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Okay, so Linn have been surviving on the "glories of the past" for some time, and the bottom has begun to drop out, forcing a change of strategy, but how many other similarly-minded UK manufacturers are likely to face similar problems?OTHER POTENTIAL CANDIDATES
Let's first take a look at SME - another company built on a history of excellence in vinyl reproduction - and consider them against the backdrop of Linn. What have SME done in the last 10-12 years that is different to what Linn have tried?
- SME stuck to their core-competencies and DID NOT dive into HT/AV
- SME also stuck to analogue replay and avoided digital
- SME continued to plough-in R&D and evolved their product range
- SME products have maintained their high engineering standardsUnfortunately, by staying focused on vinyl, SME may just have sealed their fate as the 2-channel market shrinks - and the vinyl segment of it shrinks with it. SME will probably outlast Linn, but not by much.
Next, let's consider Naim. They have embraced HT/AV and have also embraced digital replay. The big question about Naim is whether or not they have done enough in R&D to keep pace with the "audio innovators" of this world and have not, as a result, kept pace. Naim DO have a semi-cult status and a very loyal following, but is it really growing?
I have my doubts that, without a shift in strategy and budget allocation, Naim will survive in their current form as their entry into HT/AV may just have alienated some of the traditionalists in their following.
There are probably many others, but the two listed are pretty typical.
OTHER MATTERS
Immature and rapidly-evolving market segments such as AV/HT demand constant and high R&D expenditure just to keep up with the opposition, but this also implies frequent product supercession which, in turn, implies shorter product life-cycles and, as a result, a limited window in which to recoup any R&D spend.
Volume manufacture/sales such as achieved by the major mid-range Japanese electronics giants such as Sony, Denon, etc. support both high R&D spend and rapid product supercession in the drive to lead the market with new capabilities, but for low-volume, high-end (ie: pricey) UK-based companies like Linn and Naim, product life-cycles need to be longer to permit the recouping of R&D as well as bringing home some profit for the shareholders.
It is interesting to note that even some of these large electronics giants are beginning to experience some financial difficulties as a result of entries into inappropriate market segments (ie: those that don't permit leveraging of core-competencies, other R&D, etc.)
This "gap" in product life cycles is likely to be the Achilles Heel of these UK boutique brands - their products will automatically be left behind in those market segments that are not yet mature in terms of technology and/or standards.
A POSSIBLE WAY OUT?
So, maybe - just maybe - the secret for survival for these companies is to carefully select the market niches in which they will play - and to do so based on the "stability-factor" (or maturity-level) of both the standards and the technology required by the niches, to enable them to maintain long-ish product life cycles.
This shift will require a conscious decision to get out of - and stay out of - any market segments that are exemplified by rapid evolution of both standards and technologies! (Unacceptably high R&D demands?)
This will also allow them to put more focus on engineering and quality, funded by the savings of not having to spend R&D capital chasing rapidly-moving targets.
This does not mean that these companies must just "return to their traditional knitting" - which would surely result in them just fading away - but to be very cautious when considering entering new market niches/segments and applying a "checklist" of prerequisite conditions to determine whether or not the segment/niche is, in fact, an area in which they have a decent probability of succeeding.
SHORTER-TERM COURSE CORRECTIONS?
Another alternative is to look at ways and means of reducing cost while improving quality and many US manufacturers have already started down this road by buying-in technologies and outsourcing manufacturing sub-processes.
In today's world, specialisation is the order of the day, and very few manufacturers still perform/build each and every process/element.
Computer Numeric Controlled (CNC) machining provides very high levels of quality and fine tolerances but with a high level consistency, resulting in lower reject rates - something that is not easy to achieve using human artisans and largely manual processes. For components and sub-components that demand close-tolerance machining, it makes more sense to outsource the machining aspects to specialists that have both the knowledge AND the necessary equipment.
