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?"
"What do we do now?"

We focus on new opportunities and learn new ways of exposing people to quality music systems.

One suggestion I have is to stop using the term "High End". That term turns a lot of people away.
Part of it is the downturn in the economy but this is magnified by changes in technology, a shift in how people consume music and the more effective marketing strategy that has accompanied that shift. I see a wide variety of people still consuming music but they do so via a pair of earbuds and a very portable source. The marketing consists of selling people individual songs where the price is small and more importantly reducing the space necessary to listen to music of your choice. That plus the competition from big box stores is pretty much the death knell for most of high end audio. Many high end stores sold not only speakers and amplifiers but also televisions and the number of tv sales plus small unobstrusive 5 channel speaker systms far outstripped the number of amplifier and high end speakers. The problem was that it is impossible to compete with the big box stores in that arena. Space, or rather the lack of it, makes the newer technology systems more and more attractive. You can hang your TV on the wall and take up virtually no space, your portable music player and earbuds take up next to no space. It is not just music but rather music listening has merely been fit into the new paradigm. People have also greatly reduced the number of books they buy - buy it on an electronic reader and you do not need a wall of bookshelves to keep a collection. This is coming from someone who has walls of books, still purchases CDs, and does not own a portable music player so I obviously like the old ways. I do not believe that "hi end" audio will go away completely, but it will likely not make a big comeback.
Ballan: You may be right. "High end" may be somewhat alienating. The term is used in all consumer product groups, and does convey a whiff of snootiness. We have sports cars--maybe it should be "sports stereo"!

Pedrillo: Does this have to do with aliens? 'Cause I've often thought that audiophiles were a totally different species than mere Earthlings....;->

Music: Agreed, and we'll get into some of the new options in our next installment.

Thanks to you all for your insightful comments.
what strikes me is that what remains of the high end audio industry has done very little to broaden its mainstream appeal--in contrast to say, the wine or auto industries, virtually all audio advertising and/or writing (home theater excepted) is confined to a few relatively esoteric publications. i'd think that more consumers would join the fold if they could be stimulated by minstream media--say a component review section in usa today. or a reality show (in hd) about guys traveling the country to expose the coolest systems.
You are correct, sir! Marketing of high end audio is largely preaching to the choir. As audiophiles age, die off or (God forbid!) actually get a system and stick with it, the pool of available customers is drying up.
Our next entry in The Hub will discuss some alternate approaches to marketing which will attempt to take iPodders beyond earbuds and introduce regular ol' music-lovers to high quality music reproduction in the home.

Mainstream advertising in magazines or on television is prohibitively expensive for 99% of all audio manufacturers, and there is no trade organization geared to the general promotion of high end audio. Basically, guerilla marketing aided by and utilizing the net is the only real option for the industry to gain broader exposure.

Thanks for your comment.
A broader cultural change is occurring with a younger generation who may not see buying a home, settling down, etc as their future. They can't depend on an employer for security. They will rent and change jobs more often than ever. Highly mobile workforce who can work anywhere. This might mean that bulky electronics with incredible build quality simply aren't possible to drag along with them. iPods and simple systems rolled up into a laptop or mobile device make more sense. If living in an apt how coul they set up a big system. I venture to say many of us have been there but bought into the American dream of a single family home with space for our gear. Are we dinosaurs too? Fiddling while Rome burns? Probably so.
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in the good old golden age of audio, publications like playboy and esquire would regularly publish articles and images of stereo equipment as an integral part of an enviable lifestyle. the industry promoted the intrinsic sex appeal and aesthetics of their gear--i.e. "these speakers will not only look great in your pad but help you fulfill your innermost desires". today's audio advertising, such as it is, is the very antithesis of good marketing--by and large, it's all technical jargon; steak with no sizzle. even the big players like d&m and harman seem kinda clueless as to how to promote their brands; it's no wonder that younger generations flock to ipod and bose products, since, if nothing else, these companies understand how to stress style and image. query whether the audio industry woiuld benefit from an industry-wide group (analogous to the american dairy association)to build a new public consciousness.

I've just recently been participating here after years of lurking. I semi-retired earlier this year from doing design and engineering of tech systems in the private sector. While I've never "been in the business", I have worked with audio/video dealers and integrators for several years from around the world, and I have a personal obsession with music systems. I'm also the person clients call when things don't work, so I've had my share of experience with audio.

With this said, I want to say something that I hope is taken the right way....

I hear a lot of people in the music/audio business complain about how things have changed, and that there doesn't seem to be a business model that works, but at the same time, I see very few companies and people in the business doing anything about it. Take for example the previous posts. It's easy to reinforce why things are the way they are, but where are the ideas and solutions for moving forward?

