Dec 15, 2009
VOLUME 26 NO.12

THE MAGAZINE FOR MUSICAL INSTRUMENT AND SOUND PRODUCT MERCHANDISERS

 
 

   
 

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-Table of Contents
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FEATURES
-Pay It Forward! You’ve heard enough bad news. We take a look at the fantastic things happening in MI today.
-‘MIM is the Word The Musical Instrument Museum opened in Phoenix to a lot of fanfare. Rebecca Apodaca, an expert on antique instruments, gives you a rundown of the latest thing to hit MI.
-‘Loud and Clear Pro audio products continue to sell. We get the scoop from four top manufacturers.
-‘Open Door’ Policy NAMM makes a big change by allowing member-invited guests on the last day of Summer NAMM.
-Musikmesse A-107K! Attendance at Musikmesse and Pro Light + Sound dipped slightly, but optimism was up.
-It’s in the Cards ! You need to have PCI DSS-compliant terminals to handle credit card transactions by July 1. What are we talking about? Don’t worry, we’ll explain.
-Unplugged Acoustic guitar sales grew dramatically in 2009 and the beginning of 2010. Is this the beginning of a new trend?
-Head of the Class! We shine the spotlight on many of the new companies that launched at NAMM.
-Musicorp Mourns Mike Murphy We honor the sale rep’s life that ended way too soon.
-Is a New Healthcare Plan Just Snake Oil? We take a thorough look at how a new public healthcare plan can affect you and your employees. ?
-Bonanza! Behringer Buys Bosch Brands Behringer’s parent company added the Midas and Klark Teknik brands to its stable.
-The Stars Will Come Out…This Weekend We highlight a few of the celebrity appearances at NAMM.
-What A Long Strange Trip It’s Been!!! We reminisce as we close out the first decade of the new millennium. It was a tough 10 years for many. How about for the music industry though? What’s ahead?
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It’s Voting Time! Here are your nominees for the 24th annual Music & Sound Awards.
-Here We Come to Save the Day!!We provide a plethora of accessories that manufacturers assure you will provide excellent margins.
-For Those Who Make Lesser Publicized Instruments, We Salute You!!For the first time, we pay tribute to instruments and products that get little press coverage. We provide a well-deserved spotlight for these products!

-The Latest, Industry, Dealers, People and Product Buzz and Showcases.

COLUMNS
-The Music & Sound Independent Retailer Chris Lovell tells you how history can predict the future and gives a big shout out to trade magazines. Plus, a retailer affected by the Nashville-area
floods, a new dealer, iMSO’s Summer NAMM meeting and more.
-Five Minutes With: Sure, the Kentucky Derby was last month. But that doesn’t mean Spy can’t see which store will cross the
finish line first in Louisville.
-MI Spy: MI Spy is off to Sin City. Oh boy, a Spy in Las Vegas can’t be good. Amazingly, Spy did get some work done.
-Dan the Man: Music & Sound Retailer Assistant Editor Dan Ferrisi remains on the music-playing sidelines.
-Birth of a Product Two former PRS veterans combined forces to found Knaggs Guitars. The story behind the Maryland- based company, which debuted a line of products at Musikmesse.
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Sales Guru: Gene Fresco knows what “Pre-approach” is. He
imparts all of his knowledge to you.
-Veddatorial: Dan Vedda provides tons of Summer NAMM thoughts and some general summer thoughts, as well.


FORMIDABLE FEMALES

-Sue Avant is a trailblazer. She’s also someone who
has varied interests. And she is, indeed, formidable.

-Mary Ann Giorgio It sure sounds like a great job to cover soap operas like Days of our Lives and speak to celebrities on a daily basis. But MXL’s Mary Ann Giorgio was never comfortable in that industry. She sure is comfortable at MXL Microphones though.
-Fusion Bags For the first time, we feature multiple people in this column. We look at the genesis and growth of the all-women founded business, Fusion Bags.
-Linda Arink is one of the very few female executives at a DJ company. Learn how she became involved and why she hopes we won’t even need to have a column about top industry females in the future.
-Debbe Stephenson stumbled upon MI shortly after college, but is sure glad she did. She’s now president and COO of Pro Co Sound.
-• Mary Peavey
-• Jennifer Tabor
-• Tarina Dunwoodie
-• Stacey Montgomery-Clark.
-• Cathy Duncan
-• Bee Bantug
-• Dale Krevens
-• Melanie Ripley
-• Susan Grund
-• Toby Nady
-• Shawna von Behren.
-• Berenice Chauvet
-• Sue Kincade
-• Tish Ciravolo
-• Vikki Hayward
-• Roxana Ramirez
-• Susan Lipp



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What a Long Strange Trip It's Been
[December 2009 - Page 1]

You won’t believe it. The decade of the 2000s will be over in a couple of weeks. 2010 is right around the corner. It’s always interesting to reminisce, isn’t it? Well, we can certainly say this: The decade wasn’t boring.

