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Some insight as to how Gibson is rated with its debt that I thought was worth sharing.
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03-03-2018 11:53 AM
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Thanks for this. I learned a thing or two.
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Check out 4:55"Why can't they pay back the Debt?...I can answer..."
FAKE Les Paul Custom. Not mentioned, however.
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...“The fact is, we don't see ourselves as a guitar company, we see ourselves as a music lifestyle company.”...
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The most idiotic and self important thing the head of a guitar company could say. And when you look at how the profits dropped after starting to acquire these electronics companies you can see exactly why they are and should be just a guitar company.
Originally Posted by vinlander
...“The fact is, we don't see ourselves as a guitar company, we see ourselves as a music lifestyle company.”...
Sent from my iPhone using Tapatalk Pro
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Very informative. R
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Boy that guy's voice is annoying. Jeez. It kind of detracts from the information. However, a pretty succinct summary.
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That may have sounded good to investors but it sure grates on my ears. What makes it worse, their investments in "music lifestyle" haven't panned out. Originally Posted by vinlander
...“The fact is, we don't see ourselves as a guitar company, we see ourselves as a music lifestyle company.”...
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That was what Steve Jobs said. But Henry is not Steve. And Gibson isn't Apple. Originally Posted by vinlander
...“The fact is, we don't see ourselves as a guitar company, we see ourselves as a music lifestyle company.”...
His strategy was not the problem. His execution is. No clear plans on what he wanted those companies he acquired for. No clear plans on how he planned to integrate them into a "music lifestyle" group. He was soon overwhelmed more with finding ways to pay off the debts than developing his vision of "music lifestyle" integration. Originally Posted by MarkRhodes
Marshall Amps tried licensing its name and logo on a much smaller ambition. And based on the number of highstreet shops I see carrying Marshall music-tv streaming boxes and headphones I would say Marshall isn't doing too badly. At least, I haven't heard that they are in trouble, Marshall started this at about the same time Gibson did this, debuting in NAMM 2013, if I am not mistaken.
The Gibson Les Paul Pro Monitors aren't a bad idea. Their execution is. Their first function is as serious studio monitors. Tack on flamed maple wood panels and paint jobs for the home audio and showboat studio crowd. Witness ATC, Harbeth Audio, Dynaudio, Focal who all have a domestic highend home audio department. Sonus Faber sells mainly on its leather and solid wood veneer panelled cabinetry work. That they earn audiophile approval is a plus.
Using Other People's Money is the American way of growing your business. The Glazers of Florida, supermarket tycoons, used Other People's Money and bought Tampa Bay Buccaneers and Manchester United Football Club, the richest football club in the world. And pledged and used the MUFC's club revenue to pay themselves and pay off interest on the loans. The Glazers did not have to stump up a single cent of their own. They were not popular with MUFC fans because the club had little money left for buying new players or growing the club. You and I could have done the same but we are not well connected enough. None of our own money is required.
The rich get richer using Other People's Money. Henry did the same but he did not buy a football club with a readable revenue stream.Last edited by Jabberwocky; 03-04-2018 at 01:16 PM.
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Originally Posted by vinlander
...“The fact is, we don't see ourselves as a guitar company, we see ourselves as a music lifestyle company.”...
Wasn't / isn't that just the variation of the catch-all phrase of the day ? You could basically insert the name of the recently purchased company, e.g. Harley-Davidson, Levi's, Van Heusen Shirts etc etc, and see the new CEO on the six o'clock news saying something similar.
" Oh we're not just a company that makes fine snow shovels, we're actually a ' Wintersport Lifestyle Engagement' Company , etc etc, and it is our intent to 'grow the business' into a year-round destination /family centric brand etc etc.....
.....and yup, these guys get paid for this.......Last edited by Dennis D; 03-04-2018 at 09:49 AM.
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Take a look at Harley-Davidson.
For YEARS, their stock price was driven by clothing paraphernalia and accessories, NOT by motorcycles.