People are listening to music more than ever, and iPods and the computer/Internet account for a lot of listening, especial among modern music listeners. All of us here know that the iPod with the "cheap white ear buds" sounds horrible, but the iPod is not the problem. Anyone that has ever heard an iPod using Lossless or uncompressed files streamed digital into a good system will confirm that it can sound wonderful.

With the failure of the cheap ear buds, and low quality speakers systems that are in the market, there is OPPORTUNITY. There is also OPPROTUNITY to educate about why lossless and uncompressed files are better, and demonstrate it. If people are walking around with their cherished iPods, then show them how to make them sound better, and in return you will gain a customer and future relationship.

The reason I bring this up is because most of my clients ask for iTunes and iPod integration, and I myself, really like my iTunes and iPod, but when I ask dealers/integrators to provide a solution, most just roll their eyes and start telling me that iTunes and the iPod doesn't make a good source. BS! This is the type of arrogance and attitude that disconnects dealers from customers. So what if not everyone owns a large vinyl collection, has a turntable, likes the glow of tubes, etc....that doesn't make them less of a music listener. In fact, most the people I know who invest in music systems, are very passionate music listeners, and they not only invest in one room of their home, but several. I'm not just talking about the "rich". I help average people all the time design music systems for their homes, and the reason I'm helping them, is because the dealers in their area won't do it. They don't want to take on smaller projects that are simple.

If you ask an audiophile what time it is, they tell you how to build a watch. Most people don't care about building a watch. They just want the time. Most music listeners don't care about system building and tweaks. They just want music. The just want a quality experience that is simple and reliable. I can tell you, after years of recommending "high end" systems (I despise the term "high end") to my clients, I've learned that the "higher end" the system, the more service and support will be required. It's like selling a hot rod to a soccer mom. Soccer moms don't want hot rods, they want mini vans. A lot of "high end" dealers are so caught up in the technical aspects, that they totally turn off, and away, average everyday music listeners. There will always be some of us geeks and tweaks, but we need to understand that the rest of the world does not care. They want something that is high quality, very simple, consistently relaible AND comes with a person that will service and support them long term.

Audiogon is mostly for us geeks and tweaks. It's a place we can come to learn (and for some, argue) about the technical aspects of music systems, but that's not what most people want. If the industry wants to really shift into a more mainstream and profittable position, then it needs to let go of some attitude and open up to new ways of helping people listen to music....because helping people listen to music is a valuable service.

(No audiophiles, soccer moms, geeks, tweaks and rich people were harmed during the making of this post.)
Agree Ballan.... and Active Speakers will become the new "integrated". The phono input option superseded by the optional built in DAC.

Everybody and their sister has sources, be it an ipod, iphone, computer, TV, ....

Convenience is key, just add quality and...

p.s. Make the dang thing wireless = instant zillionaire.
If this makes you wealthy... I like pie. ;>)
Swan: good points, and I think many of us travel lighter than we used to. I'm heartened by the level of performance now available from portable digital sources and small speakers, and shudder to think of moving thousands of books and LPs again. Sheesh.

Tvad: largely agreed, although I'm not sure audio has been "primary entertainment" at any time in the last 50 years. Perhaps when Little Orphan Annie and Jack Benny were on the radio....

Loomis: once again, you are CORRECT, sir! It is disheartening to see how big-rig hi-fis have gone from Playboy to Geek Squad in a 30- or 40-year span. Yes, a trade group is needed; however, I personally have watched four or five different audio/high end groups crash and burn due to the same bugaboo: money. Nobody in the industry has enough to support a trade group, except those few mega-companies that don't see any benefit in belonging to a trade group. John Marks even used the analogy of the American Dairy Organization, defining it with his favorite legalese term, "fungible". Anyway, we're trying to get folks together and talk. That's a start.

Ballan: couldn't agree more, and I will come back to your comments as time permits. Sorry to run....

