DUMB IDEA? A proposed audiophile start up in a saturated market

Please share this...
Share on FacebookTweet about this on TwitterShare on RedditDigg thisShare on LinkedInEmail this to someone

Hi. A well known valve supplier and I have discussed putting (a new valve amplifier line) into production. Given your experiences with valve amplification would you be interested in selling same amps?

Well, I think it fair to say and with some regret too that currently the economic situation facing the UK audiophile industry in general and audiophile start-ups in particular is grim. I can’t see any point beating around the bush re this – especially if you are thinking of making a financial investment. My reasons for this gloomy, but I hope not permanent observation are as follows:

1. There’s a credit crunch coming which it seems will be very much beyond anyone’s control. The point here is that while there are entire sections of the UK which are to all intents and purposes recession-resistant (rich or filthy rich) this doesn’t automatically mean that they are prepared currently – if they ever were – to indulge in audiophile expenditure. They have the wherewithal but not necessarily the motivation.

2. Next, the market for valve amps in the UK is small. Yes, there is a renaissance – but it must be seen against the background of a small population, or low base if you prefer. Most of the ‘open points’ in the price bands are already well served, possibly to saturation point. At the highest price bands, Audio Research still dominates. In the mid price band, Manley Labs (my own personal favourite) are - I think -poised to make an impact (albeit in a small market sector) and Conrad Johnson are still producing fine equipment too. Esoteric Audio Research produce outstanding gear and have a cult following. At the entry level, PrimaLuna is the one to watch. Even though I didn't sell their equipment, I very much respect it. Frankly, their sound quality versus their price is setting the bar very high for others.

Thus in a non expanding (possibly contracting) sector in a definitely contacting market, finding an ‘open point’ will be very challenging.

3. Some high street audiophile retailers are, if rumours are correct, in a desperate state (unless they own their building’s freehold) because of rising overheads. Thus getting them to invest in demo stock e.g. handing over the little money they have, will be tough. I hope this might change, but there seems little prospect of that currently.

4. Trying to get magazine editors and reviewers to want to review equipment from new companies is always difficult, even when times are good. Even if you do achieve this though, the results even for a great review can be very disappointing to the uninitiated. By this I mean I know of many makers who have received outstanding reviews in the past year and the phone has not rung even once for them, let alone their retailers. All that effort for nothing.

5. Magazine advertising currently (with a few very rare exceptions) does not offer any worthwhile return on investment. This might change, but even with declining display advert prices, declining circulations, market saturation and buyer cynicism at an all time high regarding the well worn phrases, clichés, hype and unverifiable blandishments in ads, it’s a non-starter.

Thus my conclusion is that unless you are embarking on this venture purely and simply for fun and at the same time acknowledging the probability of making a thumping loss for the first year, don’t do it. Really.

Finally (well, almost), think of the venture from the ‘civilian’s’ standpoint. The depreciation on state-of-the-art valve gear from well known brands is around 40% in the first 12 months of ownership. Thus a civilian with say £1,200 to spend can (a) buy an outstanding piece of kit which just a year previously retailed at say £2,400 – or (b) a piece without a pedigree or any form of track record for say £1,200. In my experience, buyers who were rarely brand risk-takers in the past are now even less inclined to accept a brand risk.

Their rationale is simple. If they buy a known brand for say £1,200 where someone else has suffered the depreciation, they could use it for a few months and probably get around £1,000 back. A depreciation of just 16.6%. If on the other hand the buy a product without a brand history and they want to move it on, they might find they can’t – at any price.

I really wish I could have offered encouragement. I really do. But I feel obligated to state matters as I see them based on observation and experience. What I can tell you though is that to date, the industry ‘bad times’ have never lasted for ever – and neither have the ‘good’ times. It’s a cycle. Thus at some point in the not too distant future, perhaps only 18 months away if some reports are to be believed, it might be prudent for you to test the market.

Howard Popeck

Thank you for your attention

If you have any comments re this post then I'll be happy to take a look and I'll respond if I can.

Please share this...
Share on FacebookTweet about this on TwitterShare on RedditDigg thisShare on LinkedInEmail this to someone