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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
audiogon_bill OP
155 posts
 
Mac: Who'd have thought of getting upside-down in an amplifier?

Jeff: If it wasn't caused by the economy, it certainly affected the economy, with 19,000 jobs lost.

Ferrari: RMAF this year will have more exhibitors than ever, and manufacturers don't spend money on shows that don't produce for them. The manufacturers doing well right now are generally long-established brands. It's very, very difficult for new brands to break into a shrinking pool of dealers, many of whom are thinning out the number of brands they're carrying.

Map: It's hard for me to think that things are better than ever when much of the biz is on life-support. Clearly it's a buyer's market, but at what cost, long-term?

Sherpa: Yup; upscale gaming is largely untapped, but offers great promise for audio sales.

Chaz: Gloomy. Bizarre how artists used to put on shows so as to sell records, and now the recordings just draw in audiences for live shows.

Many US manufacturers are surviving on sales to overseas markets, and many foreign markets are fairly robust. Many well-respected, successful brands have no presence or limited presence in the US. Gryphon comes to mind.

Mac: The old pool of customers is indeed diminished, diminishing, and dying out. That doesn't mean quality sound won't find an audience. As we've said here repeatedly, it's got to go to the iPodders, gamers, can-fans, and so on.

Shad: I've said it before, I'll say it again: in audio, EVERYTHING matters. Voodoo? In some cases. Whether or not it's cool to believe in it or even logical, a lot of that weird and even laughable gear can make a big difference in the sound.

Having said that: would you want to emphasize that if you have any hope of acceptance in the mainstream marketplace? Of course not.

Thanks to you all for your insights.
samuel
266 posts
 
Holy cow, pass me the Xanax! I don't know what the view from the internet is, but from the ground, east coast to west, nothing is looking_that_ bleak.

>>>I suspect that voodoo claims and marketing is much to blame. After all, high end is synonymous with very expensive highly marked up but ordinary wires<<<

Hmm, as I wrote before, in high-end end audio as in other small market economies, corruption is a private enterprise. Some companies inflate their margins beyond reason and its not exclusive to wire--though it is easier to spot. There are pockets of corruption in every industry. The days are all but over where this type of gouging goes unnoticed. Checking product re-sale values and looking into a company's history, pricing and background can help. Ask questions. Again, social networks and relationships matter in this business and economy.

In the bigger picture, much of what is best about high-end audio is still very much alive, even thriving. There remains a strong network of talented manufacturers, truly excellent dealers and a host of media outlets world wide that care about covering high-end. There are also many thousands of passionate enthusiasts that fill the show rooms in Montreal and Munich as well as respectable turnouts for RMAF and CES.

There are thousands of industry people of all walks who care passionately about what they represent. They follow the tradition of long hours to earn a modest living doing what they enjoy. I don't see that going away any time soon. Companies with solid infrastructure, well established world markets and superior products will last through worse than some tough times, others wont.

There may be some good to come out of it, such as better products at lower prices. Yes, when the robber-baron's realize the money-printing gig is up, they'll look for a more lucrative scam. There are only a very few in this business that take home more than a working man's salary and those that do for the most part, have earned it.

I acknowledge the mentioned challenges and well written apocalypse scenarios above, but its pretty damn early to be writing final chapters for an industry made up of some tough and talented individuals. When the economy begins to sort itself out, there may be a slightly smaller but stronger industry revealed, having gone through a difficult period. Tough times ahead and some changes? Absolutely. The end of high-end audio? Not a chance.

Grant
Shunyata
audiogon_bill OP
155 posts
 
Grant: Agreed. I don't know more passionate, committed folks than those in audio. Yes, there are some bad apples; generally, they are found out and weeded out.

The recent resurgence of regional shows indicates that there is still interest and life in the field, and there are still large, untapped audiences for high-quality sound reproduction.

Will Hi-Fi ever regain the general level of acceptance it had in the '60's or '70's? No, it won't. That doesn't mean it's dead.

Far from it: I expect the advances in performance in the coming decade to be almost beyond belief.

The best is yet to come. It just might not have a 2" thick faceplate. ;->

Thanks as always for your thoughts.
macrojack
1,303 posts
 
We're a cult, guys. We hold to obsolete ways. We insist that others would follow us if only they would take the time to listen. If they choose to ignore us, we forgive their pitiful ignorance and redouble our efforts to show them the light. We seem to be unaware that we are the ones who are oblivious.

Young people, maybe because we have provided them with no sense of security, are very mobile in their minds and lifestyles. You have thousands of dollars and hundreds of pounds in hardware. They have an I-Pod and ear buds. You have thousands of discs. They have a hard drive. You own a house. They will probably always rent. You had a career, often at one job. They expect to be traveling and hopping from one work opportunity to the next, always remaining somewhat mobile.

Times have changed and high end audio has not. Any adaptation that our hobby makes to the ways of the next generation, will necessitate moving away from what we hope to protect. Current trends are evolutionary, not the result of intelligent design. We are seeing the future and insisting it is a blip, an aberration, to be tolerated until the natural order is restored. Due to our jingoistic insistence that our remembered youth will rise again, we remain blind to the truth that the ship has sailed. What we cherish is the garage tinkerer aspect. Digital crapped on that a bit in the 1980s but we responded with aftermarket upgrades, modifications, and cosmetic redos. When that played out to some extent, we revived analog and began sponsoring garage tinkerer turntable makers. We ignored plainly superior designs from Japan because they came from large corporations which ran contrary to our tinkerer/inventor mythos. We elevated these guys to celebrity status and lionized those who were bold enough to lead the charge toward the Absolute Sound.

Now I hear us talking about large companies and mass marketing techniques as the way to reverse our decline. It won't work because it isn't in the spirit of the dream we continue to grasp tightly in our closed minds.

Naturally, there are those entrepreneurial individuals who want to keep it alive until they've wrung the last nickel out of it, but they are running out of ears. Too many of us are folding our cards and standing pat. What we have, after all, is the stuff of dreams. Let's just live out our last however many years and enjoy the present such as it is, rather than lamenting the consequences of inevitable change.

audiogon_bill OP
155 posts
 
Mac: Ouch! How DARE you call us a cult?? See if we ever update you on the latest secret handshakes or passwords again!

I guess when you get right down to it, I'm not part of the cult. I hate gear I have to fuss over or diddle with. I want it to work immediately, work flawlessly, work every time without issue.

Is that so wrong? ;->

At one level, audiophiles are as out of touch as those guys who spend their weekends fine-tuning a Holley carb.There will likely always be some who enjoy that, just as there will be many who find (like me) such technology to be endlessly frustrating and fiddly. Sorry; give me fuel-injection, any day.

Similarly, I love turntables, have read the different cartridge set-up methodologies, have seen Michael Fremer demonstrating cartridge set-up. I can no more do a decent cartridge set-up than I can do a quadruple bypass. You can't tell me there's not a need for an expert dealer!

There will always be people who want music in the home. Will there always be card-carrying members of Audiophilia Nervosa? Some. As the technology becomes more hands-off there may be less to tweak--but never underestimate the ability of an obsessive to find something to obsess over!

Thanks for your thought-provoking comments.
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