Gibson Brands CEO Henry Juszkiewicz talks to journalist Maho Kawauchi in an interview which appeared in the Nikkei Sangyo Shimbun on 20 June 2014.
Time-honored guitar maker seeking 50% share of global audio equipment market
Gibson Brands, Inc., a long-established maker of premium guitars, is looking to focus on amplifiers, speakers, and other consumer audio equipment as it celebrates its 120th anniversary this year. The company is employing M&A to evolve into a broad-based manufacturer of musical equipment. We interviewed Henry Juszkiewicz, chief executive officer of Gibson Brands, about the company’s business plans.
Interviewer: You announced in April that you would buy WOOX Innovations, an audio products and home entertainment unit of Phillips, for $135 million (around 14 billion yen).
Juszkiewicz: We are the world’s No. 5 consumer audio equipment manufacturer. While we have less than 10% of the market at the moment, we aim to capture 50%. We’re privately owned, so we don’t disclose details of our financials. But after we complete this acquisition we will become a global company with $2 billion to $3 billion in annual sales, and around 6,000 employees. Musical instruments and related products would account for 15% of revenues, with 20% coming from professional audio equipment and the remainder from consumer appliances.
Many music giants have loved our offerings. We’ve created famous guitars used by Jimmy Page and B.B. King. Gibson-branded models account for 6% of the global premium guitar market. We have amassed more than 100 brands through small acquisitions, notably Baldwin Piano and the music software business of electronic keyboard instrument manufacturer, Roland.
Interviewer: Isn’t it enough just to manufacture prestigious guitars?
Juszkiewicz: The musical instrument business is a mature market, so it takes a lot of effort just to generate 5% annual growth. But the audio equipment market is about 20 times bigger. We concluded that that we need the audio equipment business to drive growth, and started expanding in that area around five years ago. We a looking to secure a 50% market share to ensure our survival.
Interviewer: Rapid technological changes and the way consumers experience music have transformed the appliance industry. Isn’t it very risky to enter that arena?
Juszkiewicz: American manufacturer VIZIO captured 60% of the U.S. television set market just five years after beginning operations. It’s still well within our reach to become an industry winner if we match our products to consumer needs.
Interviewer: In April last year, you bought a 54% stake in audio equipment maker TEAC Corporation. Are TEAC's financials improving? Might you make it a wholly owned 100% subsidiary?
Juszkiewicz: TEAC has yet to deliver a solid performance, but it is progressing as anticipated in a revival project under its three-year plan. TEAC got through the worst after completely withdrawing from the optical disk pickup business and halting original equipment manufacturing.
We will keep TEAC listed on the Tokyo Stock Exchange, as this will be very useful when acquiring Japanese companies down the track.
Interviewer: It’s been said Gibson would ultimately become a music lifestyle brand. Does it risk failing by diversifying?
Juszkiewicz: We aim to serve consumers and professionals with all sorts of Gibson-made musical instruments and audio equipment. That is why we renamed Gibson Holdings as Gibson Brands about a year ago.
A key priority for us is to ensure management quality as well as the quality of products at companies we buy. A company at which you have to replace most of the board members is no good at all. But it’s not problematic if we buy a brand that continues to hold a leading position in a specialized field under a reliable management team.
Gibson Brands
Gibson was founded in 1894 when luthier Orville Henry Gibson began manufacturing mandolins and guitars in Kalamazoo, Michigan. The Les Paul Model, which the company manufactured in 1952 with jazz musician and inventor Les Paul, became the standard for the electric guitar, underpinning the Gibson brand. Rock stars and jazz guitarists continue to use Gibson guitars, and the brand is globally renowned. The company moved to Nashville, Tennessee, in the 1970s.
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