The pressures felt by small musical instrument
retailers have been a recurring theme at GuitarAttack. During our
eight years online we’ve watched as the musical instrument retailing
industry transformed, and those who supposedly represent the interests of
these same retailers have, in our collective opinion, been complicit, or at
least asleep at the switch while the major musical instrument manufacturers
have set the agenda. We believe the “business speak” used by these
advocates has masked a number of the real issues, and the lack of facts,
coupled with tired slogans, will make it worse for the next generation of
guitar players. This is how we arrived at our conclusions.
Last night my son and I watched a show on the National Geographic Channel
which dealt with the space shuttle Columbia accident and the
investigation into its cause. Columbia broke up over Texas
during reentry in January 2003, and the initial cause of the accident was a
mystery, leading to a lot of wild speculation by both government contractors
and NASA. Eventually the cause was found to be a two-pound chunk of
insulating foam. Video from the launch showed what appeared to be the
foam breaking free of the main fuel tank during liftoff and hitting the
leading edge of the shuttle’s left wing.
OK…where are we going with this? The interesting thing about the show
was that the experts at NASA were looking for the “usual suspects” with
regard to the accident. This is what we can expect as “group
behavior”; that is, the group spends its time seeking consensus rather than
really trying to find the right, “hard to accept” solution. One of the
scientists sought to prove the foam/wing theory, but was ridiculed by his
peers. He used a pneumatic cannon normally used for shooting chickens
into high performance jet windshields (a legitimate test regimen) to blast a
piece of foam into a carbon fiber wing mockup at 500 miles per hour.
Based on the test -- not merely his opinion -- his theory was shown to be
plausible. Eventually, the other experts warmed to the “theory” and
the facts spoke for themselves. This was the point I wanted to share
with you, and the point I shared with my son: most people are really
uncomfortable with facts which cause them to question their opinions.
In light of the great TV show, what got me fired up were two articles sent
by Ken Huddleston. Both appear in the January 2006 Music INC.
magazine, and they provide two very different viewpoints on the state of the
music business, as well as the plight of struggling independent musical
instrument dealers. As with most of these articles, each is steeped in
emotion and use a number of arguments that, to me, appear tired, fallacious,
and opinion-based. Lets take a look at each article.
From the President of NAMM
Article number one was written by Zach Phillips and Frank
Alkyer. Their article is a sweeping interview/narrative piece
concerning Dennis Houlihan. Mr. Houlihan is President
of NAMM, which used to be the National Association of Music Merchants, and
this article really gives us some insight into the organization and its agenda.
Quietly, a few years back, NAMM started adding “(the International Music
Products Association)” to press releases and its logo products, particularly
at NAMM conventions. This is what their site says:
Q: What does the acronym
NAMM stand for?
A: Over its more-than-one-hundred-year history, the association
has evolved from a national entity representing the interests of music
products retailers to an international association including both
commercial and retail members. The International Music Products
Association’s name, NAMM, comes from the acronym “National Association
of Music Merchants,” but the long form of the name is no longer used.
Today, we simply say that NAMM stands for the interests of the global
music products industry.
Here's some more from
the NAMM site:
Over the past century, NAMM has
proudly represented the industry that brings the gift of music into
people's lives. What started in May of 1901 as a small, grassroots
organization of 52 founding Members has since blossomed into an
international association representing nearly 9,000 retailers and
manufacturers of musical instruments and products from 85 countries
Everything NAMM does is intended to serve its Members and realize its
mission of unifying, leading and strengthening the global music
products industry and increasing active participation in music making.
Did you catch that? What started as an organization to
represent retailers has transformed into an omnibus organization
representing retailers and manufacturers/wholesalers. Pretty
interesting stuff, particularly against the backdrop of what Mr. Houlihan
says in the article. By the way – Mr. Houlihan was the first president
of NAMM who actually worked for an instrument manufacturer – Roland –
rather than being involved as a retailer! Mr. Houlihan makes some very
predictable statements in his article, entitled “The New Deal”. The
central theme of his article is that “change is inevitable” and retailers
need to seek new “relationships” and “leverage” market positives, embracing
the change. These words are the stock in trade of those who
continually try to convince us that a Super Wal-Mart is better than
having a number of smaller, community-owned stores, and jobs going to China
is actually a good thing for America.
I believe that “business speak” like we see above actually leads to a
specific thought process. That is, one that dismisses the obvious truth in
favor of adopting a homogenous opinion that doesn’t buck the trend, or make
people seem to be dissenters or disruptive!
The bottom line in his article is that mass merchandisers like Best Buy,
Wal-Mart, and Target are interested in getting into the
musical instrument and accessory business. Based on his article, Mr.
Houlihan thinks this is a pretty good idea. Here are some of the cogent
points from his article:
- He understands the value of human
- NAMM has “grown” into the International Music Products Association
- “As a student of industry, it runs in cycles. The music industry has
survived 800 numbers, UPS, malls, and multiple national chains
competing aggressively with each other. The interest of mass merchants
in music products…is a repeat of cyclical patterns.”
