly expensive  natural resources only exacerbate the problem, making costs higher no matter where products are made.

So what does all this mean to you and I?

It means that manufacturers are going to have to become clever again about design. We are going to have to choose what is important and give up on the "nice to have" features if we want to remain affordable.  It means we are going to have get smarter, work harder and maybe for the first time learn real marketing.

For consumers it means mainstream products are going to be more expensive, or they are going to lose desirable cosmetic and feature elements to which we have become accustomed.  It means that people will have to make choices that they will live with, not throw away.

Any upside?  Possibly.  It is my personal belief that this can be good for all of us in the long term.  Hopefully costs will equalize geographically, creating more local jobs and local industries.  While more expensive, product quality should improve and rapid obsolescence should diminish as we hold onto products for longer periods of time.  Brands should become more differentiable than recent times, which should allow for more market stratification and improve the "gene" pool.

Like diminishing oil reserves are forcing us to re-examine our choices in the cars we drive, the trips we take, the food we eat and the clothes we wear; my guess is that people will look at electronic purchases in the same way and begin to buy more intelligently and less impulsively.

 

Music in the air

Are you noticing all the music related coverage in the news lately?  Its everywhere.  Reports of 2 channel gear sales being up, a small, but solid resurgence of vinyl, new music sites and availability for downloads.  Wow! 

One of the predictions from last winter's CES was that once DRM went away, there would be new markets opening for music through the internet.  Markets that have appeal to lots of different tastes and lots of different grades of resolution.  It is starting already.

If you want to hear and own very high rez music, go to hdtracks.com.  HD Tracks is a new venture from Chesky Records that allows members to purchase and download music from their catalog, uncompressed, lossless and DRM free.  You also get album art and notes accompanying any download.  HD Tracks is in its early stages and will be expanding its offerings and formats in the future.  You can hear what a high quality download sounds like right now for free.  HD Tracks is offering an album, called the Ultimate Download Experience.  This offer ends on June 30, so check it out soon.

Its not the intent of my blog to promote specific companies.  However these exciting times for music enthusiasts and we need keep each other informed.  Within a day or two, our website will feature a music links tab on our home page.  As we hear about new sites, new artists and new music, we'll post them as a resource.  Feel free to let us know about your discoveries and we'll post those too.

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.

Strange Days or: How I stopped worrying and learned to love MP3's

At this year's CES, I was invited to participate in a panel discussion, the title of which was "High End Demo's in an IPOD World".  The premise revolved around the industry opinion that there are now millions of consumers that think compressed music is "the music" and high fidelity is dying because of it.  Assuming that anyone cares to hear the difference it ultimately leads to the question, "Where do you go to hear a truly high quality, full-resolution recording?"  

We all know there are not nearly as many audio retail outlets around and that audio is really no longer as prevalent a hobby as in the past.  But wtf?  Are we as an industry blaming the disappearance of hi-fi retail shops on the IPOD instead of a lack of consumer interest in traditional gear?  Does anyone out there think that just maybe, audio manufacturers have avoided change for the last 20 years and we are now paying the price?

Personally, I love MP3's (and other compressed formats).  Music is so easy to acquire and it is so inexpensive.  A buck for a DRM-free track on Amazon?  Fine with me, I can afford to take a flyer on something I have never heard before.

I mean, what's the risk?  That these same consumers will never experience the joy of sitting in the sweet spot grooving on minute details of the recording  and passing judgement on the image which might be pulling slightly to the left?

Guess what folks!  Even during stereo's heyday, 90% or better of all music listeners didn't know or care about the "sweet spot".  Hopefully they listened for the content, because it made them happy or sad, or provided nothing more than a pleasant diversion from the rest of their day.  Hopefully they still do.

This is what I love about personal media players and the ability to listen on demand to whatever you find interesting.  Consumers that embrace IPOD-type products are listening to more music than ever before, in quantity and variety.

We audio manufacturers have gotten so full of ourselves that we forgot why we got into the business in the first place... tunes.  We made the gear more complicated and expensive.  Plus we told the market that movies are cooler.  While the virtual world was moving on, making products simpler and more fun, the message we sent was "you have to do it our way".  We lost touch with our customers, and we won't get them back unless we change.

Let give you an example.  Recently I got back into playing music after a hiatus of over 30 years.  Once I was sure I was going to stick with it, I decided to set up a home recording rig.  The technology available for recording is amazing, but in most cases it is not simple.  My goal was to make music, not become an engineer.  I went through at least 5 iterations of gear and software, finding each too time consuming, and cumbersome to learn and use.  Then I found Garage Band, an Apple notebook and an inexpensive audio interface from Tascam.  Within an hour I was laying down tracks with nearly all my focus on the content, not the technology.  If this is not a lesson for our industry, I do not know what is.

I have learned something else as well.  There is no way to take music away from people, no matter how hard we might try.  And we have tried.  Along with gear, music got expensive.  The record industry spent millions trying to stop P2P sharing, blaming downloading for the downturn in music sales.  It could have nothing to do with the fact that before being available on-line, there was no way to hear new music without shelling out $15 -$18 per disc.  I still believe that an everyday, sub-$10 price for CD's would have kept that format alive for many years to come, and I also believe that greater access to broadband would force the music industry to find alternate means of selling recordings no matter what.

But it is too late and none of this really no longer matters.  The industry did not pay attention to its customers and they have taken the music back.  We can now listen to whatever we want and we can buy it so affordably, there is no reason not to.  We can afford to experiment again.  I truly believe that music appreciation is growing because of these formats.  Artists are connecting directly with their fans; it's amazing.

Check the growing sales of turntables, vinyl records, stereo receivers and bookshelf speakers.  Music is almost as important as oxygen.  It will always find a way to flourish.

And I know one other thing:  If there is music, there will be audio companies that provide the playback gear, although you may not recognize their names unless we wake up.