I know this from personal, painful experience...having owned 2000 shares at 25, and selling them at 38...for CHUMP change. The stock went to about 300 or so....on a split-adjusted basis. Believe me, I'd be playing golf every day now instead of thinking about my next job, if I'd held. Instead, I said "how many motorcycles can they really sell?"
The investment world....the marketing world....suppliers....customers....manufacturers of all this "lifestyle" stuff, had jobs, orders, business, etc. all driven by this "lifestyle" product....which was a very tangible reality.
So....your simon-pure denunciation of "lifestyle products" is just ridiculous...and ignores what may be tangible business reality.
The world is full of them....Sperry Topsiders--boat shoes--- worn by people who don't know port from starboard. Bean's duck hunting boots-- worn by people who never held a shotgun in their hands. Women's cosmetics---lipstick, rouge, etc. which all promise beauty, allure, and youth---something almost all women want. 4-wheel drive vehicles-- driven by suburban soccer moms who might encounter the dirt edge of the parking lot at the soccer field. Fishing vests---formerly beloved by photographers who liked the multiple pockets and sporty image. Gibson L5's----beloved by hobbyist guitarists. Yoga pants----beloved by self-deluding dilettantes who just exude a self-righteous glow of enlightenment.
You can go on...and on.
Gibson's biggest money maker, the Les Paul guitar, is itself an image item, I would argue. Yeah, by accident, it turned out to be really good at overdriving an amp that didn't exist when the Les P. was first introduced, i.e. the Marshall amp, itself an accident. So....the instrument came back into production....after it had flopped initially, and it became an "iconic" instrument. I can't believe there aren't other instruments, maybe of similar design, that cant't do the same thing. But, for people of a certain age, only a Les Paul will do.Last edited by goldenwave77; 03-09-2018 at 01:30 PM.
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Originally Posted by Jabberwocky
You know what--- it doesn't take "connections". People or financiers don't commit $ because they know someone: They believe in the person's idea.
There is LOTS of money to be had for financing. Insurance companies, pension funds, mutual funds, commercial banks, hedge funds....all full of people looking to invest....in established businesses, but also in new businesses.
IDEA people...who can come up with something and make it work, are always in short supply. Money can always be hired.
The continental US, a vast land from coast to coast, with great natural resources, and a shortage of labor in the 19th century....wouldn't a railroad connecting everything be a great idea? Well, yeah....except it wouldn't pay for itself...by carrying passengers and freight....nobody in their right mind would build it. So....the idea came up to give the RR's grants of land, adjoining the rights of way...on that basis, money was committed.
At one pt., I worked in a small law ofc. that dealt with startups....we had one guy walk in, worked at an academic hospital, nerdy computer guy....had an idea to put all medical records in digital form....this was in 90's.. lots of good reasons to do this. Someone did....the problem was....this guy was kind of an absent-minded scientist type....ask him "what time is it?" and he'd give you a 10-minute lecture on how a watch works. Basically, not someone who could persuade money sources to ante up...not without a LOT of help and coaching. It was a no-go for him, but other people did this very thing.
And you know what, no one is forced to supply THEIR capital....the "other people's money" you talk about. Lenders and financiers do this on their own. British built the 1st RR's in the world...US followed and much of it was built with British backing....by 1870's there was massive overbuilding, and numerous bankruptcies, and a lot of British investors got burned... some made fortunes. It always works that way. If everyone could succeed, then everyone in the world would follow suit, and the opportunity would get competed away.
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I love reading the history of American businesses. Growing up in the 70s you hear of head scratchers like AMF owning Wilson Sports, and Harley Davidson. Fila Sportswear was huge as was Diadora and Donnay. Bjorn Borg. Bjorn who? Fila what? Donnay?
(AMF: Operator of bowling centers. And Harley Davidsons...H-D ran into the ground and was saved by management buyout. Went back to making H-D the old way with no cost-cutting. This was about the time that Henry bought Gibson and did the same thing practically. No brainer when you look back at it now. oK, Slash helped a whole lot. Got to give Saul his due.)
