The Hi-Fi Industry and Hobby

[Ordinaryman]

4 years on, I thought this might be worth revisiting. Below is Richard's article for Hi-Fi Critic magazine. Has any of it come true? Has anything else changed / progressed? What are our views now, looking forward?

RICHARD DUNN (NVA) AND PAUL MESSENGER EXAMINE THE EVOLUTION OF THE HI-FI BUSINESS, AND SPECULATE ON WHERE WE MIGHT BE HEADING NOW…..

Hi-fi effectively began with the production of stereo LPs in the mid-1950s. Mainstream music reproduction was record players and radiograms, but a small number of electronics enthusiasts had learned the technical aspects during the war and wanted to play. So a small DIY enthusiast market emerged in the UK, mainly using Government surplus components sold out of scruffy shops in London’s Edgware Road and Lisle St.

From these people a small industry emerged. Magazines like Wireless World supplied new projects and helped to influence relatively new companies like Quad, Rogers and Leak that have subsequently become legendary, to produce products of a higher musical standard than the radiogram of the day. There was also a pro market, whereby products from companies like Garrard and Tannoy fed the BBC, the cinemas and the recording studios, and also began to supply the domestic market. Upmarket shops like Imhofs (which started the Tottenham Court Road hi-fi conurbation) started to appear. On one side salesmen in suits and dem areas took advantage of the newly allowed hire purchase (aka ‘the never never’); on the other the component shops also started to sell finished goods. A hobby and a marketplace were both created.

The distribution chain in those days was very different to now. A manufacturer designed and made a product, and appointed a wholesaler (or more than one) to carry out retail distribution. The wholesaler’s reps then took the product around to sell to the shops. So the products had a three price structure: wholesale price; trade price; and retail price, and the manufacturer fixed the price the retailer sold it for. This was called retail price maintenance. It created a very stable market with much lower profit margins than today: the wholesaler made 10 - 20%; the retailer 20 - 30%.

The system suffered two major shocks in the 1960s. The first was the ending of retail price maintenance in 1964; the second was the appearance of Japanese products on the UK market shortly thereafter. The big initial winners were the wholesalers, who could sell to anyone they wanted to at any price they wanted, and if a manufacturer refused to supply them it could be sued. The other main winners were the component shops, which morphed into big discount houses: small companies like Laskys, GW Smith and Comet expanded and to a significant extent took over the retail side of the industry.

The specialist hi-fi magazine market expanded dramatically. What Hi-Fi, Hi-Fi Sound, Hi-Fi Answers, Hi-Fi Choice and Practical Hi-Fi provided stiff competition for established magazines like Gramophone and Hi-Fi News. Then the oil price increase at the beginning of 1974 had all sorts of implications for UK hi-fi manufacturing and the marketplace. One immediate result of the ‘oil shock’ was a three day week, but in the general election that followed, Labour came to power. Chancellor Healey introduced a budget that involved massive VAT price rises for electrical goods, but deferred them for three months. A year’s worth of hi-fi was therefore sold in those three months, followed by an appalling slump. This played right into the hands of the large Japanese brands, which cashed in by diverting stock intended for other markets, whereas the much smaller UK brands simply couldn’t cope, and suffered in the aftermath.

A number of new and youthful British brands emerged in the mid-1970s, including Linn, Naim, Rega, Exposure, Meridian, Creek and Arcam, plus Michaelson & Austin (the roots of Musical Fidelity). Most succeeded in spite of the Japanese competition, helped by some clever marketing, especially from Ivor Tiefenbrun of Linn Products and Julian Vereker at Naim Audio. Although these two initially worked together, success and growth meant that they eventually operated independently. One reason for the success of these newcomers was that traditional retailers, struggling in the face of discounters, needed the high profit margins from exclusive products that were not available to the discount houses.

The 1980s saw several significant events, including the gradual development of a new retro market for valve amps, a recession affected the early 80s, CD arrived to challenge the turntable in the middle of the decade, and Absolute Sounds started to create a so-called ‘High End’ market in the UK, beginning with big American muscle amps.

Another recession blighted the early 1990s, though the emergence of home cinema provided a sideline that looked as if it could become important. (In practice this has now effectively become a separate market, as has the multi-room installation scene.)

Key developments, initially of MP3 coding and subsequently Napster file-sharing, effectively stopped the growth of the hi-fi industry, leading to a slow decline which has subsequently accelerated. Since then, youth has largely turned its back on hi-fi, and hi-fi enthusiasm has become almost as maligned as train-spotting. The arrival of the iPod (and subsequently the iPhone) brought an increase in personal and portable listening that is essentially on-line based, leaving the rump of the hi-fi market to older but mostly also richer customers (because of escalating property values).

