By Dan Ferrisi
At the end of last year, all of us heard the news that Gibson Guitar had created a pro audio division through the acquisition of the platform assets of the Stanton Group. The Stanton Group is, of course, comprised of KRK Systems, Cerwin-Vega! and Stanton DJ, and is known for making products for consumers and professionals. Together, the companies formed the Nashville TN-based Gibson Pro Audio division. Bearing all that in mind, what better time than now to have a detailed, forward-looking discussion with Timothy Dorwart, General Manager, Gibson Pro Audio? Here, we get a comprehensive overview of how this deal came to fruition, what it will mean for the MI retail channel and how Gibson Pro Audio plans to continue to drive innovation.
The Music & Sound Retailer: Tell me about Gibson Guitar purchasing the assets of the Stanton Group and Stanton’s subsequent transition to become Gibson Pro Audio. How did this come about?
Timothy Dorwart: There has been ongoing interest in the Stanton Group assets by a wide range of the industry’s key players. The Stanton Group has been owned by a private equity investor, and they had held the investment for about nine years. The industry is savvy enough to know that, once an investor has been holding an asset for a certain period of time, they’re interested in listening to offers. Once our investor/owner had received several acquisition inquiries, they were motivated to conduct a search to see who would be interested in buying the brands. The entire process of the sale was planned and methodical: It is a course of action that our investors have done many times. And, just as a side note, one of the interesting things in this transition is that the Stanton Group has just enjoyed its best year ever in 2011: record profits and record sales growth. So, the timing was actually very good for the investors.
Gibson Guitar wasn’t a potential suitor that we had anticipated. We didn’t see them necessarily in the core of who might be interested in our assets. And, so, it was really quite interesting to us when they entered the negotiations. And I would say that they not only had the best value for the seller, but also had the best strategic fit of anybody who was interested in purchasing us. And that’s quite simply because there is nothing duplicative with what Gibson is doing today. All three brands are additive and complementary. And, so, in that regard, it was a good thing for the seller, the buyer and the employees, because Gibson has retained the majority of the employees as part of the transition.
The Retailer: What are the strategic benefits of this relationship, from your perspective? Why is it good for the Stanton Group, for the MI industry at large and, ultimately, for the MI retailer and his or her customers?
Dorwart: One of the things that we saw very quickly was not only do we add value to one another as far as our product lines and our technologies, but we also bring some engineering resources to the table that Gibson didn’t have: most notably in audio engineering and electronics. Conversely, Gibson possesses technology that we see as a natural fit in making our next-generation products more compelling. And, so, there were some good additives for both companies on the engineering side.
So, what does that mean for the channel? It means that the Stanton Group brands, which are now the Gibson Pro Audio brands, will have much faster turnaround on product development. There will be new research and development resources that can accelerate some of the innovation that we’ve been working on under the umbrella of the former Stanton Group. The other area where we had good synergies was in our sales, marketing and technical support to the channel. It turned out that channel partners that did 80-plus-percent of Gibson’s business were largely the same as the Stanton Group’s. I guess that’s probably not surprising to most, but it was certainly a great opportunity for us to combine our sales organizations, which we’re in the process of doing right now.
And, so, what happens now is you have a factory-direct sales representative from Gibson who is representing all Gibson’s divisions, including Gibson Pro Audio. Our former Stanton Group sales team has been transitioned to Gibson, adding expertise and feet on the street as well as additional new resources. Gibson deploys a sales philosophy that was also very synergistic with the way Stanton approached it, where they have different people who focus on the negotiation/business development, marketing and merchandising strategies with our channel partners, and then they have a separate organization that is field-based, which goes in and actually will help merchandise and train in-store. That was something that we had through our independent sales rep channel, but it was weak in the sense that they didn’t have as much time as we would have liked for that function. So, in theory, we’re now going to be able to deliver a much better experience, both on the front end of the sales process and, more importantly, on the back end of the sales process.