The decade began in 2000 with worries dissipating about the Y2K bug. For many, it was scary. All the talk in the press was about how all electronic devices could cease to function. Airplanes could fall from the sky.

Of course, none of that took place. We were riding a high. The economy was running on all cylinders. Corporate bonuses were massive. The Internet era was gangbusters. After the Y2K scare, it’s safe to say times were good.

Like other industries, MI was riding a nice wave. The NAMM show was a happy event. New companies and products were springing up everywhere. Nothing could go wrong.

Well, that’s until something did go wrong. A recession began in March 2000, although it would not be fully felt until later. We got the first sign things were turning when the stock market stopped its constant rise and not only took a breather but, in fact, began to drop.

As the calendar changed to 2001, the recession was being felt. The Internet bubble had burst. For many in the younger generation, this was the first significant economic downturn they had seen in their lives.

It was a big year for the NAMM show, however. The organization celebrated the 100th anniversary of its first show. 2001 also marked the show’s return to Anaheim after a sabbatical in Los Angeles.

Of course, the defining moment that year came on Sept. 11, when the world changed forever. That one day was clearly the biggest event of the decade and one none of us will ever forget. The economy was already in a recession but, now, it fell off a steep cliff. Although MI is more recession-resistant than other industries, no industry was immune to Sept. 11. Not only had the world changed, but the business world also had changed. Everyone tightened their belts. People were scared. They were so scared that, on Sept. 17, the first trading day after Sept. 11, the stock market sold off to the tune of 684.81 points, or 7 percent. That was just the beginning. The market continued to drop from there.

There was a lot of pro-American sentiment around the world, at least temporarily, but fear took over. Will we be attacked again? If so, when and where? Many Americans thought this was the safest place to live in the world. But everything changed.

Instruments, like other commodities such as movies and alcohol, continued to sell. People wanted to forget their fears. Not to think about their problems. Playing musical instruments has always been a way to get your mind on another topic. A way to relieve stress.

Our October 1, 2001 issue brought up the MAP pricing debate, which is so important today. We said “MI is divided over Minimum Advertised Pricing.”

Despite bad times, 2001 was remembered for a huge innovation that changed the way people listened to music forever. Apple’s first iPod shipped on November 10, 2001.

Although Internet retailing was certainly strong in the 1990s, some argue online music instrument retailing exploded in the past decade as people became more comfortable with the security of such Web sites. However, customers could not get to touch the instrument or appreciate the sound it emanated until receiving it in the mail.

2002 was another dismal year for the economy. War talk dominated the headlines. Uncertainty continued. The stock market continued its selloff. Obtaining a job was a difficult task.
Mars also had a tough year. The retailing giant declared Chapter 11 bankruptcy.

Improvements came in 2003. People began to resume their normal lives. Many came to the realization the world had changed forever. We could not return to pre-Sept. 11. We lived in a new world with inherent dangers. In MI, NAMM, based on feedback from its membership, tried to rotate the Summer NAMM show between Indianapolis and Austin.

From 2004 to 2006, better times continued to roll for most. However, it was nothing like the 1990s Internet era. During that period, mergers in our industry became a fact again. Avid Technology bought M-Audio. LOUD Technologies bought St. Louis Music. Guitar Center bought Music & Arts. The economy recovered. People could get jobs again. The recession was officially over.

Rick Young, senior vice president of Yamaha Corporation of America, pointed out the recession and massive unemployment were definitely negatives of the first millennium of the new century. He pointed out the following positives, however: “Internet/social media is moving quickly. We went from e-mail to MySpace, to YouTube, to Facebook, to Twitter and others.