Thanks to you all for your insightful comments.
@Springnr: Active speakers with a DAC, and wireless integration. That's not a difficult thing, not difficult at all. I like cake....warm, moist cake. ;)
as much a cultural evolution away from 'sitting in front of a stereo and listening' as an economic crisis. 'the times they are a changin'.....not enough money..not enough time.
Audiogon bill,
The last book he published, to not read it is foolish. If I posted anonymously at cafes I could explain otherwise only the foolish or those with iron castanas would elaborate under their moniker from their own computer. What we are witnessing now we will be wishing it only came to that come a few months/years. We are on the brink of.....
IMO: One difficulty in analyzing the original topic of this thread is that there are 2 major conditions affecting the "high end".
1. Bad economy.
2. Major paradigm shift in technology, music industry, marketing etc. etc.
the problem with high end audio is high end audio. consumers are becoming smarter and manufacturers' cling to their outdated economic models. dealers are part of the problem. many consumers are as expert or more so than some dealers. hence many savy consumers are buying boxes and do not need the service that dealers offer or propose.

audio components are a commodity just like anything else. people can learn how to set up a stereo system properly without some so-called expert telling them how to do it.

some manufacturers are charging obscene prices but the value is not there.

some manufacturers are smart. selling direct on the internet. i suspect that is the ultimate solution for the industry--fair prices, fewer dealers and cooperative manufacturers.
Because the companies that make high end gear tend to be very small they are having a very diffult time adapting. This is a cottage industry run by fanatics, as a result there is lack of scale of economy and the target market is very narrow and getting smaller.

The blame for the shrinking high end market lays clearly on the industry itself. Technology has not adapted to fit the market place (no internet connectivity, the gear is still very large, etc.). Pricing has not kept up with the rest of the CE industry. While, TV, dvd, blue ray etc. prices have gone down, some high end speakers now cost more than a three bedroom house.

Nothing new, no consumer awareness, lack of pricing power/scale, and the average consumer do not recognize the benefit.
Ballan: back to your long comment. I couldn't agree with you more about the opportunity presented by iPods, and your experience with pros re: iPod sounds sadly familiar. Once again, we have the True Believers wanting to deal only with other TB's, rather than doing what customers want and working to show them how it can be better.

Guys, this is why the audio biz is drying up. If somebody wants to use a 'pod, help them make it the best it can be--don't fight 'em. As General Douglas MacArthur said: "There is no security; there is only opportunity".

Spring: if you can make it wireless AND cordless: wow.
What's this about pie?!?

Ballan, again: can we keep the baked goods out of it, please? ;->

Jay: agreed. We forget how affluent the "golden years" of audio were, compared to now. Remember that a 45 was essentially the same price as an iTune cut...50 years ago.So, that 45 cost about $5 in 2010 money.

Ped: I have no idea what it's about, but I'll take a look. Having heard most of the signs of the "end times" being trumpeted for the last 50 years, I'm a little Apocalypsed out.

Rja: agreed. If it were only #1, then the industry would improve as the economy improves. Thanks to #2, that won't happen unless the industry changes, big time.

We're at a point where the industry has to examine what it's all about. When the bankrupt railroads were rejiggered into Amtrak, it was with the realization that they wern't in the railroad business, but the transportation business, with connections to other modes of transport (trucks, ships, etc.). Similarly: is the audio business just about selling big boxes for the home, or about enabling people to enjoy music, whenever, wherever?

It sounds pedantic and buzzwordy, but there's a huge difference.

Thanks to you all for your insightful comments.
Mr.: there's nothing better than a good dealer. I know guys who routinely do things that make Abe Lincoln's 10-mile walk to return a penny look like the act of a slacker. In an economy where price is crucial, dealers have to have products and service which will cause buyers to choose them. If it's only based on the best price on commonly-available goods, independent dealers will not survive. They can't.

There is a place in the business for direct sales to the end-user. There is a place for dealer-sold products. The two are not necessarily mutually exclusive.

3way: I partly agree with you. The "fanatics" often base their pricing on giving buddies such a deal, and while that's wonderful and generous, it is not a sustainable business practice. When a guy moves 3 or 4 pieces per month, his per-unit cost on parts is going to be astronomical compared to say, Sony.

Rok: Is it possible, in these days when virtually everyone is familiar with virtual etiquette, that you don't know that it's rude to shout? Please.

I'm glad you love music, I'm glad you're happy with your receiver, but it's not only offensive to categorize the entire industry as a scam, it's patently untrue.

I'm pretty sure that I speak for a majority of A'goners when I say that anytime I encounter the phrase "you people" in the middle of a rant (and a shouted rant, at that) I not only stop listening, I want to make the rant stop. By any means necessary.

I'm also puzzled: if you feel so strongly that all "US PEOPLE" are snake-oil artists, then why are you here?


Thank you all for taking the time to comment.
@Audiogon_bill: I totally agree with dealer service and support. I too, know dealers that go above and beyond to do things that I know they are losing money on. I get disappointed when customers take advantage of a local dealer's time for demonstration, only to go buy from someone else. This is a big problem, and one that customers needs to take some responsibility for. It's just disrespectful to expect a dealer to invest in employees, facility and inventory while buying from someone else, for whatever reason.