Both companies also had a shared philosophy on sell-through as one of our guiding principles. If we sell product into the channel and it just sits in the channel, we all lose. And, so, what we had as a philosophy of the Stanton Group—which is absolutely identical to Gibson—is that we have to sell the product through. That means what the channel buys, how it’s merchandised, how it’s positioned, how it’s priced and how it’s sold are all very important parts of sell-through. So, they have a whole group of people who are now supporting our brands at that level.
And then, they have a third organization—which we had here, too—that is in-house people who support the channel. Ours was reactionary, in the sense that they only had time to answer the phone and process orders. Gibson actually has the resources to be able to reach out to the channel, which is another asset that we lacked. So, we had synergy in the channel, meaning that we’re dealing with the same customers and, now, we can bring a new level of support before, during and after the sale.
The Retailer: Can we definitely expect to see Stanton, KRK Systems and Cerwin-Vega! all as continuing brand names in perpetuity into the future?
Dorwart: The brands will continue. The three brands’ equity is one of the most valuable assets the Stanton Group brought to this partnership. There are no plans to eliminate any of the brands, by any means. The baby of the group is KRK, and it has more than 25 years in the marketplace. And Stanton and Cerwin-Vega! have more than double that. So, you have global reach of brands that are very valuable to Gibson.
The Retailer: Share some of the highlights of your own story as it pertains to the audio industry. Tell me about the path that you’ve traveled, bringing us right up to the present day and your current position.
Dorwart: Like so many in the audio business, I started as a musician. I was a bass player in a band in the early ’70s. And, like all musicians, you had to figure out how to work with audio equipment as a part of your craft. That’s generally how I got involved in it. I went from being a musician to working for the music store that I bought my gear from to becoming a sales rep. I spent a large part of my career at Bose Corporation, in its Professional Products division. In my last decade at Bose, I led the North American sales and marketing organization for the Professional division. And, in those final two years, I had the added responsibility of leading their product development on the marketing side. So, that’s kind of where I grew up, learned the craft and learned a lot about technology, audio and how to market audio.
I joined the Stanton Group, initially, in 2005 as the head of their marketing and sales for KRK and Cerwin-Vega!, with the goal of turning those brands around and getting a growth plan in place. A year or so into that mission, I was appointed to be the CEO of the company, which I’ve been doing for the last five years.
The Retailer: In terms of what you accomplish day-to-day within Gibson Pro Audio, what are your key duties and roles? What do you most enjoy doing?
Dorwart: Well, it’s evolving. What I had been doing as the CEO of Stanton is very similar to what I’ll be doing with Gibson. It’s set up as a division within the Gibson corporate structure. And, as the General Manager of that division, I’m basically responsible for that business unit. I have complete P&L responsibility for the business. I have corporate colleagues now who provide certain functions that, before, were completely part of our corporate structure. But, essentially, on a day-to-day basis, I’m going to be doing very similar things to what I was doing before: product strategy, market strategy, etc. But, now, it also includes, “How do I help Gibson in this new area of audio and, in particular, professional audio?” “How do we craft a future for that division?”
One of the things that Gibson wants to do is to expand the reach of the Gibson brand. It’s obviously a world-famous brand. It’s extremely powerful within the MI space and, certainly, within the guitar space. But, we believe that there are a lot of opportunities to expand the brand beyond just MI and guitars. And you’ve seen that a little bit with the company’s recent acquisition of the majority share of Onkyo USA. So, there certainly is a strong aspiration for the company, and the brand, to expand beyond the MI space and, certainly, beyond the guitar space.
The Retailer: What is Gibson Pro Audio’s founding vision? How will this vision affect its eventual boundaries in terms of its offering?
Dorwart: When you say “pro audio,” it’s a very broad category. It does open up an opportunity to add other brands or other product lines underneath that can go into a number of other areas. If you look at what the three Stanton Group brands bring to the foundation of that division, it’s a fairly broad base. We’re active in live sound and consumer audio with the Cerwin-Vega! brand. We’re in the recording space with KRK. And, we’re in the DJ space with Stanton. So, we’re fairly well rounded and we have an opportunity to go in a number of expansion directions with the existing brands. And there might be other brands that are assimilated—or other technologies that are sought—that can accelerate this growth.