OK, Mr. Houlihan -- we are tired of hearing about
cycles as an explanation for everything. We believe that cycles
occur when the underlying conditions are generally the same and a “sine
wave”, or ups and downs of activity occur over a time period. However,
when the conditions change, it is probably fair to believe that the
resultant cycles – as well as their impacts -- will change as well.
However, NAMM is clearly using "cycle speak" without a change in methodology
to explain away a changing environment, and I think this is just plain
wrong. This is a simple way to deflect criticism and forego analysis.
How does a small business compete with these big boys? According to
Mr. Houlihan the answer is simple: teach music lessons! That is
NAMM’s focus; namely, keeping music in schools and keeping programs funded
which, by the way, we wholeheartedly support. He also states that
“recreational music making” is a huge thing for our Baby Boomer generation
which will drive 50-somethings into independent music stores for lessons.
The Opposing Viewpoint
Chris Lovell, co-founder of Strings n’ Things in Memphis, also has an
article in this issue entitled “An Industry Revolution, Part 1”.
Predictably, the article is not very complementary to the viewpoint of Mr.
Houlihan. Mr. Lovell contends that, based on his recent Winter NAMM
show experience, that most independent musical instrument dealers are
“filled with a lot of anxiety and anger. He also states that, "Several
retailers have lost their stores and even their life savings.” (Note: I
would like to know the exact number because anecdotes like this don’t help
to drive solutions.) Lovell clearly believes that “somewhere along the
line, manufacturers had chosen the bottom line over integrity, profits over
common sense.” Pretty strong words, because he doesn’t exactly define
“common sense” which, as Voltaire stated, “is not so common.”
Mr. Lovell contends that independent music dealers are the “keepers of the
key”; that is, respecting music, not just the instrument, and “respect,
uphold, and make and spread good music.” Along with this, Mr. Lovell
would like to have a “level playing field” with the big retailers, which is
an admirable goal. We would also like to hear how we characterize
I think he does make one very interesting point with which we agree.
Mr. Lovell states that “For manufacturers to end up with literally less than
a handful of customers would be the worst possible scenario for them, and
yet they still stand by and offer little assistance. The tail is now
wagging the dog, and eventually, it will own the dog.” Do some
research, GuitarAttackers…look at what Wal-Mart allegedly did to Pillowtex
Industries and make up your own mind.
Mr. Lovell continues with an entire litany of grievances against the big
manufacturers. I am sure we know who “they” are based on previous
rants on this site and conversations with some industry insiders. I
particularly like his explanation of how the big internet sites beat the
Minimum Advertised Price (MAP) for instruments, and how they sell comparable
instruments below what Mom and Pop can get them for wholesale!
Note: The MAP goes something like this:
MAP Policy is a voluntarily
agreement that all legitimate Authorized retailers enter into with
their authorized USA suppliers, usually the manufacturers. According
to such agreements, Authorized retailers can usually sell MAP
restricted items for any price they choose, but may not display in any
print or online advertising, a price below the Minimum Advertised
Price. The "Price too low to show" indicates an additional discount is
in effect, and this discount is calculated in the Shopping Cart. You
can see this price by clicking the product name and then selecting the
Add to Cart button on the product information page. Please be assured
that simply adding an item to your shopping cart does no obligate you
to buy anything as you can always delete the item from your cart if
you decide not to purchase it.
This is what Musicians
Friend says about it:
Some of our prices are so low that
manufacturers have requested that we not post them on our web site.
Email our tech support staff or call us at 1-800-391-xxxx for the
latest info or to place an order.
Musicians Friend doesn’t see MAP as being a problem – just give them a call.
You'll see this on PRS guitars and some of the Peavey gear.
Interestingly, our Federal Trade Commission has ruled that certain MAP
structures may actually be in violation Federal law! Check out this website:
Here is how the MAP can be easily side-stepped: A big chain orders a
“one-off” famous guitar with a special, non-catalog paint job. They
receive 1,000 of them for their retail and internet operation and get a
great price on them because they are buying in quantity. Due to the
special paint job, the MAP is usually set much lower because, technically,
the guitar is not sold anywhere else. So Junior, who really wants
guitar X, is attracted to the “one-off” because of the price. This
"arrangement" also applies to closeouts and other business arrangements.
Mr. Lovell continues his call to arms, and asks if the reader wants to be
part of the revolution. We’ll have to wait until next month to see
what that revolution actually looks like! I like Mr. Lovell’s
enthusiasm and emotion, but the article feels like sour grapes and would
probably be better served by applying some analysis to this very difficult
question. We don’t need name calling – it diverts us from our true
purpose of finding the truth.
Hey...wait a minute...you know what? Enough rhetoric...GuitarAttack wants to see some no-kidding
research and some facts. I want to see if selling GHS strings in
Wal-Mart impacts selling GHS strings at KKs Music down the street, and what
NAMM is going to do about it if something is required to support its
Here are a couple of lines from GuitarAttack, January 2004:
We've said it before -- this is the
next step in cutting out the middle man entirely and transitioning to
a direct-sales model for Fender. We see it forming with Gibson
already. Go check out Musicyo.com for the evidence.