I like your comments about the price of 45s vs. MP3s. It brings up something that I think gets overlooked. If you compare the price/performance of a music system in the 60s to today, I think you'll find that today's "consumer" products are much better. For example, I use my iPhone and Etymotic headset when working out and traveling. The sound quality that is produced it's light years ahead of anything available when I was a kid, not to mention that I have music with in my pocket that would take a suitcase of CDs (or a car load of records). This touches on Mrtennis's comments about products being a "commodity". It is true, but the "commodity" is much better than in the past.

I don't want to get off on another rant, so I want to finish by again offering an answer to Audiogon_bill's original question...."what do we do now?"

We, the manufactures, distributors, dealers and customers of this industry need to step up and define it for a new generation. We need to realize that people are the most important thing, and taking care of each other (personally and professionally) is always best for everyone. We need to focus on service and support, and be willing to educate music listeners (and each other) so we can keep evolving to meet new technologies and methods. We need to realize that "product and money" do not define who we are, and that when the day is through, we can all improve the lives we are blessed with.

Music is a precious thing. It's a form of communication and art that has been with us for longer than we can comprehend. Improving the experience and helping people listen, create and perform music should be a noble activity. The world needs more noble action, and we can step forward and define ourselves better.
The point about the mass market stuff being pretty good is a massive point, which makes it difficult for the high end makers and dealers compete. A buddy of mine who is totally into music and movies has an Onkyo HT receiver from Costco, an old pair of budget Polks, and a Costco bought Sub, streaming itunes and he is very happy. (audio gear @$450.00) He and others have listened to high end gear but did not think it is worth the increased cost. The mass market gear's cost to benefit ratio is much more compelling than the high end stuff - unless you are part of shrinking market where serious audio is still valued, where we do not mind spending more $$ for the incremental added benefits.

Where do we go. As in the past, the high end industry takes what the mass makers create and they try to perfect it. The first cd players left lots to be desired, but companies like CAL, Wadia, etc. helped turned the cd player into something very enjoyable. Before that, Nakamichi, Revox, Tandberg, took the cassette player to a much higher level. The challange going forward - will there be a high end industry to enhance the technology going foward in an environment where technology is evolvoing faster than ever, the resources/expertise demands are increasing, and changing consumer/market trends (small is cool, CE price deflation, portablity, slick user interface, connectivity, etc.)
Most of the comments that precede this have be quite informative.
1. The economics of the industry are adverse to growth. I will attend the RMAF next month and hopefully meet many of you reading this thread. When I see staggering cost of most of the components being sold today, there is no doubt that my hobby has lost touch with the audio enthusiast. The typical pair of monoblock amps start at 20K and the average pair of speakers are about the same. The price/value of the gear has absurdly decreased. The smaller pool of buyers have forced manufacturers to increase pricing to stay in business. This is a business model destined for failure.

2. The internet has changed the audio landscape forever.
It would be hard to avoid the fact that Audiogon (or websites like it) have taken advantage of the technology. This has made life more difficult for retailers. It is amazing to me that virtually (pun intended) all the audio equipment purchases that I have made since finding this website have been internet based. I have made the decision that it is better to make a mistake from a sonic perspective on an internet based purchase and have a ready market of buyers for that same item lined-up on the website. Many have come to the same conclusion. Many (not all!)of the home based dealers are audio enthusiasts who want to buy equipment at wholesale for themselves and their friends. There are obviously many notable exceptions but many home based dealers are enthusiasts clothed as dealers.
The problem with all of this is that without real dealers the industry will have trouble attracting new flesh to the hobby.

3. The audio magazines have also played a part in this shift. Becoming an organ of their advertisers, these magazines have lost credibility with their readership. I am much more likely to consider the opinion of a known Audiogon member than the magazines. This again shifts me to the internet as a clearinghouse of information. The magazines as well as the industry have lost relevance except on Acura car commercials.

4. Chinese gear has shown us how poor the price/value of the gear we buy. I don't want to get into a political debate especially when many known companies have shifted at least a portion of their manufacturing overseas.

5. Are the components today really much better than those of the 80's and 90's? They are certainly different but are they more satisfying? To me this is one of the major points of discussion. Audio for the most part is a quite mature industry. I have not really seen any major break-through that has made me want to run out and buy newer equipment. The Ipod was certainly a watershed for portable music. I have not seen anything in audio nearly as significant. When I went to my first RMAF 3 years ago, I bought my first $150 GPS to get around. My thought during the entire show was that this GPS was far more interesting than anything that I saw at the show (yet I am going again!) We are dusting off analog turntables and reel to reel machines from 30 years ago because of the incredible sonics of these relics.

