Brian T. Majeski
COVID, A ONCE-IN-A-CENTURY PANDEMIC, took the world by surprise and left most if not all government institutions struggling to craft an appropriate response. The music products industry has struggled as well, adapting to a world of social distancing, severely limited public gatherings, and education delivered virtually, not to mention the anxieties that accompany a serious economic downturn. Six months into the pandemic seems like a good time to assess its impact. Some industry segments have thrived under the unprecedented conditions, while others have suffered. However, with the uncertainties surrounding the prospects of an effective vaccine, a second outbreak, or a workable treatment, no one we know is making confident forecasts about what to expect in the near term.
The surprise winners in COVID have been any and all products tailored for home music making. Apparently, music holds a special place in troubled times. Hard data and anecdotal evidence suggest that there has been a surge in new customers who, looking for a worthwhile activity in quarantine, have decided to try their hand at making music. Confirming this trend, Yamaha reported that its North American acoustic guitar and keyboard sales advanced over 5% for the three months ended June 30, despite a 27% decline in global revenues. For the same period, Alpha Theta, the maker of Pioneer DJ products, also reported “a strong sales increase” of home use products, as did Japan-based Zoom. Sales of its recording products racked up a 14% sales gain in the first six months of the year. Online activity further confirms the rising consumer interest in music making. Reverb.com reports that the volume of consumer searches on its site have increased roughly 200% year-over-year since the pandemic. Datahawk and Sellics, two popular sites that track the popularity of search words, report that phrases including the word “guitar” have surged in rank from the “mid thousands” to the “high hundreds.”
Gauging the scale of the increased demand is difficult, particularly in the case of guitars, because of a serious mismatch between supply and demand. Starting in mid-March, guitar manufacturers around the world drastically ratcheted back production, in part because of concerns that demand was poised to plummet, and also because social distancing protocols made it near-impossible to operate production facilities at full capacity. The drop in demand never materialized, and by late June, with factories on pause, distributors and retailers sold through their inventories. Now, guitar makers worldwide are scrambling to keep up with incoming orders and retailers have abruptly shifted priorities from maximizing inventory turns to amassing the largest stockpile possible. The new mantra is: “He who has the inventory gets the business.” Nearly all guitar makers are currently in a backorder situation; however, the unanswered question is: how much reflects an increase in demand and how much represents inventory replenishment? Accurately quantifying the underlying organic demand will take time. However, widely touted predictions of three years ago that the guitar was dead now seem just silly.
School music been an unfortunate casualty of the pandemic. Long touted as the industry’s single most stable market, in 2020 it will record the first major downturn in over three decades. The nation’s 13,000 school districts have adopted differing strategies for addressing the pandemic, running the gamut from full in-class participation to 100% virtual education. However, all seem to agree that it’s impossible to maintain social distancing protocols in a band or orchestra rehearsal. The unhappy result is that most school music programs have been suspended, rental inventory is piling up in warehouses, and horn manufacturers report that incoming orders are off between 50% and 70%.
The vibrant school music programs have depended on a complex ecosystem that has taken decades to develop. School buildings with adequate rehearsal facilities, skilled music educators and the institutions to train them, instrument makers, retailers and their rental and service programs, publishers, and parent-run booster groups are among the crucial elements necessary for a successful program. The hope is that these components can withstand the shock of the pandemic and will remain in place until conditions normalize.
Professional audio, the industry’ second-largest product category after fretted products, has also been hard-hit. Government edicts curtailing concerts, combined with public wariness of any large indoor gathering, have drastically reduced the demand for microphones, loudspeakers, mixers, and everything else associated with projecting sound. Leading concert promotor Live Nation predicts that concerts will only resume in the fourth quarter of 2021, but many consider that an overly optimistic forecast. Similar constraints are impacting churches, schools, exercise gyms, small venues, and all the other customers that rely on the m.i. channel for their sound gear.
Taken together, gains in the sale of guitars, electronic keyboards, recording gear, and DJ products weighed against the sharp declines in pro audio, acoustic pianos, and school music suggest that shipments of new products to retailers will be off 25% to 30% for 2020. The decline has been felt most acutely by brick-and-mortar stores, most of which were operating at reduced capacity in the second quarter. Scaled-back lesson programs, another casualty of social distancing protocols, have further impacted their finances. By contrast, online specialists have thrived, gaining market share. As one remarked, “every month is like December.”
It would be naïve to suggest that revenue declines of this magnitude won’t cause casualties up and down the supply chain. Not every manufacturer can weather a yearlong 30% sales decline. Twelve months of reduced lesson income and diminished instrument rentals will also be tough for some retailers to handle. And a sizable number of baby-boomer proprietors may just opt to retire rather than fight it out for an indeterminate period.
There are hopeful signs to be found amidst the challenges. A new crop of first-time buyers promises to expand the customer base, the industry has rebounded from steeper sales declines in recent memory (recall the 2008 financial crisis), and music in all its forms remains an integral part of the world we live in. Those who can weather the current challenge will be able to address a larger and more vibrant market in the years ahead. We base this assessment on a reading of history. Our industry’s progress has never been neatly linear, but over the past seven decades, every downturn, whether caused by soaring interest rates, spikes in oil prices, or a financial crisis, has been followed by a brisk upturn in demand. We suspect the same will hold true in a post-pandemic world.
Historical data from the Music Trades archives bears this out. We suspect that our current and future reports tracking retail sales, imports, and sales by product category will do the same. Click the link below for complete details on available data reports from Music Trades.