The Retailer: When you look at Gibson Pro Audio and the Stanton family of brands as they currently exist, of what would you say you’re the proudest? What makes these brands stand apart not only from competitors in the market, but also from all manufacturers in the audio and music products industries?
Dorwart: First, I would say people. One of the things that I’m most proud of is the team we assembled here at Stanton, and the fact that Gibson wanted to hire almost every one of those key leaders and managers in the organization, particularly on the engineering, manufacturing, supply chain, sales and marketing sides. The other thing that I think we’ve done very well is to innovate and differentiate in the marketplace. Our product lines are purposefully small, in the sense that there aren’t a lot of products. But, they are well positioned and differentiated in the marketplace through a combination of technology, performance and ergonomics. And those products have done very well for our resellers.
The Retailer: In the music products segment, a great number of creative individuals often work within manufacturers. Would you say that the Gibson Pro Audio team is a very creative one, where the products you manufacture and sell are actually a big part of the team’s own lives?
Dorwart: Yes. In fact, I’m not sure that I know anybody in the company who hasn’t played, or isn’t playing, or hasn’t recorded, or isn’t a DJ. There’s a lot of passion and individual, hands-on application of all the products that we make. And that’s a key, I think, to some of our success: The guys who are envisioning the products are the same people who are using them. And one of the things we’ve encouraged is looking for product challenges. What are the problems you have that aren’t being solved by today’s products or technologies? How can we make technology solve problems and make the experience better, or make it faster, or make it more enjoyable or more creative?
We’re in a passion business. We’re creating technology that makes performance possible. When you really boil it all down, we’re selling entertainment and the products that support it. So, you have to have passion about what you do.
The Retailer: Shine a light on some of Gibson Pro Audio—and its related brands’—most recent product developments. Going forward, what are you going to be pushing most aggressively? What in the product pipeline might you want to preview? Finally, why are these offerings important additions to the market?
Dorwart: Starting with our Stanton brand, we introduced last year our SCS.4DJ, which is a fully integrated DJ control mix station, with computer software and control surface all in one unit. It’s at a very attractive price. It’s very feature-laden, and this technology of integration is something in which the company is heavily invested. We see this as a disruptive product in the category. For the KRK business, one of the innovations that we’ve just recently launched was our Rokit Powered10-3, which is a 10-inch three-way mid-field monitor that is getting extremely good reviews. It’s a high-performance product. One of its innovations is not only its technical performance but also its performance at an attractive price. The magazine reviewers are writing that this is a product that performs at the same level as a product that’s twice its price. And that’s been one of the key goals and successes for KRK…always has been: not only performance, but also value for the price. We also added two new professional-class subwoofers that are an excellent companion for our VXT and Expose class monitors…really any brand of studio monitor. And we also recently introduced a line of headphones that achieve sonic accuracy in a durable, natural-sounding and very comfortable design. So, you’re seeing us expand that brand in the studio space into other areas where we think we can add a lot of value. First and foremost, a core competence of ours is in acoustics and loudspeaker performance.
And that carries over to our Cerwin-Vega! brand, and I think that’s the brand you want to keep an eye on. This is a brand with a lot of untapped potential, because it plays in both the consumer and pro spaces. That is a significantly larger marketplace than are the recording and DJ spaces. And it has a brand that’s world-renowned. We have some technologies that Stanton was investing in, which can now be accelerated with Gibson, that will allow us to round out the Cerwin-Vega! product line rapidly over the next couple of years.
The Retailer: What is your philosophy when it comes to working with dealers and the dealer channel? Is working closely with dealers a big part of Gibson Pro Audio’s approach to business?