Come right up to the current decade, and the elephant in the room is still very much the home computer. However, at last the hi-fi enthusiast can find and talk directly to other hi-fi enthusiasts, and no longer has to rely on sometimes misleading information from retailers and magazines.

Although the industry is declining, the buying power of individuals has tended to increase, and the so called ‘High End’ market has therefore expanded. However, the prices of these high end products is a real problem, as there’s really no justification for the price increases that have happened over the last 10 to 15 years. The reason behind it is the aforementioned decrease in the numbers of customers alongside an increase in individual customer wealth. The margins involved are becoming like jewelry for the present industry: distributors 30%, and retailers 50% (of retail price, as they have to be compensated for fewer sales).

The magazines are dying, partly because of internet competition and partly because there is not the numbers of readers or available advertising to keep them going. Some even seem to be like supercar mags, for people to look at the pictures and read about things they can never afford.

So what will happen when the present hi-fi market finally dies and just a small rump of enthusiasts remains? An obvious first call will be that all the hi-fi in circulation from the good times is now available secondhand. The secondhand market is now far bigger than the new market, as a recent visit to the Tonbridge Audiojumble amply proved, and although prices are going up, bargains can still be found. Some retailers try to operate in this market, but tend to price themselves out of it. The king in this marketplace is eBay, and although it can be a pain, I think the service they give to enthusiasts is mostly brilliant.

Another increasing trend is the DIY market, which is becoming prominent again just like in the 1950s. This is a good thing, as these people will develop and introduce new products, and new companies will emerge. But how do they find and sell to customers? This may well be where an ‘underground’ marketplace emerges from the hi-fi forums,

New product is being offered on a sale or return basis, sales are coming, and small, new enthusiast companies are appearing. And by selling directly to the customer, much of the overpricing problem is solved. No distributor, no retailer, no advertising; just good prices on products that you can borrow to try in your own system. It would be very nice if this business could be linked or tied together in one place for the benefit of the customer.

Another forum bonus comes in the organisation of what are normally called ‘bake-offs’, where enthusiasts usually gather at a member’s house and compare equipment that they own, or just bring new music for everybody to enjoy. These events should be encouraged, and the results tend to be written up on the forums as comparative reviews. Members are also encouraged to write their reviews and opinions of an item, good or bad, when they buy or try something new, which is something that tends to scare the industry’s vested interests.



Future possibilities outside the traditional hi-fi industry therefore include:
Secondhand (via eBay etc.)
Direct sale (via forums, eBay, amazon etc.)
DIY enthusiasts
Social network of Bake-Off shows etc.
Loan schemes of new products

The main independent UK forums include:

HiFi Wigwam
Pink Fish Media
The Art of Sound
Hi-Fi Subjectivist
The Audio Standard
and others.

Plus Web-Mags like:
The Ear
Andrew Everard
Hi-Fi Pig

[Lindsayt]

If the hi-fi market for new equipment from dealers hasn't died yet, it's on life support compared to what it was in the 1960's to 1980's.

2nd hand does seem to have gone up in price, faster than inflation.
I'm glad I bought a load of classic equipment about 10 years, when bargains weren't too difficult to come by.

DIY still seems to be relatively niche.

[Fretless]

Plenty of bluetooth speakers on Ebay.

What folks want these days. No ugly equipment or messy wires.

[CN211276]

Streaming has gone from strength to strength and CD players could become a thing of the past. Vinyl is liKely to retain its niche status, the big problem being new records costing more than a month HR streaming subscription. The price of quality DACs has come down and there seems to be a growing tendency for one box solutions incorperating the streamer, DAC and pre amp. This is linked with WAF and the popularity of awful thin floor standing speakers. There is a definite move to less cabaling. The headphone market seems to be prospering with a wider appreciation of quality. Whether this will lead to a greater appreciation of quality sound through a pair of speakers I am not so sure. The effects of Covid are likely to have an influence and I can see more specialist dealers going down the pan, as with the high street in general, and more manufactures selling on line.

[CN211276]

When I was outside the industry, I had hopes for a more 'enthusiast' led sector, with more regular bake-offs, loan schemes, and direct selling. Having been inside the industry for a year (albeit a rather exceptional one) I am more of the opinion that it will be very hard for such a 'movement' to get worthwhile traction. This is not because the circumstances are not right - thanks to social media, forums, ebay, independent websites, mobile phones, email, next day couriers, it has never have been easier. The reason for my pessimism is that I've come to believe that the vast majority of 'enthusiasts' have become addicted to paying more than they need to. In other words, they LIKE being consumers of luxury goods.