JRDG outsource the machining of those gorgeous cases, so why shouldn't Linn (and other vinyl replay manufacturers) outsource the close-tolerance machining of items like sub-chassis', platters, bearings, arm components, etc.? They've also "bought-in" other technologies (as in B&O's ICEpower amplification modules) and fitted them into externally manufactured casework and marketed the combination as "their product"...
NB: I'm not touting Jeff Rowland as "The Model of Financial Stability in Audio" - just using them as an example of a possible future scenario for survival in this rapidly changing market.
Just as the IT industry has moved from proprietary and fully home-grown product to systems assembled from bought-in components, maybe the Audio industry needs to do the same...
Or is this sh*t I'm smoking of particularly fine quality?
DevillEars
Follow Ups:
I bet you are a marketing consultant (that's a compliment).I would like to point out two rays of hope:
Linn has developped leading-edge switch-mode power supplies, which if I am not mistaken debuted in the CD-12 and the Klimax amplifiers. Now they are using the same technology throughout the product line, at low cost and extremely high performance. This will give them a technical advantage in the AV marketplace. Maybe there are more proprietary technologies/processes, Linn is known to invest wisely and heavily in RD.
By the way Linn's inovation with the LP12 was not the suspended chassis, it was the painstaking care they took in machining to very strict tolerances (3 triangles AKA mirror finish).
Music encoded on an LP groove can be measured in tens of thousands of an inch. The LP12 was the first turntable to have zero play in its main spindle and in its tonearm bearing. At the time the LP-12 was lauched, a Thorens TD-126 or Technics SP-10 PRO turntable had one or two milimeters of vertical play in the platter. Imagine what that does to channel separation and retrieval of detail. Most tone arms made at the time had lots of play, including the knife-edge tonearm technology that SME dropped a few years later.
An LP12 sub-platter takes about 30 seconds to sink into position, during initial assembly... sometimes up to a minute if well lubed.Second ray of hope: SME has focused on its main competencies. They used to make high-quality scale models (hence the SME brand).
I understand that nowadays most of SME's revenue comes from specialized military contracting work.As for Naim, I am at a loss. They charge thousands of dollars for an additional power supply (Super-Cap and similar names) that has inside it a couple of toroidal transformers (maybe $50 each?), a few LM 317 chips (U$ 0.70 each)and lots of capacitance (regular electrolytic caps, nothing fancy like Black Gates or Dubilier's 50,000 hour caps).
It's been known throughout the DIY community that there are alternative electronic parts that provide audible and measurable improvements, like C-core transformers, large EI transformers, Schottky or Hexfred diodes and Linear Technology regulators.
For example, a schottky diode has no measurable switching noise vs 2000 nS of noise from a regular 1N4007 diode.
An LT 108X regulator has 10 db lower noise than an LM317 regulator (it's in the data sheets).
An Elna Silmic cap has distortion/self-noise 130 db below the main signal, however the mainstream industry keeps ignoring those better parts and techniques.
There are exceptions, companies that care and use really high-performance, leading-edge parts, like ASR, ModWright, Conrad-Johnson, AMR and several nordic manufacturers. In the meanwhile, the old guys continue using 70 cents chips within a fancy box.
Maybe you should factor into your analysis the sincerity of some so-called high-end companies. They are actually middle-market products disguised as high-end by means of a thick faceplate.I am not associated with any of the above-mentioned companies, but I own an ASR Emmiter amplifier, a Linn turntable, a couple of SME arms and a parts closet with plenty of the caps, regulators and diodes mentioned.
Thanks for your very intelligent and insightful post.
Carlos
IMO, high-end audio has grown stodgy and conservative, more a dad's hobby than one for a hipster. 25+ years ago, hifi was sexy enough that Playboy published a buyer's guide; today, you go to a hifi show and it's populated by boomers who hate rap music.What went wrong? Basically everything else changed, but hifi stayed the same: We have our 1080p high definition video, wifi, hybrid automobies with GPS navigation, digital camera/Blackberry phones, Bluetooth, Half-Life, iLife, Second Life, Nintendogs, atomic clocks, Naruto--need I continue? In high-end audio, the prices went up--way up. But if you could transport my 1982 self to a 2007 hifi show, there's little that wouldn't seem familiar or even surprisingly "old hat".
