Who Owns Whom? The Industry's Acquisition Binge
This has been the year that the music products industry around the world plays musical chairs. After six years of recession in which sales of drum sets (and some other instrument categories) plummeted, the industry has undergone a wave of consolidations, company sales, and new partnerships.
DW Goes On A Last Minute Binge
In the fall, Sabian started snacking on smaller companies, buying accessory makers and then taking overCrescent Cymbals early in the new year. But the biggest news in January was DW's purchase of LP Music, Kat, Toca, Gibraltar, and other brands from Fender Music's KMC subsidiary. They also got the distribution rights to Gretsch drums in that deal. Most drummers and industry-watchers were blindsided by this deal, since there had been zero rumors about it beforehand. But Fender has been unloading assets (Takamine, Guild) since last year in an attempt to slim down and remake itself. This was just weeks before Fender spun off the rest of KMC's distribution business to Jam Industries, a large Canadian distributor.
Subsequently to the DW deal, the internet went wild with speculation. Would DW be good for Gretsch? Or was this the end of an historic brand? What happened to dealers? Artist endorsers? The mix of product lines? A pair of hilarious Hitler parody videos hit the web (with an unforgettable Fuhrer wondering what brand he can play jazz on if Gretsch were to ever disappear.)
As things have quieted down and more news has trickled out, those who predicted a percussion apocalypse were a little hasty in reacting. The deal had been in the works for a year, but at some point DW backed out, and then late last year, the deal was on again. Don Lombardi, DW founder, and President Chris Lombardi both intend to keep Gretsch production in South Carolina. They anticipate no changes to Gretsch's product line for now, instead focusing on marketing, sales, and distribution strategies. Needless to say, they've got a lot on their plate but in talking with the company they are confidently moving ahead.
And Then There Was Sonor
The news from DW was so big that it swamped the announcement that KHS America, the distributor of Mapex and Majestic, took over Hohner America, which puts the Sonor drum brand under their control in the US. Sonor has been almost invisible in the US in recent years, so that might explain why that news didn't exercise fans to the degree that Gretsch's did.
The word on that deal is that Sonor has been a bit of an invalid, and KHS has high hopes for the brand. The drums they build in Germany are still great and there are a lot of Sonor fans worldwide. According to Marketing VP Mike Robinson, the company is taking its time integrating Hohner's many brands and product lines into the KHS operation. But once they do, he expects Sonor to have a much higher profile than it has had. KHS, founded in Taiwan in 1930, is a big player in the global music industry. They have a large stable of brands they distribute worldwide such as Altus flutes, Jupiter band instruments, Majestic concert percussion, and Walden guitars. They should have the know-how to pull this off and do a great job with Sonor.
This Is The End?
Just in case that was not enough excitement for the young year, in early February, the industry had a new topic on its mind: whether or not Guitar Center was headed for bankruptcy. Analyst Eric Garland, in a post ominously titled, "The End Of Guitar Center" laid out the case that Guitar Center will never be able to fully service the debt it was saddled with by previous owners Bain & Company (yes, that Bain). And, because of that, new owners Ares & Co. will sooner or later need an orderly bankruptcy process to shed debts and slim down the firm. Fuel was added to these fiery thoughts when GC laid off more than 100 managers at the end of January. [Several longtime friends of DRUM! departed the company at that time—we're glad that many of them have already landed in new positions.] A visit to Guitar Center in February yielded a little insight. The company is working hard on its current plans, and several new executives have been brought in to turbocharge areas such as e-commerce. They have lots of new products and even store openings in the pipeline. And, they have a deep reservoir of talent on their staff. Despite the difficulties the company may have experienced, Garland has made similar predictions in recent years. He hasn't been right yet.
What will the future hold? Our crystal ball is no better than yours. For now, we're just enjoying the show.