5. Ipod, economy. The posts above handled these topics.

Ballan: your point about the preciousness of music and the need for noble action is spot-on. One of the things that continues to bemuse and baffle me is how something as fundamentally wonderful as the love of music can degenerate into the back-biting, name-calling and flame-throwing that often plagues the audiophile world. Somebody figure THAT one out, willya?

3way: the bang for buck offered by a lot of what audiophiles would think of as "entry level" gear is pretty astonishing, these days. Think of Virtue, Peachtree, a lot of headphones, Music Hall 'tables.... A lot of high end gear handles certain elements of music well, but often neglects the sense of life than most jamboxes can produce. Another mystery to decode.

I agree also that small, skunkwork-y companies may lead the way with human engineering; certainly pre-Meridian Sooloos pioneered that, and look at the things being designed by Holm Acoustics.

Baranyi: you bring up too many good points to explore in depth here, but I will say that I agree that cost: benefit analysis of most gear is worrisome, and that the net and iPod have indeed changed the audio world forever. The trick will be for brick and mortar dealers to learn how to utilize the net to their advantage rather than simply being overwhelmed or defeated by it. Simple to say; tough to execute.

Regarding world-changing technologies like GPS: fascinating, both technologically and socially (Big Brother overtones and all), but it took billions if not trillions of dollars to get to the point where that technology is available for $150. Governments and venture capitalists aren't lining up to pour money into the audio biz. --or if they are, I need to write a business plan!

Thanks to all for your interesting comments.
no one has dispusted my premise that consumers can learn and provide service for themselves that dealers allegedly supply.

i doubt that the "high end" industry would cease to esist if there were no dealers. small enterprising manufacturers offering quality products who are willing to interface with consumers can be a substitute for an audio retailer. this would entail more "research" nad factual information acquired by buyers.

the big problem with dealers is that the risk of buying a component is not ameliorated by auditioning it in a system which is not congruent with one's home stereo.

if a dealer is willing to "lend" a component for a home audition, that would be a major effort and positive step.

another words, customer comes in and says, i would like to borrow xyz preamp for n days. here is my credit card. if i decide not to buy it please nullify the transaction.

of course this brings up the issue of retail price.

i prefer not to go to deeply into the pros and cons of discounts.

i will make this statement. a dealer should be able to structure his business to offer some discount and still be a viable operation.

i think manufacturers are a more reliable source for info about their products than dealers.
Mr Tennis?

>>>the problem with high end audio is high end audio. consumers are becoming smarter and manufacturers' cling to their outdated economic models<<<

No one is "clinging" to anything, that is an inauspicious way to start off. There are still many exceptional regional dealers that provide extraordinary service, knowledge and support. For hi-end speaker and electronics purchases it is still the very safest and best value way to go--through a carefully selected dealer that has a great reputation, and there are many. When dealers go away, so will a great many of the truly worthwhile brands. Sure there are some bad dealers, there are bad people in every profession, even on-line :o)

>>>"audio components are a commodity just like anything else. people can learn how to set up a stereo system properly without some so-called expert telling them how to do it."<<

That is just plain wrong.

Nobody needs to be 'told what to do' but a 35 year, 25 year expert on system set-up TT set-up,speaker-set up can be invaluable and provide after-purchase support, a helpful ear and counsel that far outweighs what you pay in retail--and by a mile.

The fact that people in these forums still think the HE dealers (as a group) are out there charging too much for their time and service have not paid many visits to good retailers. The idea that dealers and manufacturers are getting rich at consumer expense is entirely fanciful. Many of the great dealers are shirt-off-the-back types and it is frustrating to see so many sincere businesses lumped into your strangled one-way opinion.

Sure, there are some few manufacturers that over-charge, inflate margins too high and laugh about it, but those days are over and manufacturers that do business this way are in trouble--and pretty easy to spot.

And the independents? The sell directs? Those are not always the righteous do gooders and the customers friend as you seem to imply. It's like saying that all magazines that do not accept ads are virtuous and honest, when my experience has been that they can be worse than any ad-magazine, whether net or print could ever be.

In this business, corruption is a private enterprise. Meaning, no supposed direct, or via-dealer manufacturer is any more or less likely to over-charge the consumer. Do you think direct-sale manufacturers don't charge for time, service, exchanges, returns, call backs, two-hour system conversations etc? --Yeah, the ones not in business. An entire additional sales-staff would be required unless the business is tiny, and lets not get me started with what could be wrong there..... And what to do with overseas accounts? Direct there too? Or are dealers ok for that? This would dry up sales, good companies would fold and you would have your dream. DIY speakers at wholesale prices, amps from companies named Dr.Feelgood and wire from someone's closet. Yep, commodity heaven...