I had been considering the purchase of a Linn or Naim CD player, but am currently leaning in a different direction, towards one of the few of a newer class of components built around computer/networking technology: Slim Designs Transporter.
The parallel drawn between the High-End Audio industry and the Information Technology (IT) industry came to mind near the end of the above post and, on re-reading the post, it struck me that maybe a more detailed comparison could be interesting.The IT industry has been seriously impacted by a few megatrends and key “turning points” which have had significant impacts on the dynamics of vendor:buyer interactions.
These are:
a) The Personal Computer
b) Commoditisation
c) Insourcing and OutsourcingTHE PERSONAL COMPUTER (PC)
The long-term effect of the development of the PC has eroded the market for mainframe computers. Large mainframe systems still exist, but PC-derived systems have begun to erode the periphery of their environments. Initially, PC’s were stand-alone workstations but soon evolved to operate on networks. The PC started out as a “moveable” but “desk-bound” system and has evolved through the “laptop”, “notebook” to “palm-top” portability. In addition, PCs have split into “servers” and “workstations”.
Some parallels in the Audio industry?
a) Erosion of market? HT/AV and iPOD-type devices have begun to erode stereo market
b) Stand-lone to networks? Traditional stereo rig vs Multi-Zone/Multi-Room systems
c) Move toward portability? Portable record players -> iPOD
d) Client/Server? What price Music Servers and Satellites?COMMODITISATION
As the price per unit of computing power has plummeted, we’ve seen forced changes in the “Go-To-Market-Models” of IT companies. Mainframe computers were sold to specialists by specialists, while, nowadays, PC’s are bought by anyone from total idiots. Selling entailed salespeople visiting clients to sell, while buying happens via the most convenient “channel”.
In the Audio industry?
a) Music has been commoditised – it’s bought via the most convenient channel
b) Audio equipment is, these days, also sold by idiots and buying is becoming more prevalent
c) Portable music players are fully commoditised and becoming more portableINSOURCING & OUTSOURCING
Back in the heyday of the proprietary mainframes, each manufacturer designed, engineered and manufactured virtually each and every component that went in to make up the mainframe system and it’s peripherals. Over time, specialist companies like Intel, Seagate, etc. started to drive the technology development in their respective fields of microprocessors, disk drives, etc. The major system manufacturers stopped their own R&D in these areas and bought-in rather than have to duplicate the R&D and compete in non-core niches. More recently, we’ve seen companies outsource other non-core elements like casework, software development, etc. Today’s successful IT companies are either very narrowly-focused niche manufacturers of either hardware or software components, or they are “integrators” that build “systems” using bought-in “components”.
In audio?
a) CD players are a good example of “integrated components” – CD mechanisms, DAC chips, displays, etc.
b) JRDG? Outsource of casework, buying-in of ICEpower electronics?SO, WHERE IS IT ALL HEADING?
Well, there is another factor – let’s call it “miniaturization” for lack of a better term.
Back in 1969 when I first entered the IT world, the largest-capacity disk drive was 5MB in a cabinet the size of a SpeedQueen automatic washing machine. Today, we see an iPOD Nano equipped with 8GB of storage on a memory card the size of a 1/8” thick postage stamp. We won’t even bother to compare either the purchase price of each or the price per MB. This is another megatrend – the plummeting of the cost per MB of solid-state storage and the rapid growth in capacity per unit size.
