The Buffalo News is reporting that Denton, Cottier & Daniels, the world's oldest Steinway dealer, is ceasing its Steinway piano dealership after 2017. It will attempt to sell-through and then return any remaining inventory to the factory after December 31, 2107.
"They're really good pianos," she said. "The quotas they are looking for are not realistic for Buffalo and Rochester." - Michelle Trimper, Vice President of Dentor, Cottier & Daniels
Denton, Cottier & Daniels have sold Steinway pianos for 157 years, and yet the maker's sales quotas are choking their oldest dealer. That a relationship that is that long-standing would be done in by a supply-sided economic requirement is not merely shocking, but quite disturbing.
Owned by investment management company Paulson & Co. since 2013, headed by billionaire John Paulson, Steinway also owns Conn-Selmer, maker of several iconic brands of brass instruments, including Conn, Holton, and Bach.
Imposing unrealistic sales quotas on dealers is not new, but to do it in such a way as to destroy your dealer relationships is, in my opinion, a sure way to kill your brands. Certainly, manufacturers want to lift sales, but this is a niche industry facing strong headwinds. A management that does not understand the dynamic of the instrument market can kill itself by not adapting. You can only whip the horses pulling the carriage just so hard and just so many times before they fall down dead.
And it's not just that the market isn't there. According to the article, "Denton, Cottier and Daniels will continue to deal in fine pianos, [Trimper] said. The store will offer historic and restored pianos, as well as digital pianos, and it will pursue relationships with other distinguished piano manufacturers." Clearly, it isn't that the market doesn't exist. The problem here is that management has an 'unreasonable' expectation of that market. One wonders if that extends into the wind instrument market, as well? One also wonders what this will mean for the holding company if the flagship piano line falters? It has been opined in this blog that a sale of a division is one way to prop up the main business.
We will continue to monitor the Steinway situation because it has a direct effect on their brass instrument making division.
Storied Czech brass instrument maker Josef Lidl has been sold to Arnold Stoelzel GmbH, according to a post on Facebook post by Vlastimil Jiráček, owner of M. Jiráček and Sons, Czech maker of horns. The capital invested (which likely means purchase price) is 1,000,000 Czech crowns, which translates currently into approximately US$ 45,000.
We don't yet have an independent verification of the sale.
ITG 2017 is in the history books, and Terry Warburton takes advantage of being up in the mid-Atlantic/Northeast region to visit some of his dealers' shops, including Chris Cromer's shop, A Minor Tune Up Trumpet and Brasswind Services in Wilmington, DE. Chris then takes the opportunity to interview Terry about his shop's history and what the future holds for Warburton.
Originally live streamed on our Facebook page, find the interview on our YouTube channel.
That's what it costs annually to go to the Peabody Conservatory of Johns Hopkins University, according to collegedata.com. And if you play horn, Denise Tryon, former 4th horn in the Philadelphia Orchestra (ex Detroit Symphony, ex Baltimore Symphony), will be your horn professor.
So, you can audition and apply and pay over $60,000 to study with Denise. OR, you can subscribe to her new online service, Low Horns Unite! LHU is a subscription service and costs $9.97 per month.
$64,554 per year versus $120 year.
Of course, it's not the same education. You can hardly even compare the two, because a Peabody education includes tuition for a complete course of classes, room and board, books and supplies, and so forth, as well as top notch ensemble performance opportunities. What do you get with Low Horns Unite!?
WHAT YOU GET:
What you do get is the wisdom and experience of a world-class performer, monthly, and all for less than a single in-person lesson with most top notch performers.
Distance learning is not new in the music world. Although I cannot remember his name, a renowned bassoonist is known to have given what we now call distance learning lessons over the telephone. That's right. Over land line telephones, connected to a wall, without any visual cues, without good audio, and with high long-distance phone charges on top of the cost of lessons. But if you were a student in a remote area without any bassoon teachers you might have been willing to pay for those lessons.