Dorwart: Building close relationships with dealers has always been important to the Stanton Group, and that will not change. Whenever we develop anything, whether it is a product or a program, we’re always thinking about the end user and the channel. Hand-in-hand with every product we develop and every program that we put into play is this question: “How do we create the right value proposition for the channel?” There’s a lot of choice at the channel level, and we play in very competitive markets. So, our products need to perform well. They need to be reliable. They need to provide ample margin for the channel, so that it can inventory it and display it, and demo it and get people trained on it. And, so, all those things are important.
And, also, we want to be easy and fun to do business with. That’s always been a core part of our philosophy, as far as how we want to treat the channel. The channel, to us, is first and foremost our customer, and we need to make sure that we support them. Now, that’s a two-way street, meaning that this philosophy only works when the channel is very supportive of us. And, so, I don’t see that philosophy necessarily changing. I see that as an extension of what Gibson does. And I hope that the combination of our products along with Gibson provides an opportunity for the channel partners that helps to create interaction with us that is more efficient and, certainly, a big opportunity to grow their overall business.
The Retailer: Is there anything that the dealer channel could do that would be helpful to you, as a manufacturer? Do you have any suggestions to give the channel, which would help them sell Gibson Pro Audio brand products even better?
Dorwart: Our goal is to grow the market and increase value and profit for our channel partners and ourselves. Gibson Pro Audio can contribute in many ways to this relationship. Where the channel can help us is by providing as much background information and feedback as possible, so that we can partner with them to best assure that the products they want to assort are appropriate for their customer base or the customer base they want to attract and build. Some of our products require some familiarity and trained personnel to sell effectively, such as high-end DJ systems. Other DJ systems we manufacture have a much lower learning curve and are self-merchandising. So, it pays to be selective and informed, because we both have a stake in sell-through versus just “loading in” product.
The Retailer: What were your impressions of the most recent NAMM show?
Dorwart: I had a positive impression. The aisles were jammed. By the middle of the afternoon, you couldn’t get from one place to another without fighting your way through a sea of people. I thought the attitude was better, meaning people were more upbeat and positive about the coming year. There was still a little bit of reserve, but, my sense was that, overall, it was the best-attended show that I’ve been to in years. The energy level was up. I think the number of new products you see starting to flow again is another indication of the industry in general becoming healthier. Plus, we were extremely busy because of the sheer number of sales meetings that we had scheduled. We had new products we were introducing. And, of course, there was a lot of excitement in regard to our partnership with Gibson.
The Retailer: What does the future hold for Gibson Pro Audio? Do you foresee any further changes or shifts in terms of products, market segments, business relationships or company strategy? What can we expect to see?
Dorwart: You’re going to see a lot of growth coming from us. We’ve had aggressive plans from the beginning and, now, we have a structure that’s going to help us. A couple of examples would be that we got exposure at the Consumer Electronics Show for all three of our brands, which wasn’t even in Stanton’s plan. So, within the first month of our association with Gibson, we were being exposed on the exhibit floor at CES. And, turning to NAMM, we not only had our normal presence there, but we also had an extended presence in the Gibson booth. If anybody was upstairs, it was mobbed the whole time. So, we have people who are looking at our brands for the first time. We have people taking a second look at our brands. And that’s going to bode well for us.
So, we’re really excited about what this partnership means and where we can take this new division. With their strength in human capital, as well as the support that they have, we can grow at a much more rapid rate than we could on our own. But, also, we can expand into a lot of other categories that might have been outside the purview of Stanton in its standalone nature.
The Retailer: What closing thoughts can you share with us?
Dorwart: The only thing I would add is, something I would use as a demonstration of our trying to innovate in the channel is the product I mentioned before: the SCS.4DJ, the standalone DJ controller. And one of the things we did with that product that was absolutely channel-focused was, because it was a standalone unit with its own computer and its own video screen and its own software, we were actually able to put self-merchandising into that product. Meaning, when it comes out of the box, the reseller can put it on the floor and it will actually help them to sell, without having to do anything more. And that’s something we also see: The MI industry tends to lag behind some of the other retail channels, as far as how it presents and merchandises products. This is one of the other areas in which we think we can innovate. That would be an example of our first attempt at offering that innovation.