>>>some manufacturers are smart. selling direct on the internet. i suspect that is the ultimate solution for the industry--fair prices, fewer dealers and cooperative manufacturers.<<<

Obviously, your experience with the business side of HE is limited or you would not write that. Without face to face regional outreach,seminars, gatherings, events, Aduiophile Society meetings, the local shop that loans cables, amps or CD players; The great retailer that became a friend and got so many into the pleasurable hobby;--- the HE business would not exist today.

If all the great local dealers go away, the Goodwins, Optimal Enchantments, Definitives, Audio Advice and dozens of others, then this truly will become a hobby of commodity. Enjoy your new Bose-wave system or buy direct from a manufacturer that does times tables with his fingers to come up with a retail price. There are some good direct companies, and some not so good and some that take your money and sell you home-depot projects with little jimmy's peanut-butter on the front panel, for a screaming bargain..

Yeah, get rid of all the dealers and all will be well...


You forgot to mention the closing of Tweeter,Etc. Just an FYI

"another words, customer comes in and says, i would like to borrow xyz preamp for n days. here is my credit card. if i decide not to buy it please nullify the transaction."

I read that and couldn't help but ponder that most people don't even know what a preamp is. Actually, most people don't know what the differences between a tuner, amp, integrated amp or a receiver is for that matter.

Some of the people that do know and care, continue the never ending quest for some sort of magical system synergy, only to find themselves with dissatisfaction, ready to toss it back on Agon for some other poor sucker to waste his/her money on. But at least here, there is a chance for people to purchase something better then what's on most shelves these days, for a fraction of the original cost.

If someone happens to wonder what "High-End" is all about, and possibly gain interest, then it would have to go something like this way: The consumer would have to find a dealer who has nicely assembled a system(s) that are comprised of components that work beautifully together- AND get a demonstration that actually sells the benefits of "High-End".

I'm sure most of us would like the bankroll to be able to drop whatever we like on the best available - 1 shot,done,enjoy.

This is all possible but increasingly unrealistic. How do you turn on new customers to something that is becoming less popular? Good Question. *How many people were the non-hobbyist consumers, for decent gear over the decades, able to get anything meaningful out of their systems other then be able to play loud and take up a ton of space? There have been tons of people that filled that part of the audio market, who really didn't know squat about anything, that just wanted a great music system.

*The Hifi card has already been played with this group, which just dumps it in the trash, yard sales it or what have you. Enter the compact systems, PC's, amazing video technology and now they have other things to spend money on. Add in the Teen-based phenomenon, and then we realize they must have iPods/phones, PC's and gaming systems to be cool.
Tennis: I'm not disputing your premise. I will say that consumers, myself included, can learn a fair amount about a product. Is that knowledge equal to what a good dealer knows about a product through his relationship with and communication from a manufacturer? If it is, then you need to go to another dealer.

Margins are traditionally set up to allow the dealer a little wiggle-room, while maintaining adequate service and sales personnel and facilities.Even then, many folks complain that dealer mark-ups are too high. If a dealer heavily discounts every piece he sells, there's no way that he can maintain a high quality of service and still stay in business. Anyone who has ever run a business, and especially a retail business, knows that their customers are only aware of a fraction of the costs involved in running a business.

In my experience, most well-established dealers have some sort of try-at-home. The problem, of course, comes with guys who try to sample every audiophile flavor of the month using such programs.

Obviously, I believe that there is a place for internet sales of gear. I also believe that the service, advice and set-up provided by a good dealer is worth more than a simple box-handler.

I know and respect a number of dealers, both brick and mortar and inernet, who have more experience and insight than I will ever have the patience to accumulate. They are also able to do things of which I am physically or temperamentally incapable. Is not the workman worthy of his wage?

Grant: largely agreed. The value of a good dealer is generally worth whatever cost-differential there is in the initial purchase. As I said, there are good guys both b&m and virtual, and you're right, there are bad guys everywhere, too.

The point that becomes very clear in these discussions is that there is a widespread perception that anyone who charges enough to make his business sustainable, is a crook. In order for a dealer or manufacturer to survive, pricing has to be sufficient to cover worst-case scenaria: what happens if the economy suddenly tanks and my sales fall off 50% and half my dealers disappear? Don't laugh; that's the situation a lot of folks are in right this minute. Without reserves, those folks would simply be gone. POOF.

Does that mean all survivors are crooks? Of course not. I'm neither a socialist nor a corporation-coddler, but businesses in this country cannot win. No matter how great the product, service, price, whatever a business provides, a good chunk of humanity will find fault with their actions. I applaud the people who take risks, invent things, buy stocks of merchandise, deal with cranky customers every day. Y'all have more patience than I have.