Wendell Rider, Principal Horn of the San Jose Symphony, has been giving distance learning lessons for many years now, mainly over Skype. In fact, the ubiquitous use of the ostensibly free video phone service has given distance lessons a new moniker: Skype lessons. As an early adopter of the then-new internet technology Wendell had initial struggles with both hardware and software. Now, as the technology advances those struggles melt away, and the important stuff that was only hindered by distance learning - the knowledge and expertise - is now facilitated by the technology. Excellent audio and video compression, combined with amazing mobile technology, make Skype lessons more useful every day. To be sure, the technology is not perfect. But neither is it land line phones laid upon a nearby table while the student performs her etudes for the week.
As with most useful technology, for a new industry to flourish you need an intersection of two or more technologies to make it truly useful for the mass market. Consider the passenger airline industry. Planes were flying long before passengers were carried en masse. Large-scale passenger service was not feasible until powered flight, radio transmission, AND radar tracking all were in place. Only then did the industry flourish, because planes full of passengers could fly safely and in great numbers.
Distance music education is still finding its footing. The mobile phone and internet technology of today is a large step, because audio and video combine to simulate the in-person lesson experience. Denise Tryon's combined use of YouTube and Slack make her service less of an in-person lesson simulacrum, and more of a master class experience.
The holy grail of the online music experience is the real-time ensemble performance. We are not there, yet. Services such as MusikFusion attempt to get near that experience, stitching together canned accompaniment with solo recordings, but the usefulness and marketability of such services remains to be seen. The experience is not universally accepted as satisfying. The internet is truly an 'information superhighway', and as such has traffic jams. These create latency - the temporary delay of information transmission. And latency kills any hope of a seamless, in-room ensemble experience. It will take a further, as-yet-unknown or unproven technology that will eliminate latency to make the remote ensemble experience possible. And that means that teacher/pupil duets will have to wait.
For now, as the technology evolves and matures, we will have to content ourselves with incremental improvements in music education as a distance learning activity. Still, we are a far cry from long-distance land line phone lessons.
Nerd out, my brass friends, at the making of an Alexander 103 double horn! This documentary (in German, no subtitles) follows a 103 from tube to finished instrument. It is 45 minutes of ever-loving brass-making fun!
Neither a borrower nor a lender be, for loan oft loses both itself and friend.
Polonius's famous advice to his son, Laertes, in Act I of Shakespeare's "Hamlet" has become an aphorism. It speaks eloquently to the difficulty with which those ill-situated to afford the price of a purchase can eventually afford the repayment.
In an article dated 27 April, 2017, MarketWatch warns us on the impending downgrade of Guitar Center's bond status.
Bonds issued by Guitar Center, the biggest retailer of musical instruments in the world, are languishing at record lows on growing concern that the company is going to be overwhelmed by its roughly $1 billion of outstanding bond debt, part of a debt burden that totals about $1.6 billion, once loans and other borrowings are included.
The article draws out GC's current troubles, it's history, and makes a comparison to other troubled LBOs of the period immediately preceding the Great Recession. Of course, this is relevant to the brass-playing world because GC owns Music & Arts, Giardinelli, Woodwind and Brasswind, and Music 123. A significant segment of the retail brass market and a related segment of rentals and repairs are serviced by GC holdings.
What does a reduced bond rating mean for GC? Prospectively, it means that the cost of borrowing will go up significantly. Taking on more debt can be increasingly costly for GC, reducing future profits. And, that makes it harder and harder to pay down current debt.
Debt is how a leveraged buyout is born. GC took on significant debt to be acquired by Bain Capital, and the timing of acquisition could not have been much worse. The Great Recession (also born in debt) has caused myriad pressures: reduced school music budgets, reduced household spending, and greatly diminished discretionary spending. Juxtapose those pressures against competitive forces, fueled both by the wide availability of low-cost (and lower margin) imports and the juggernaut of internet commerce, and you have market forces that press down both revenues and profits. A debt-laden company cannot service its lenders. In the case of GC, one of the main lenders, Ares Management, decided to protect it's loan by trading it for equity. It has not been enough.
The rating agency [Moody's] is further concerned about the limited revenue visibility in the musical instrument space and the company’s “only very modest free cash flow potential,” which makes the company vulnerable to a rise in leverage.
