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Will the next generation of Bob Dylans and Jimi Hendrixes play the DJ decks instead of the guitar?
Guitar company Gibson Brands Inc. filed for bankruptcy protection Tuesday. It will continue to operate during those proceedings.
As consumers have more options for hobbies and imported instruments compete with American-made ones, the musical instrument business in the U.S. is becoming more fractured.
The company, which is based in Nashville, has struggled with debt it took on to finance acquisitions of home-entertainment and audio-equipment makers, as well as TEAC and Onkyo stereos.
What really happened with Gibson Brands?
In fact, Gibson’s struggles seem to be unique, said Tim Hynes, the head of North American research at Debtwire, a data and analysis company. “They just moved into something they didn’t have any experience in,” he said.
Once an industry leader, Gibson experienced problems after it signed an agreement with Royal Philips to acquire its audio, video, multimedia and accessories business.
It’s a case of bad timing for Gibson, analysts say, as well as a strategically questionable move. That business was in direct competition with Amazon to sell similar products, and for Gibson, things went south, Hynes said.
So how have U.S. guitar sales been doing?
Over the past 10 years, sales of all guitars have been broadly flat. In 2017, guitars collectively sold for about $1.3 billion, up from about $1.2 billion in 2016, according to the National Association of Music Merchants (NAMM), a trade group based in Carlsbad, Calif.
Sales of electric guitars have fallen. About 1.1 million electric guitars were sold in the U.S. in 2017, down from more than 1.6 million in 2005. Acoustic guitar sales were more solid: 1.5 million were sold last year, down slightly from 1.6 million in 2005. (Thank Ed Sheeran, among others, for that.)
As a result, companies that sell musical instruments have to work harder than ever to turn a profit. Overall, the U.S. musical instrument industry reported $5.6 billion in revenue in 2017, down from $6.6 billion in 2006, according to industry research group IBISWorld.
Why has it been a tough time for the industry?
U.S. manufacturers are under pressure to lower their prices, due to the popularity of imported instruments, IBISWorld found. Advances in technology are also making more-complex instruments easier to produce, lowering their prices.
Competition is growing more intense. More musical instrument stores have opened, as production costs have declined. Some 33,700 workers are now employed in the instrument-sales industry, IBISWorld found, up about 1% since 2012.
That’s good news for consumers: Lower prices could make instruments more accessible to beginners and casual players, IBISWorld said. Budding musicians between the ages of 10 and 19 are key players, because they often take music classes at school and often want their own instruments.
Guitar manufacturers have all sorts of competition
There’s another problem facing guitar manufacturers: Time. Music aficionados may want to be “Guitar Heroes” on their TV screen more than they want to be actual rock stars. (“Guitar Hero” is a video game where you pretend to be a rock star rather than play an actual guitar.)
And that’s part of the reason why guitar sales have not increased significantly in recent years. Computer games, gaming consoles, smartphones and tablets are all taking up leisure time, in addition to sports and outdoor activities, IBISWorld found.
Aspiring musicians can also experiment with electronic music with gadgets, said Bob Phibbs, CEO of The Retail Doctor, a retail consultancy firm based in New York. “You can lay beats down with an iPhone these days,” he said.