Pure: Had I gone into Tweeter, that would have dragged in Sound Advice and all the other chains Tweeter absorbed. Point taken, but my piece was already pretty long.

I agree that our present structure tends to shut out non-tech-geek music lovers. In the past, that's where the dealer came in, to explain benefits, guide, and set up gear. As we have become more of an "in-group", the folks who just want to enjoy music in their home have suffered. And that's a shame.

Thanks to all for your comments.
I've been proposing a not so unique idea to several of my audio buddies. Since most high-end audio companies are small independent shops, their ability to move their interests beyond the basic business struggles is almost non existent.

My suggestion is to create a high end audio association that represents the interests of this industry. I know that CEA and other associations are supposed to represent our interests but let's face it; we're a small group without much influence on key strategic industry issues.

My experience working on issues of this nature at a national level has shown me that you can improve the position of small cottage industries but you need a broader, more coherent voice to do it. I'd certainly help to set up an initiative of this nature.

The benefits of creating such an organization are many- influencing policy at several levels of industry and government, creating relationships with non traditional business partners that increase opportunities, resources, and exposure and helping with basic business essentials and benefit packages.

I know I’m making this sound all rosy. It’s not. There would be many, many tough issues to decide and not everyone’s needs could be met. But I see a big upside. Besides, what’s the biggest risk? It doesn’t work? That doesn’t seem like a risk to me given the state of the industry.

Go ahead and beat me up but I see something of vaule in this idea.
on a certain level, it's hard to conjure up any sympathy for an industry which is so out of touch with customer needs and desires. mainstream manufacturers and retailers continue to foist big, complex, aesthetically unpleasing components on a buying public which overwhelmingly wants portability, ease of use and sleek design. it's sorta like how gm kept trotting out expensive, gas-guzzling trucks in the teeth of demand for small, fuel-efficient cars. whatever your opinion of bose products, at least they are oriented to consumers' tastes, and i suspect they and other design-oriented manufacturers will be among the few to survive the apocalypse.
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.


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.
I suppose those that offer good service and value are most likely to survive as is generally the case. Its a lot harder to provide good value than it is to provide good sound when cost is not an issue. Natural selection?
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.
I've read many valid observations. Trends. Economy. Market. etc.
A suggestion.
I remain convinced, that if a person is given a choice, the will gravitate to quality, high end sound. If this is true, then the manner in which the consumer becomes exposed to the possibilities of access and quality needs to addressed.
Since our hobby is one in which "hearing is believing", a new business model needs to be created so that a "brick and mortar" retail store is viable. A key historical model needs to change, and that is the independent retailer.
I might suggest the formation of a High End Association of manufacturers which might invest in superstores. I envision a retail store which has a wide variety of manufacturers with various rooms to audition, mixing and matching COMPETING components.
Inventories would remain at the manufacturers ordered and shipped, much like the current direct sellers do today.
By necessity, the marketing theme should be, getting the most out of your computer/digital libraries. Modern and hip.(Of course, once the customer is in the store, expose them to the magic of vinyl).
If they want to combine with video, send them to BestBuy for the low margin flat screen TV.
From what I understand high end retailers became forced to offer video and installation which actually proved profitable until the crash. In house set up should be a service rendered and charged. How many of us would relish a chance of having a audio expert confirm our setups?
Stores, by necessity, would need to be located in major markets. They might become a destination visit as Sound by Singer might have been. If successful, expand.
Most of us will never attend a HiFi show. This would bring the show us, or at least closer.
We need to tap that group of people that are listening to and enjoying music. Period.
Cost is shared among all of the manufacturers.
The manufactures will need to show some guts and confidence in their products.
The investment in the store will need to be categorized as an element of sales and marketing costs. This will be very difficult, given the lack of effort or resources of the past.
I'm sure this business model has a many holes which I'm too naive to consider.
The key is the INDUSTRY must take responsibility and initiative to keep our love of good sound alive. Unfortunately, egos run rampant in this hobby. Maybe survival will be a motivator.
Just a suggestion.
Sherpa: We may both be a trifle naive, but we're thinking along parallel lines. More later.

Loomis: Not going to tell you again that you're correct, but yeah,you are. ;->

Git-tar: Interesting how the CEO of Hollywood Video is now the CEO of Ultimate, no?

Ferrari: we're be hearing from more in the industry in the next entry. I welcome any and all to comment on this thread, as well.

Hifi: Glad to hear it! Good for them!