And another? Convergence! Remember when a cellular phone was just a phone? Next they added a digital camera, and now you can get cellular phones that run a Windows-like operating system; have applications like word processing, spreadsheets and e-mail; incorporate a digital camera to support voice and/or video calling; internet streaming of TV broadcasts; and – wait for it – they also include MP3 playback. At a less portable level, we’re seeing PC’s forming the basis for “music servers” for multi-room sound.
(Maybe the choice of IT as an analogy wasn’t so far out after all?)
The market is changing! Why? Because we’re all changing!
The cost of living space is increasing and we’re less able to allocate decent-sized rooms for audio.
We’re always on the move, so there is less time for dedicated “sit & listen” in front of the hifi.
Portability of entertainment is a big attraction – music in the car, bus, train, airplane, etc.
Why carry separate items for photography, music, communication?(He gazes into his crystal ball and makes some weird hand-movements, then turns to the audience and says “I see you in ten years time with a complete home entertainment system coupled with a complete communication and imaging system – and it bears the label “NOKIA!”)
DevillEars
-in order to survive and thrive. In order to do that we need to assess what it is that we are doing in the world of audio. Here is something to consider:http://www.atma-sphere.com/papers/paradigm_paper2.html
It should be no surprise that the audio world is shrinking. The industry only has itself to blame: a false paradigm, 'perfect sound forever', mp3s that offer zero emotional response...
(BTW it is possible to create a codec that does create emotional response.)
When we transform that we will see a turnaround.
I think about many of the items discussed in the OP all the time, and will try to address them as objectively as possible ;> ) Great post, btw...1) not sure that any of us know exactly what's happening at Linn. Something tells me there will be a lot of conjecture in the following months, however. There are some shifts in the market that have created problems for ALL high-end companies. I don't want to get off track from the original question but Linn's woes are probably being felt by high-end electronics maufacturers on an international level. In the US, RIAA statistics show that the category of business that includes SACD, Vinyl LP, and DVD-A is down 54.5% from 2005 to 2006. Down 86% from 2003 to 2006 (Yikes!)CD sales in general are down 25% from 2003 to 2006. Meanwhile downloads are WAY WAY up. The health of the high end has always been tethered to the growth of new music lovers looking for a better way to appreciate their music. Current stats show that an awful lot of music is being purchased but the growth areas are decidedly non high-end. (at least in a traditional sense...go over to the PC Audio forum and you'll get a peek at the "new" high-end) ) Are we trying to sell more audio to the same group of old crusty audiophiles? Maybe...and it looks like a lot of those sales are going to the used market.
2)SME...don't know. Something tells me that their overhead is probably very low and that they will always have a certain amount of demand. Plus...their name is VERY sellable. (hate even mentioning that)
3) "Immature and rapidly-evolving market segments such as AV/HT demand constant and high R&D expenditure just to keep up with the opposition, but this also implies frequent product supercession which, in turn, implies shorter product life-cycles and, as a result, a limited window in which to recoup any R&D spend."
Yep::: entering in to the HT/AV manufacturing business is a huge expense and even more of a gamble. I could go on and on. Look at what it did to Adcom, Proceed, Tag McLaren, Cal Audio, Sunfire, etc...etc...millions of dollars lost, and in a couple cases the company with it. Even commodity suppliers have problems with this category of business.. Kenwood's HT division is practically bankrupt today after doing $250M in 1995 in the US alone!
4) "So, maybe - just maybe - the secret for survival for these companies is to carefully select the market niches in which they will play - and to do so based on the "stability-factor" (or maturity-level) of both the standards and the technology required by the niches, to enable them to maintain long-ish product life cycles."
you should be paid for that kind of advice.
IMHO Linn really made only one really good landmark product , the LP12. They have been surviving on that for yonks.
Even that wasnt an innovative product and is way overpriced for its build quality. System based Co's like linn and even meridian are impacted by the lifestyle music stores of Bose and B&O. Folk these days live in smaller dwellings and are computer savvy , they want small discrete easy to use with a HT component and tons of puter convergence. It's really only ppl our age and audio persuasion that will go for more esoteric expensive stuff.