Browse through the pages of the big forums - you won't find the pursuit of value for money. Even before Covid, you would not have found a plethora of get togethers and bake offs (the WAM show and NEBO were the exceptions). The average age of enthusiasts is over 50. That age group has a relatively high level of disposable income. They are used to luxury cars, luxury household goods, luxury holidays. They'd rather spend their Sunday being waited on in a gastro pub or boutique restaurant than meet up with 'crusties' to compare DACs.

A further barrier has been the behaviour of direct sellers and enthusiasts on forums. These haven't been used as an enabling 'open source' library for enthusiasts to gain knowledge and organise bake-offs, they have simply (mostly) become a sort of random online catalogue for flavour of the month luxuries and scams; a source of willing volunteers to be spoon fed the marketing department's latest 'sizzle'. Send a few freebie 'cartridge isolators', graphene fuses or £1000 mains leads to a few forum 'influencers', imply personal importance... and watch the BS and sycophantic fawning multiply exponentially. Try and talk about how £2k slimline ported floorstanders are full of small, cheap drivers that cost less than the veneer ...and you will most often get either a patronising pat on the head or told straight to fuck off. Rather than trying to break the cycle, forums feed it. Forums are supposed to make the hobby MORE accessible to the next generation of music lovers, not narrow it's base through lapping up the margins-led cynicism of putting ever more mediocre designs into ever more luxurious containers.

Younger generations have seen this 'luxury' nonsense, and they have turned to convenience ...and I don't blame them. Bluetooth speakers are cheap to buy, portable, take up virtually zero estate, require no cables, take very little setting up and sound a good deal better than a laptop or phone speaker. If you want to take it further, then you have things like Sonos. Long gone are the days when 'the youth' would press their noses up against Lasky's window to lust after a NAD 3020. For a manufacturer such as NVA - handmade in the UK, high quality, bespoke components - the 'people's hifi' market appears to have gone. If we put the innards of the S80 into a sexy , stylised case, forums would fall over themselves to talk about it, at £1k. In a quality but utilitarian case, at £495, it barely gets a mention. So, why not go down that route? Because the enthusiast market for it is much smaller than it was in the 1980s, and the routes to market are either ineffective or hugely expensive. Previously, dealers got maybe 15% of the NAD 3020, now they demand, and get, 40% of a £1.5k amplifier that would struggle to out perform the NAD (if you are intelligent about speaker choice). At the other end of the scale, there is the problem that small UK manufacturers cannot compete with the slave labour, ersatz culture and low headline prices of mass produced Chinese goods.

Of course, I am generalising, but that is the point. ..to understand the general direction we are going in. The next generation want convenience, they want sound quality that exceeds their expectations and they want it to be affordable and accessible. They also want it to look good. That is the challenge for any manufacturer that wants to keep itself out of the 'luxury trap'of an ever decreasing market.

So, the future? NVA is still there for intelligent enthusiasts - the design is proven and the overheads are low. Prices reflect the transition from a one man, bedroom business, but the sound per pound equation is still strong, not least because of the improvement that Tomasz has driven. There will also be the opportunity to take a share of the luxury market, while it is still there. Wider cases, bigger knobs, free tea and coffee in the dem room, 50% more expensive ...there will be those who will love that. Dealers may be fewer but they are working on higher ticket prices and larger margins. 10 sales a week, nowadays, are more lucrative than 25 sales a week were 15 years ago. When I bought my Klipsch Heresys secondhand for £900 a couple of years ago, they were £1600 new. The latest Heresys are £3500. Will they sell more now, at £3.5k, in slightly nicer finishes (and with more 'luxurious' branding) than they did when they were essentially the same speaker and sold for £1.6k? You bet they will.

The bigger, more interesting challenge, is to be the 'people's hi-fi'...the product that cuts through to almost everyone. Can it be done, though?

[Geoff.R.G]

I think, Paul, that you have hit the nail squarely on the head. Convenience is now cheap, look at the price of a Bluetooth speaker, and the quality is better than you can get from a computer's built-in speakers. Class D amplification (yuck) delivers huge amounts of "power" and to some that is all they want. Couple reasonable quality drive units, class D and Bluetooth and you have a winner.

No I wouldn't be happy with it but I am ancient and my opinion isn't mainstream any more.