Mac: way to win friends and influence people, big guy! Sadly, your comments are absolutely accurate. I only wish I'd coined the phrases, "a small band of delusional eccentrics", and "finitum is on the horizon". Great stuff!

Sbr, Mac: Yup, agreed. Now we're back to the question, "What do we do now?"

Thanks to you all for your provocative and insightful comments.
don't sell the consumer short. necessity is the mother of invention. people can figure out how to configure a stereo system without a dealer's advice.

what happened to experimentation ?

the only issue is who will sell the equipment ?

will it gravitate to direct sales from manufacturers whose overhead is low ?

will brick and mortar stores prosper, grow or diminish in number ?

I think over time brick and mortar stores will represent a smaller market share of audio produtcs, over time.

that is, it is my hypothesis that there will be more direct sales from manufacturers at the expense of audio stores.
"09-09-10: Papermill
I remain convinced, that if a person is given a choice, the will gravitate to quality, high end sound."

I disagree. IMO, most people will gravitate to brands they know, ease of use, flashy bells and whistles every time. Sound is not at the top of the list. The choice for most consumers is between pretty good sound (big box stores) and really good sound (Hi end B&M). It's just not worth the effort to them.
Apple killed high-end audio.

Back in the 80's when I went off to college, every kid had or wanted a stereo. In our dorms we were introduced to the various brands. Some of your buddies might have had some exotic gear. I'll never forget helping one guy move his Klipsch speakers. They weighed probably 150 pouns each.

Fast forward 3o years. My 17-year-old who'll be leaving for college next year listens to just about everything on an iPod. I've invited him to check out his music on a real system and he's not interested.

It's not any kind of father-son rift, he just doesn't care. His buddies are all the same way.
Well, the tough times now may be a memory in 5-8 years. I wouldn't call the demise of high-end audio quite yet. There is SO MUCH 10-30K amplifiers and speakers out there now, it's really a prestige arms race as much as it's about sound. Adjusted to inflation, top gear is far more expensive than ever before. If companies slightly lower their standards, and shave off 15-25% of the price of these premium products, they and the dealers may be able to hold on until a recovery emerges.
Respect the past but embrace today. I often read posts on audio sites like Audiogon and think to myself, "How old are these people? My gosh, they think and talk like no one my age and I'm not exactly young." Ya'll need to start thinking in a "Beats By Dr. Dre" mentality (metaphorically speaking).
@Geneoshea: How did Apple "kill high-end audio"? Please explain?

@Mrtennis & Sebrof: There are people who want quality, but they also want simplicity. Audiophiles don't make things simple. That's not a bad thing, but it's not want most people want.
Paper: good idea, actually heard similar ideas floated. Problem is, as always, time and capital to get it going. Thanks for the thoughts.

Tennis: guess we'll have to wait and see. I wouldn't rule out the draw of hands-on product contact; been to an Apple store lately?

Sebrof: can't we have both? Back in the day when I bought and sold old radios, their elderly owners always made comments like, "it has such wonderful tone", not, "boy it was easy to use". Ease of use should be a minimum acceptable requirement for ALL products, in my admittedly-demanding view.

Geneo: Don't blame Apple. If anything, they've done more to facillitate the widespread enjoyment of music than any company since...who? The Victor Talking Machine Company?
I have two teenagers, understand the gap in understanding. I'm slowly and sneakily getting them interested in the 'pod through the Big Rig (such as it is).

I've met Victor Tiscareno, head of audio at Apple; he's a very bright guy, with a background in the high end. He GETS it. The fact that Apple doesn't see the possibilities in more-upscale audio isn't his fault; it may, however, show a lack of insight on the part of the traditional audio industry.

Mywife: Judging by what I hear from dealers, right now the deal is everything.

Sherpa: Mostly, we're ancient, and that's a big part of the problem. I'm 54, but have two teenagers, as mentioned above. Daughter HAS Beats, and just got the new iPod Touch. Agree completely with your viewpoint. Y'all/we-all are indeed out of touch.

Ballan: "Audiophiles don't make things simple" is a classic of understatement! Thanks for that.

Thanks to all of you for sharing your insights and concerns. Keep 'em coming!
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.
I see a future where larger manufacture are near nonexistent that only small factory direct will have a chance to survive. If one can not go into a holding pattern to wait this out. They will go under.
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?
May, 2010:
Movie Gallery closes 1,906 Movie Gallery, Hollywood Video and Game Crazy stores. Over 19,000 jobs are lost.

The closing of Movie Gallery had nothing to do with the economy. They lost for 2 reasons:

1. They drasticly over extended themselves with the Hollywood Video purchase
2. On-demand, NETFLIX and cheep videos at mass merchandisers