Music Trades: “Finding Opportunity In Crisis”

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Our good friend Brian Majeski, Editor of the US Music Trades magazine, has written an insightful article about how disruption can be a source of new opportunity for the MI industry…

The COVID pandemic has roiled the music industry, upending once reasonable expectations for the near future. With factories and retail stores either closed or operating at reduced capacity, business plans made with a high degree of confidence in January now bear little resemblance to reality. “Flying blind” best describes the feelings of the suppliers and retailers we talk to. Amidst all the uncertainty, here’s one thing to count on. History has shown that good times tend to favor the status quo, but disruption is a source of new opportunity. The solutions currently being developed to deal with the shutdown, a disrupted supply chain, and changing customer behaviors will have a lasting impact on how business is done. We’re not sure yet how those changes will unfold. But, a few years down the road, there will probably be people who point to COVID as a positive turning point for their business. And, it won’t be the first time something like that has happened.

The last time a government edict suspended business activity was in 1942 when the U.S. entered World War II. Three months after Pearl Harbor was bombed, President Roosevelt issued an executive order instructing all “non-essential” manufacturers to cease operations immediately and apply for military contracts to support the war effort. Overnight, production of all musical instruments and related products came to an abrupt halt. S.N. Shure was running a small radio parts distribution business at the time, building a few microphones on the side. With his consumer business on hold, military contracts to build headsets and microphones for tank operators and bomber pilots, enabled him to keep going. There were few bright sides in the most devastating military conflict in history; however Shure later said that the discipline of stringent military specifications taught him how to build a better product. When the consumer business resumed after the war, these skills positioned the company to prosper. He often said the strictures of World War II helped his company secure a dominant share of the microphone market.

The Beatles’ U.S. debut in 1964 sent guitar sales soaring, but not everyone benefitted from surging demand. The full line stores that had dominated the industry for the previous six decades, stocking pianos, band instruments, phonographs, and sheet music, proved singularly ill-equipped to address a rock and roll customer. No matter how hard they tried, grand pianos and electric guitars displayed in the same showroom proved unworkable. The shift in musical tastes spelled doom for once proud retailers like Grinnell Brothers, Lyon & Healy, and Campbells Music, but created an opening for an entirely new kind of store, typified by current industry leader Guitar Center.

The early 1980s were grim times for the acoustic guitar market. Fascination with the synthesizer, a sharp economic downturn, and the “aging out” of baby boom buyers conspired to drive unit sales to a multi-decade low, pushing a number of established manufacturers in the U.S. and Asia to the brink of bankruptcy. From the vantage point of hindsight, Bob Taylor, says the shrunken market was a unique opportunity because it deprived his established rivals of the benefits of scale. With their production and marketing resources constrained, his fledgling Taylor Guitar Company was able to compete on a more equal footing. Terrible market conditions actually proved to be a door opener.

In 1942, did S.N. Shure see the suspension of consumer production as the chance to build a better microphone? We doubt it. Similarly, when a few retailers started hanging guitars on a wall and letting customers play loud, did they think they were redefining retail. Unlikely. And, when his business was struggling for survival in the early 1980s, did Bob Taylor know that hardship was the key to later success? Probably not. Similarly, we suspect that in a few years there will be people talking in the same way about opportunities created by COVID.

Currently retailers are experimenting with online lessons, curbside pick-up, and other emergency measures to get through the shutdown. Their task is complicated by shuttered factories and disrupted supply chains that make it difficult to maintain an optimal inventory mix. (Entry level acoustic guitars and USB microphones are in short supply, but powered loudspeakers and DJ gear is readily available.) While these conditions are no one’s idea of a good time, we’re confident that they will spur innovation that will ultimately create a stronger industry.

We base this optimistic assessment on the fact that demand for music has remained undiminished for centuries. It is deeply woven into the human experience, manifesting itself in different ways from one generation to the next. The COVID Pandemic will no doubt impact the way we work, with remote working becoming more prevalent; change our attitudes towards large public gatherings; and perhaps even engender a greater sense of caution. However, it will also lead to new ways of creating music, and new ways of serving the demand.

Like everyone else working their way through these difficult times, we can’t say with certainty how events will play out. However, in the months to come, Music Trades data tracking imports, retail trends, and the revenues of major industry firms, will provide some guidance.

Brian T. Majeski, Editor of Music Trades.

www.musictrades.com