Part 1 of 2: In Which MUSIC Group Parts Ways with the Retail Giant
I’ve personally bought tens of thousands of dollars worth of equipment at Guitar Center (GC), but not recently. As the largest brick-and-mortar music retailer in the world, with hundreds of locations in the United States, I imagine you have spent some good money there, too. Hell, GC saved my band on tour countless times.
But, that was then.
I haven’t been back in a long while, and most musicians I know aren’t making serious purchases there anymore. Sure, maybe a few picks or strings, but not a PRS or a synthesizer; for those, there’s a plethora of online retailers that will ship it right to you for a decent price (in many cases, free). So, what’s going on?
A short time ago, we received a sharply worded press release outlining how MUSIC Group (a leader in Pro Audio) was “parting ways” with Guitar Center based upon their (meaning Guitar Center’s) “financial situation” and their (again, GC’s) high risk “credit worthiness.” You can read it here: http://www.music-group.com/CEO-Document-MUSIC-Group-Guitar-Center-Part-Ways-2014.pdf
I reached out MUSIC Group for comment, and as of this printing, have not received a response.
So, I sought out Eric Garland (@ericgarland), Managing Director of Competitive Futures. Garland is a mastermind at providing strategic trend and competitive analysis to executives from business and government agencies. And he’s a bass player, too! Just for fun, he wrote a personal post on his blog about Guitar Center, as if he were analyzing them, and it caught viral fire. Read it at www.ericgarland.co when you have a minute. Eric knows his stuff, if his analysis holds true (and it most likely will), Guitar Center doesn’t have a very rosy outlook. I’m interested in whether this is confined to them alone, and what effect it might have on the wider MI community.
This press release war was fairly harsh, what did you think of it?
Eric Garland: The underlying issue is a very common story, in other words, “you owe us money, we don’t trust you; we’re parting ways.” But the release war did seem over the top. The GC press release struck first, then the response from MUSIC Group, and it was mind-boggling. I grabbed the popcorn. It was amazing, what did they think they’d get after publicly slamming a vendor?
Are you sick of the Guitar Center thing?
EG: No, it’s super fun. I’ve done analysis on every sort of industry, from nuclear power to diesel engines, and even toothpaste tubes. At night, I’m playing bass, or jamming in a honky-tonk band. So, I get to do a little of this stuff, and just talk about guitars and basses. I’ve gotten fan mail and contacts of people that make the instruments that I play. Dude! That is incredibly gratifying. It hit a nerve for a reason; people care about this.
What do you say to detractors who think you’re picking on Guitar Center?
EG: That initial post had the most shares of any article I’ve written, over 25,000 Facebook shares. I shopped at Guitar Center and I shopped at local stores, as well. I had no particular animus toward them. I’m the guy that buys $5,000 basses! When I was in Washington, DC in 2003 before Bain Capital got a hold of them (and the economy changed), they didn’t seem to be an aggressive category killer. They encouraged relationships. They were occupying a space where no one else was.
Is this a music instrument retailer failure, or something greater?
EG: In all of retail, there’s no real recovery. There are some types of recovery for different reasons, but across the board, consumers have less disposable cash. There are 70 million baby boomers who have propped up guitar-driven musical instrument purchases, who thought guitars were cool. They’re the ones buying the $18,000 Strats (or used to). There must be fresh consumers. Your average profile for a musician today is much more of a tech play: software, sequencers, etc. So, it’s a retail thing compounded with this segment [shift].
Do you think the MUSIC Group row is an isolated incident?
EG: I’ve only written about 19% of what I know. When someone has billionaire attorneys, it wouldn’t take much for them to really mess with me, or my wife, so I’m very careful about what I put out. But anyone can see the situation. They have terrible inventory now, and there are rumors swirling of more vendors exiting. After the first article, in December, someone tipped me, “Did you hear they were a junk bond?” Really?! Then, their CEO came to comment on my Facebook page, and that’s when I knew something was up. That was that they knew they were going bankrupt.
Editor’s Note: In part two, we’ll explore deeper the cause of GC’s troubles, and how independent musicians might be affected by it, and other music retailers’ demise. Read more music business coverage here.
ABOUT THE AUTHOR
-Michael St. James is the founder and creative director of St. James Media, specializing in music licensing, publishing, production and artist development.