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Someday Will There Be Only One Audio Company?

Paul Wilson looks at the pros and cons of consolidation in the audio industry…

AR-ConsolidationSmallFormat225.jpgMy Brother, who for thirty years was employed by United Airlines, used to tell me the joke in the airline industry was, after all the mergers were completed, there would one day be only one airline. 

Passengers would no longer be able to compare competing prices between carriers because there would be no competitors. Whatever this unified airline charged, or whatever routes they flew or departure and arrival times, well, you simply wouldn’t have a choice. You played the hand you were dealt. 

Of course, the truth is, the Federal Government would never allow this to happen. Government mandates state one business entity cannot have total control over all other companies. So the number and magnitude of the mergers and acquisitions required to have only one US carrier would simply never happen. But it was a pretty interesting joke to spearhead a conversation. 

AR-Airplane225.jpgIn audio, it is plainly evident that mergers have gobbled up small, family owned business thereby creating conglomerates, or at least large audiophile companies. None of these newly formed business entities will ever be a challenge to, say Exxon or Walmart, but you get the idea. 

From a straight business standpoint, large, multi-company businesses make sense. Manufacturing costs, sales expenses, advertising and virtually all overhead may be shared among all the divisions. Revenue can be distributed as well thus ensuring stability of the parent company and providing for growth, something of paramount importance for any business. Conversely, all operating units can also be responsible for their own balance sheets and stand on their own. Either way, there is strength in numbers. 

AR-StrengthInNumbers225.jpgOn the other hand, consolidation can have negative effects. For one, technology may not be shared between brands. Car companies routinely battle this as one car brand always wants a marketing advantage over a sister division. If an advanced technology is offered by one brand that is not a favorite, a choice must then be made – go with the less desirous brand or sacrifice new and better technology. 

Another issue is pricing. If all brand names in a conglomerate must stand on their own, one seeking higher profits than another will carry higher list prices. Or if one brand is generally considered better than another, much like Cadillac is usually considered better than Chevrolet, the better designed and manufactured product will cost more. Will the parent company therefore be held in less regard because price levels are not more consistent? Unlike automobiles, there are far fewer audiophiles buying audio gear so such differences might easily create antagonism. 

AR-Esoteric225.jpgObviously, consolidation in the high performance audio industry has not proceeded to the point that stand alone, individual manufacturers are not in abundance. But it is very difficult to ignore the fact that consolidation has taken place. Moreover, the trend is, to a point anyway, continuing. 

Another factor that is emerging is non audiophile companies looking to gain a foothold in the high end landscape. Samsung, under the Harman brand name, is one such conglomerate. While they currently have only purchased a couple high-profile audio companies, it does not mean they don’t have the size and financial strength to buy quite a few more. Even Technics, perhaps more commonly associated with lower fidelity products, has for years kept its toes in the high performance category. Turntables and speakers are product segments that may be found at audio shows, and, somewhat surprisingly, typically carry with them considerably high list prices. 

AR-GibsonGuitars225.jpgSometimes, consolidations don’t go so well. Gibson Guitars declared bankruptcy in 2008 after going on a buying spree that left them with far too much debt. Part of their goal was to expand into luxury audio and one of their premier brands was Teac on the professional side, and Esoteric on consumer side. After declaring bankruptcy, Onkyo assumed the marketing mantle of distributing Esoteric and Teac in the US. 

Other companies will, in all likelihood, be very hard pressed to ever be bought out. Some of our legacy designers and emerging creators of some of the industry’s most remarkable products will have as their guiding business principal individuality. Selling the company to a much larger entity is not a consideration. 

AR-TimeWillTell225.jpgIn business today, consolidation is a fact of life and a practice that will continue. Audio companies are not immune. Some consumers will hardly take notice or even care if their favorite manufacturer is swallowed whole by some unknown entity. Others will take considerable exception to such practices, maybe to the point of ceasing doing business with that company. Legacy designers will probably lose control of their company in the process. Of course, the possibility of new and sought after innovations may occur because of an influx of design capital. 

Audio as audiophiles know it is in a state of flux. If your long-loved brand decides to sell out to some unknown, unheard of parent company, there will be little the average consumer can say or do to stop such unwanted consolidation efforts. Whether these consolidations prove beneficial or the end of an era will ultimately be determined by that historically accurate business indicator – time will tell. 

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