The news that the Gibson Guitar Corporation filed for bankruptcy reorganization Tuesday night came as no surprise to those of us in the music industry. The handwriting was on the wall when Gibson opted out of NAMM this year, the largest showcase for musical instrument manufacturers in the world. Reports that Gibson sales had fallen by a half billion dollars over the past 3 years and has debt exceeding $100 million all pointed to Chapter 11. And of course, Gibson was not helped by new restrictions on rosewood imports, the lifeblood of its guitars.
All of us in the industry wondered what would happen to Gibson’s brands – Epiphone, Kramer, Steinberger, Dobro, and Baldwin pianos. Closer to home, those of us in LA wondered what would happen to the Gibson Guitar Showroom in Beverly Hills that is the site of the “secret” showcase concerts I have written about here.
It turns out that the news is good for the showroom; local officials tell me – subject to final approval by headquarters in Nashville – that it will stay open and organizations can still use it for concerts. I can’t report on the fate of the brands yet.
So what happened? Orville Gibson founded the famous company in Kalamazoo MI around 1896 to make mandolins and then invented arch-top guitars using a design based on violins. The rest has been historic, to say the least. Gibson has become a leading innovator in guitar design and manufacture and grew to $2.1 billion in annual sales at its height. But it was brought down by management decisions to diversify out of musical instruments, including spending $135 million to purchase Phillips Electronics.
But there was more at play than just poor management decisions; its market changed. Although Gibson’s sales were actually up last year by 10%, the guitar market and all of the music market has been moving away from Gibson’s sweet spots. Only 8 years ago sales of high profit electric guitars boosted Gibson’s earrings to 13% of capital. Today its profit margin is closer to 4% as the sales of electric guitars has flattened and cheaper and lower margin instruments like acoustic guitars and ukuleles have taken over. What is going on?
Much has been made of the growth of hip hop, rap and pop music which use synths and computers and Abletons instead of guitars leading to the death of the flamboyant male Guitar Hero. But there is no shortage of guitar heroes in metal and alt rock; guitar sales numbers point to other trends in sales affecting Gibson and all guitar makers. The total music market is larger than ever – $7.4 billion last year. Fretted instruments sales were up 8.9% in 2016 (I don’t have 2017 numbers), so a lot of people are still buying guitars. But inside those sales numbers is another story – electric guitar sales are steady but not rising; acoustic guitar sales are rising so fast that they outstripped electrics in 2010 and kept going (thank you Ed Sheeran and John Mayer); and ukulele sales have exploded (thank you Dwayne Johnson, Cindy Lauper and Taylor Swift). But most important, over half of all guitar sales are now made to women.
Enter the Guitar Heroine who is saving the industry.
Women play Les Paul’s, Flying V’s and Firebirds, not mention electric basses, Stratocasters, Telecasters and anything with a whammy bar just like men do. A look through She Shreds Magazine introduces you to many, many guitar heroines. But despite the many “girls with guitars” plugging in and shooting out electric riffs onstage, statistically it is young women driving rising acoustic guitar sales that is fueling the growth in the industry – women now buy over half of all new guitars. And they are doing it online, which is where the sales growth is coming from, because it eliminates the intimidation factor of brick and mortar guitar stores.
The “I” factor was visible at NAMM this year. The aisles were packed with women carrying guitars and looking at guitars their numbers boosted by the presence of She Rocks Awards at NAMM. Those women wanted to test-drive the instruments. But almost all of the sales staff and guitar demonstrators I saw were men, and most of the marketing posters and instruction videos were of men – not always a welcoming environment. Except for niche brands like Tish Ciravolo’s Daisy Rock Guitars, the industry’s market outreach had not caught up with half its market.
To be fair, although it was not obvious at NAMM Fender seems to be getting the message. It is making more acoustic guitars but equipping them with electric controls and it has introduced the California series of acoustics that are lighter and more colorful. Its Fender Play online instruction site appeals to women buyers, many of whom are beginners, and links to online sales where women dominate. And it is now using more women in it market imagery, although it still has a long way to go.
Gibson on the other hand is ahead of the game because of its long history with women. During WW II an-all women Gibson workforce made 9000 of the famous and still highly-prized Banner model acoustic guitars. Today Gibson endorses and supplies a small army of female guitar players, including Halestorm’s Lzzy Hale, Joan Jett, Sheryl Crow and Emmylou Harris. Back in 2006, the company introduced the designed-for-women Les Paul Vixen guitars and the Goddess series. Hopefully, as the company sheds their extraneous consumer products business, negotiate their debt, and focus on doing what Orville Gibson set out to do in 1896 – make fretted instruments – this early attention to the fastest growing half of the market will pull them back to financial success. And will ensure that the Gibson Showroom in Beverly Hills remains a wonderful LA secret venue.
UPDATE: On Thursday morning I was contacted by Gibson’s public relations representative in Los Angeles with the following message:
We have closed our Beverly Hills showroom and are moving into the Sunset Blvd. location currently. We are still in a planning stage on what we will be doing in this new space.
So, it looks like we will lose a great secret venue. Stay tuned for more news as Gibson works through their plans.