“The digital revolution has also affected our industry. Though synths, portable keyboards, digital pianos, and digital drums top the list, technology has helped create better acoustic instruments that have higher tolerances, improved designs, and faster production. Most consumers are comfortable with technology and our industry now delivers more value for the price than ever before.

“As new countries have become involved in production and design of musical instruments, especially over the last 10 years, relatively low barriers to entry and plenty of low-cost workers put the U.S. into a deflationary market. Most manufacturers that were not tied into China, India, and Vietnam had a hard time adjusting. The recession that followed this offshore production has hit everyone hard, but I believe that the toughest part is over.
“Gaming, in general, has taken a mind and dollar share from our industry, of course, but it’s not going to change soon and we need to work with it. Some say that they have Guitar Hero players coming into the store to buy the real thing and many dealers have marketed to GH junkies to try and get them to start lessons.”

The Last Three Years

2007 was a big year for MI, as Guitar Center was taken private by leveraged buyout firm Bain Capital. The move was made during a heavy merger and acquisition phase. Fender merged with Kaman.

And then, there were attempted mergers. Kohlberg, Kravis and Roberts was supposed to purchase Harman International, but the deal collapsed in October 2007.

It was also the year that the Federal Trade Commission began to investigate the music industry. The FTC investigated possible industry price fixing.

Guitar Hero also dominated the headlines that year. Could a video game draw more people into our industry? We conducted an informal poll of people unrelated to our industry who said they were interested in playing instruments after trying their hand at Guitar Hero. However, critics said the video game could have negative effects because some would master the video game, realize a real instrument is much harder to play, and give up on our industry for good. The jury is still out on that one.

2008 got off to a fast start. The NAMM show set an all-time record with about 88,000 attendees, larger than several cities. However, only months later, the economy took a sharp turn for the worse. The stock market began drifting lower again. Everything came to a head when Lehman Bros. declared bankruptcy and Merrill Lynch was sold to Bank of America. The news caused the stock market to tank more than 500 points. Several government buyouts followed. Layoffs were massive at every corner. That includes MI companies. Some subsequently had to cut up to 100 jobs.

Bernard Madoff confessed to a massive Ponzi scheme, which put the topping on the cake of what most people agree was the worst financial period in U.S. history since the Great Depression.

There was hope. The election of Barack Obama as president was lauded internationally and lifted the spirits of many abroad. There was a feeling things were going to change, and hopefully for the better.

An initial candidate for the 2008 presidential election on the Republican side was former Arkansas Gov. Mike Huckabee. Huckabee is a huge MI advocate. He now hosts a television show on Fox News and became the spokesperson for NAMM’s Wanna Play Fund.

2008 also marked the beginning of a new MI movement. Independent dealer groups became all the rage when IMRA and MSO merged. The combined group, now called iMSO, has more than 350 members. Unlike before, many independent dealers feel that through such groups, they now have a voice and others to lean on for advice. The AIMM group established itself as a top retailer consortium throughout the decade.

Economic woes continued well into 2009. The stock market sold off so badly that people wondered if it would go to zero. Even the most bullish investors had to sell at least some assets and preserve capital. The NAMM show was extremely productive but somber at the same time. There were no lavish parties like those that we saw earlier in the decade. Manufacturers and dealers alike talked about making ends meet. For many, it was about surviving, not thriving.

Summer NAMM was also productive for those who attended. The problem was, several large companies failed to exhibit in Nashville. The national unemployment rate reached 10 percent.

On a positive note for many readers, we really saw large manufacturers circle the wagons in 2009 and increasingly rely on independent retailers again. This is according to independent dealer groups such as iMSO. Several retailers have told us manufacturers no longer want to place their bets on a couple of larger chain stores. As Jim Cramer says on the CNBC show Mad Money, manufacturers have allegedly decided that “diversification” is the best policy.

2009 will be remembered for a lot. In MI, one of those things will be how litigious a year it was. Early in the year, NAMM settled with the FTC. The consent agreement admitted no wrongdoing on NAMM’s part.

However, several lawsuits followed. The first was a class-action lawsuit filed by David Giambusso, a Brooklyn, N.Y. guitarist who visited Guitar Center in 2007. This, and the other lawsuits, is ongoing as we speak.

We’d be remiss if we’d didn’t mention Rock Band also became a huge video game hit.

Social networking became a sensation. Facebook and Twitter are more popular than ever today. Predecessors such as MySpace have lost popularity, but were certainly influential.

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