[slinger]

I wonder where the bling-merchants will end up, forum-wise, or if they'll even use forums.

Apart from a few decent forums, there is a Hell of a lot of willy-waving going on; there always has been and probably always will be. When all they've really got to brag about is the cost, and how many rhinestones are on the trim, though, will the existing forums even have them as members? (I'm more likely to brag how LITTLE I paid for something. Does that mean instead of willy-waving I'm actually saying "look at my tiny little penis"? )

The current roll-call of forum "gurus" pretty much know what things are worth, or at least, what they ought to cost, and I'm sure they won't be backward in coming forward with those facts and figures. "You paid HOW MUCH for those Heresys? (Heresies?)" Get thee hence buffoon." etc.

With fewer people actually caring about the level of quality their music is reproduced at then the fewer forum denizens. I'm sure the MP3 merchants have no idea that their music, in general, sounds shit in comparison to how it could sound.

I'm not saying forums will die out overnight, no way, but they could, eventually, start to be replaced by some sort of gallery, where people can post pictures of their "hi-fi" rather than the platforms to discuss it, how to improve it, and what's good and what's bad etc. that they are now.

Unless people are educated in the differences between a damn good system and a really pretty box, the "proper" hi-fi market itself may also shrink accordingly. There will, I hope, always be people who want the best, and not just the prettiest box, with added WAF, but one-box solutions, anathema though they are to even me, are the direction the main market seems to be heading in. A one-box system would (obviously) need to sound as good as my many-box system(s) for me to even think about owning one. I'm sure there are som0, though, and I'm sure they're available for extremely silly money too.

I haven't even mentioned integration, as with an AV system.

Maybe we should just lead a "back to basics" charge.

[karatestu]

I don't know what to say about it really. Willy waving is rife with hifi and forums which is a bit of a shame but it's the same with a lot of things. I personally admire those who can seek out lower priced systems which punch way above their weight (Gromit and LindsayT for example).

I do feel most contributors on hifi forums want the best sound they can get within reason (price, size, complexity)but we are all different in our assessment of music. There could never be a cut through product that reaches everyone. And sadly people have a very long memory and grudges are hard to shift (although time may help).

Sound quality is not that important to most people but brand is. It's like being at school and only Nike trainers would do. My brother in law likes anything with the letters B&O on it It sounds alright but I don't think he buys it for mainly that reason. Marketing and advertising are very powerful if done right and is used to brain wash.

Physical magazines are all but dead I should think. Are forums doomed as well? I don't know about that but I do know there are probably more lurkers than participants and you have to be careful who's opinion you trust. I have been around long enough to know that it is best to trust nobody but yourself.

There is enough 2nd hand stuff around to please us lot for the rest of our lives even if all manufacturers went bust tomorrow. That won't help the next generation of music lovers though. If they are happy with what they have then that's fine.

[Ordinaryman]

I for one have been pretty impressed with my echo? used over christmas a lot.
Should I have grown up with this as a musical reference then it would be what I would look for, ease of use and good sound.
What were you listeng to in your formative years?
I realise that its not the be all and end all of music reproduction, but as a "device" it works pretty well.
As for educating people as to whats good and whats not. Thats a hard road to follow, I.M.O.
The problem, as I see it is getting accross to the buying public that there are "other options" not easy.
I can only salute anyone who takes on the current market.
The"peoples hifi" unfortunatly I think its here, the iphone+internett etc.
Like it or not unless inroads are made the best that can happen is that the current generation allso start to feel "nostalgic" and drive the market, much the same as has gone on for years.

[CN211276]

Some good points. The Bluetooth devices of today are the equvalent of the music centres and rack systems of the 70s and 80s. They were so popular with the masses because of their decent sound and most of all convenience. I sold them for a year in 81/82, first in a shop that specialsed in tv and video and later in a super market as the emplyee of a supplier of Phillips and Sharp. Looks and convenience were the overriding factors. Very occasionally a customer would question me about how the geer compared with more expensive proper hifi which featured in magazines. With my commission in mind, it was not difficult to bullshit them with standard lines about availabilty of spare parts etc. Bluetooth devices being a lot smaller and convenient than rack systems, proper hifi is up against it far more today. I'm sure decent rack systems sounded better than Bluetooth, but that is not the point.

I have come to the conclusion that a very high proportion of those who regulary post on most forums are more interested in the equipment than the music. Different boxes and different (not neccessarily better) sound is what matters.

I have my doubts about NVA amps sounding impressive at dealers who dem them with thin floor standers.