Durban poison or Malawi cob is the connoisseurs (sp) choics:)
Rodney Gold
I guess that very few buy a new LP12.Somewhere, somehow something went very wrong obviously for them to be in such a financial trouble.
A real creative wacky design they came up was the Isobarik and Kans which they moved away from a long time ago along with abandoning a long-time loyal customers and dealers.
I talked to a Linn rep about this some years ago. He said that Ivor Tiefenbrun had told the company's staff that Linn would be the last turntable manufacturer on earth. Linn's recent announcement of the new "Keel" subchassis for the LP-12 shows that they're committed to the product. The Linn rep also said that tooling and machinery for the LP-12 were amortized long ago, and it now costs Linn little more than the price of the raw materials to run off a batch of LP-12s.
*Linn's recent announcement of the new "Keel" subchassis for the LP-12 shows that they're committed to the product.*
I would think that only for a very select market. Mainly in the Orient where an LP12 is still highly regarded.A new arm and a subchassis might have a bigger margin, but I'd think that they need a lot of volume to make a substantial profit.
I just don't see most of current LP12 users shelling out 5k$ for a Linn arm and 4k for a piece of metal, tbh.
If Ivor thinks that an LP12 can save the company, more power to him, but I am very skeptical.
As I wrote above, I got the info about the LP-12's manufacturing cost and Mr. Tiefenbrun's commitment to continue it's production straight from a Linn rep. By the way, I did not write anything like "if Ivor thinks that an LP12 can save the company..."; I don't know where you got that notion. Obviously Linn doesn't sell enough turntables to support a company with hundreds of employees. The point is that the LP-12s they do sell are quite profitable.
*The point is that the LP-12s they do sell are quite profitable. *
well, too bad that it's not enough.I was looking more from an overall picture where one product that is profitable is just a drop in a bucket.
Recently, Linn has invested heavily in building state of the art digital player transports (ie. Silver Disk Engine).However, just like it's almost impossible for a startup/small conmpany to build a car from first principles, it will become impossible for anyone but large consumer electronics firms to innovate when it comes to electronic components.
Most high end DVD players these days (Linn and TEAC would be exceptions) are basically OEMed off a mass produced platform. It's difficult for a small company to navigate through the licenses involved for DVD-Video, DVD-Audio, Dolby, DTS, etc. let alone invest sufficient resources to design and build their own transports, MPEG decoder, etc.
The future will become worse, thanks to DRM. The requirements for content protection and the limiting of HD content transmission to HDMI will mean it's impossible for a small company to design or even manufacture a BluRay/HD-DVD player or AV receiver/processor unless they OEM off an existing design (or go down the PC route).
I would hate to be in Linn's shoes at the moment. The only way they can ever release a BluRay/HD-DVD player is if they abandon every principle on which their company was founded on.
As I understand it, Christine, Linn appropriated the design of the LP12 from the American AR TT (and possibly they stole it from a 1960s 3-point, suspended Aussie TT ... called, I think, the "Aurora" - a mate of mine has one! :-)) )So I don't know what "principle" you were thinking of? :-))
Regards,
Andy
.
.
Out of GB, which came first LP-12 or Ariston?
.
Most specialty companies do not wish to glow bigger or have a plan for the future.What is the probability of Rowland, Krell or Wilson surviving after the founder's ( guru ) death?
I was amased Naim survived after Julian's gone, tho.
What's going for them, however, is company's upgrade scheme.They seem to be following very similar to Linn's product path,( HT, HD music server, DAC etc.. ) so I am curious to see how they survive.