That phrase, "limited revenue visibility", can mean only one thing: the outlook for increased sales is poor.
So, GC's various holdings are looking at both weak revenue growth and strong competition in the market place. But GC practically owns the vertical market in the US, on the large scale. They own the largest vertical online retail web sites and the largest retail brick-and-mortar chain. Who is the competition? The article says Amazon, mainly. I say, the internet, itself.
In an earlier post I opined that Steinway might decide to sell Conn-Selmer to raise cash to ameliorate its own debt problems. Are these two stories related? Most certainly. GC's divisions sell Steinway's band and orchestra products. If GC scales back or goes under, Conn-Selmer can go with it. GC's troubles ripple throughout the music industry on every level. Conn-Selmer would lose it's primary national dealer network if GC goes. With GC owning such a large segment of the market, if it gets a cough, instrument makers who supply it will get a cold.
‘The negative rating outlook also considers that a substantial amount of GCI’s debt matures within our two year rating horizon.’ Keith Foley, senior vice president, Moody’s
And, there isn't much time to turn this around. As GC threatens to spiral down into junk bond territory, it's hard to imagine how they can turn everything around. LBOs have used the sale of divisions to raise cash to improve the leverage position. But each of GC's divisions face the same market pressures that the GC chain itself faces. It's hard to see that a sale could raise the needed cash. And as their bond status declines, leveraging their way out of this becomes harder and harder. It seems like a death spiral. Only robust revenues can really help, and those seem illusory at best.
If GC were not so highly leveraged, if there was not so very much debt to service, then they could probably weather current market conditions. As it is, the current incarnation of Guitar Center was born in debt, and it might die in debt. GC needs to find a solution to improve its debt position, and it needs to find it fast.
Neither a borrower nor a lender be....
Dave gets a little gem in the shop - a Scherzer rotary D trumpet from circa the 1950s. Disassembly does not go perfectly easily, as one might expect from a trumpet that has not seen the light of day in many years!
We know that some of the images are mirror image, and for that we apologize. We will work on that in the future.
Finally! I returned to live streaming and chatting with a casual lunch-time stream on The Brass Bench page on Facebook. The subject of the stream is a Shires trombone that required four separate repairs/mods: A new brace post to replace one that was suspected to be bent; installation of a hand rest; clean up a badly pitted branch; and solder the detachable leadpipe into the inner slide tube. I only got to the disassembly and discussion of how to proceed in the allotted 90 minutes, but it was productive and hopefully instructive.
Moody's has downgraded the bond status and probability of default of Conn-Selmer's parent company, Steinway which is privately owned by Paulson & Co. Read a report here at Bankrupt Company News.
Moody’s believes that unless the Company’s operating performance significantly improves, there is a risk that leverage will remain above 7 times as the Company attempts to refinance its ABL revolving credit facility and its $300 million term loan. “We think that the company will need to seek covenant relief again as it did in September 2016,” noted Cassidy. “This could come through another equity cure by its owner, Paulson & Co. Inc., or a covenant amendment.”
In layman's language, this means that Moody's believes that the company will not be able to significantly reduce its debt. In order to 'relieve' the debt burden either the parent company will have to kick in more cash or they may have to seek other relief such as protection from their creditors, i.e. bankruptcy protection.
And what this all means at the bottom of it is that the company cannot grow by taking on debt. It may even be possible that it cannot operate at its current level without taking on debt. This spells trouble for the iconic brands that Steinway owns. The company could piece off more profitable divisions (Conn-Selmer is historically one of these) in order to prop up the less profitable divisions, which is likely Steinway pianos. I say all this in terms of probability because since the company went private we no longer get public reports that indicate which divisions are money makers are which are losers (if any).
So, a sale of Conn-Selmer would not be an unexpected turn of events in this situation, especially because it seems the owner has already injected cash into the company at least once since the purchase.
Reports are coming in of the passing of Zig Kanstul, founder of Kanstul Musical Instruments.
Our thoughts and condolences go out to Mark and Jack Kanstul and the entire Kanstul family.
Dave and Chris are brass technicians who enjoy helping players get the most out of their playing experience.