While the MBA types will continue to tell us this is good for America,
will create jobs, blah, blah, blah, we are now losing one of the
things that made a lot of us want to play guitar in the first place --
the local music store. I guess in a few years there won't even need
to be a NAMM Convention. Guitar Center can just invite the
big manufacturers to a cocktail party and call it a day.
Is it good for the customer? Time will tell, but you young guys will
know nothing but buying a guitar impersonally, and that is a real
My opinion: Having worked in a music
store, I’ve seen folks drive two hours each way to save $30 on a set of
$1500 drums. I never personally saw the correlation between buying a
guitar and guitar instruction, unless it was on a very low end guitar in
which the first-time student used for lessons. Once the student
decided to step up to a better guitar, price became the driving factor.
This is an observation that both Mr. Houlihan and Mr. Lovell really miss --
the behavior of the consumer.
What should the companies do?
Bob Lutz, perennial car guy and the dude who brought you
the Viper says that “making money is not the most important thing” for a
company. To quote his great book “Guts”, which is one of my all-time
“A business must make money.
What I mean to suggest with this law, however, is that companies that
do make a lot of money almost never have as their goal “making a lot
of money.” They tend to be run by enthusiasts who, in the normal
course of gratifying their own tastes and curiosities, come up with
products or services so startling, so compelling, and so exciting that
customers practically rip their trouser pockets reaching for their
Rather, Mr. Lutz derides those who “regard product as
nothing more than a conduit: In one end they pour as little money as they
can get away with; out of the other end they expect a munificent return”.
BTW: munificent \myoo-NIF-i-suhnt\, adjective: Very liberal in
giving or bestowing; very generous; lavish.
In my opinion you’ll find a number of companies that do this start with a
desired amount of money as a return, then work backwards to figure out how
to get there, as with a “five year business plan”. When they do this,
they start squeezing people who do not support their vision or plan. I think
that is what we are seeing now with our big manufacturers.
I believe this is why Fender makes about 85 different Stratocasters and
Gibson makes “special” Les Paul models that are only available through
Where do we go from here?
This is where the opinion and predictive analysis starts….
- The large manufacturers will continue to squeeze the
retailers until they decided the time is right for selling direct to the
public. I believe we are very close to this time right now.
- Small retailers will continue to fail because there
is no way they can compete while trying to sell the same product available
from the big retailers. Music retailers will consolidate in some
markets. The bigger stores will buy out or wait out smaller ones with
- Smaller towns – those with populations in the 10,000
to 35,000 range outside of metro areas will lose their music stores all
together because the owners will not be able to stock instruments other than
entry level instruments with extremely slim margins and their all-important
accessory business will be taken over by the ubiquitous
Wal-Mart Super Center which, by the way, has destroyed most of the other
retail businesses in town also.
- Guitar repair people will probably be able to eek out
a living doing work on guitars purchased from the big box stores, but I
believe that a kid who paid $250 for a guitar will shy away from paying $50
for a setup, nor will he pay $10 to have a set of strings installed. I also
predict we’ll see a lot more internet store fronts offering refrets and neck
resets for cut rate prices.
- Used guitars will continue to be sold on eBay, not in
local stores. We already see eBay setting the price for used guitars
no matter where the seller is located.
- The time might be right for a new brand of guitars
geared toward independent dealers. Who would have thought PRS could have
been a “playa” against Fender and Gibson?
What I would like to see...
As stated earlier, NAMM needs to conduct some no-kidding research into this
phenomenon if it cares about small retailers. However, based on its
behavior and shifting focus, this research would pre-suppose that they
care about the survival of small retailers. I believe they have
already written that segment off, and the study may offend some of the
biggest supporters of, and contributors to NAMM. If not, I would like
to see a real analysis; that is, not some rehashed online questionnaire for
major retailers. If NAMM has as much cash-on-hand as it claims it
does, this should be pretty easy to pull off, and would probably quiet a lot
of the critics and help the industry chart a sustainable course.
Sadly, the very stores and owners who helped Gibson and Fender out of the
dumps in the 1980s are the very ones who are paying for their new-found
prosperity and their bottom-line focused business plans.
When guys like George Gruhn and Chris Lovell get squeezed by “The Man”, we
are all in trouble. As we’ve said before, the culture of the “guitar
shop” is changing radically, and we are not planting seed corn for life long
guitar customers. I believe the reason Baby Boomers are still buying
guitars is because of that culture; Gen X and Y will probably not do the
Gloom and doom from GuitarAttack? Not exactly, because nowhere will
you read that business is fair. We just want to see a sustainable
relationship, and we’re not sure Best Buy or Sam's Club is the
best place to buy a guitar. Let’s see some research and let the
numbers and facts speak for themselves!
addition, out there lurking somewhere is the Wal-Mart killing
business model. Who would have ever thought twenty years ago that
Sears would go bankrupt? Keep on the lookout....
Tell us what you think!