Actually Linn has decided to basically abandon the so called audiophile market. Just look at what they are manufacturing: CD receivers, very slick styling.Linn has decided to emulate the B&O/Bose market strategy: offering very beautiful styling and an an all in one kind of shopping mentality. I personally spoke to a US Linn rep a couple of years ago and he informed me, as I was interested in the LP-12 TT, that TT sales accounted for less than 1% of their overall sales. Their product line is organized in certain price groups these days
The sad truth is that the high end market is not large at all. A large high end manufacturer may employ 20 people (CJ falls in this category). For a while, Madrigal/Mark Levinson claimed to have the largest factories in the high end world, and at their peak I believe they had something like 55 employees. If you want your company to grow larger, the high end market is not the place you really want to be.
Your slice of the pie is increasingly shrinking with new players jumping in, and it is difficult to sell a new product to the same customer year after year, because the products are generally better built and therefore simply last longer.
In addition, look at who has the money to purchase the high priced items. Many are not really music lovers. Sure, they enjoy music, but in my experience, the most fanatical of music listeners were not among the upper class financially: sure they were very middle class, but they had financial worries about mortgages, college education for the kids and the like. I had one guy who, in a decision between car insurance and a really good sale at Tower, elected to sell off his car. If you really listen, your software collection will be worth way more than your hardware. Few fall in that category.
Any way:
it's all good food for thought.
Stu
Pride comes before a fall.
Regarding 'Shorter-term course corrections': Linn has always outsourced their machining to
its parent company Castle Precision Engineering. CPE is a military contractor here in the UK specialising in machining precision parts.
I was not aware of Linn's situation, but I read your post because I know you often have interesting insights. Once I get past the odd (to my eyes) Brit noun/verb pairings, I found your essay quite insightful.The basic problem that higher-end audio manufacturers face is declining interest in audio per se. With so many new-tech alternatives to choose from, most consumers have "moved on" to other pursuits, mostly in the video realm.... and it's hard to fault them. We humans are more sight-oriented than sound-oriented, so it's easy to see why someone would rather buy a hi-def TV than a two-channel amplifer or a pair of speakers for the same money. And of course, we have the home computer market competing for the same discretionary spending.
I suspect that high-end home audio systems will become increasingly rare, owned only by rich eccentrics. Even $4,000 audio-only systems will become an oddity. Until and unless there is a resurgence of interest in high-quality sound the market will continue to shrink. 98% of the population will spend their money on big-screen TVs and listen to music on iPods. Nothing that Linn, Rowland and the others can do will change this.
A couple of nights ago I had dinner with a fairly wealthy gentleman and his wife who live nearby, in a very tastefully furnished home they bought last year as a retirement home. They are educated, highly intelligent people. Everything in their home was of high quality, most of it obviously new. In their living room they had a 54" Pioneer HDTV, and sitting next to it a Bose Acoustic Wave system. I know they could have spent more on a sound system, but they didn't care to. Probably 75% of the money they spent on a/v gear went to the video side, and I'm sure they think their Bose system is about as good as it gets. After all, they've been bombarded with ads telling them so for years!
So, in a certain sense, Bose is the future of audio. They've pretty much followed the strategy you describe, and advertised the hell out of their products. They have an excellent reputation, and their products aren't all that bad - just overpriced by about 200%. For companies with better products to succeed, they must become more Bose-like. Sad but true.
"Music is the medicine of a troubled mind." -- Walter Haddon, 1567
"odd (to my eyes) Brit noun/verb pairings"...??Could you point to some examples of odd noun/verb pairings? Curious, as I did not notice.
Thanks
In mon-American English usage, collective nouns (or nouns that refer to a collection of people) take the plural of the verb form. (I'm not sure "non-American" is correct; it may be that we have influenced our North American neighbors, the Candadians, into the same usage, even as they cling to the British superflous "u" in words like "colour" and "harbour.")Thus, in American English, one would say (referring the the enterprise) "Linn has decided to . . ."
And elsewhere in the Anglosphere, one would say "Linn have decided to . . . "
I think that's what Big Dave refers to.
Yep, that's it!
"Music is the medicine of a troubled mind." -- Walter Haddon, 1567
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