And of course, Norlin owned Gibson. Norlin was a Brazilian cement company, if I am not mistaken.
Dennis D said "...and yup, these guys get paid for this..." Carly Fiorina got like $23.1m as a kiss-off for fukking up HP. Not a bad shift.
I got to lay the blame at the feet of the great American invention of the turn of the 20th Century, the American Business School and the MBA. MBAs march out of the Business School with the mantra of the day. To a large extent, the American Business School is built upon the other Great American invention, slightly older perhaps, the American Missionary School. Yours is not to question the cant. Go forth and proselytise. Spread the Word.
So, MBAs took the dominant mantra of the day and out into the business world. In the 1970s, following the oil crisis of 1973, it was cutting corners on the product to make the books look better. The can of Coke shrank by 5% in volume at the same price and the consumer did not know it. The vinyl record went from 180g to 100g and the consumer did not know it. H-D motorcycles; cut back on the chrome and metals,the consumer did not know it. Except that in many cases, the consumer did know it and still knows it when a previously good product is now shit.
In the 80s, the mantra was Branding. Hell, doesn't matter what the underlying product was, the brand is the thing. Thus, we had a bewildering array of products carrying brands of companies with no business to be associated with the product.
In the 90s, the mantra was Mergers and Acquisitions. HP buying up Compaq for $10 billion dollars. Big yourself up and swallow your competitors. We know how well that venture went.
In the Noughties, came the backlash: let us go back to Core Businesses and divest businesses we had no business to be in. Divest was the new big mantra.
And then came the Second Coming of Steve Jobs and Lifestyle became the new mantra. And the CLOUD!
And the Business Schools kept churning them out with new "theological" doctrines of the day. It is all pretty funny to watch because talking to an MBA is exactly like talking to a missionary: it is all religious zeal except that the missionary has the far harder job of having no product to sell. He has got to rely on sheer genius. The numbers and all are all legerdemain created to obfuscate because every MBA knows, numbers intimidate and nobody wants to admit the numbers look terrifying and just nod on in a knowing manner. By the way the MBA has no idea what the numbers mean either. It is the MATHS, man. Nobody questions the MATHS because Americans, we be scared of them numbers.
I have really got bad news for Henry because after the lifestyle thing has run its course the Next Big Mantra is The Cloud where everybody plugs his brain into. We are at the age of the Cybernetic Man. Direct brain stimulation is the new business mantra.
You want to play a 1959 Les Paul with original PAFs? Plug in and JUST THINK IT. We shall do the rest, send your brain the modelled code, and you don't even have to know what mode to play over what chord. Theory free.
All in good fun, fellows.Last edited by Jabberwocky; 03-04-2018 at 12:26 PM.
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I think both GW and Jabbs make good points.
Laying the blame for modern economic woes at the feet of Henry J. and the other "one percenters" (in the Biker subculture, we give that term an entirely different meaning, though no less nefarious
) is simplistic and incorrect (there are many other contributing reasons for why things are what they are, globalization, the Internet, changing values etc.).
But at the same time, the short term profit culture of "management" (highly driven by the academic drivel of the MBA world to be sure) has not been good for the consumer, the worker or the planet.
Between Henry J.'s desire to be a big player and the consumer desire to buy cheap goods (buying a made in China guitar constructed by a robot/slave laborer, from woods that are harvested in an ecologically detrimental fashion is just as bad karma as anything Henry J. and his ilk may do), things are not working well. Add a heavy handed government into the mix (overboard reactions to environmental concerns) and here we are.
I submit that finger pointing and the blame game are no solution at all to any crisis. The Japanese business model seeks solutions to a problem BEFORE blame is assigned. After all, not fixing a problem, means a potentially greater problem up the road.
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@Jabberwocky - that was elegant and funny as hell. It might as well be funny, because the alternative is weeping and hair-tearing, but reality is what it is so might as well enjoy the ride.
The democratization of popular music is a funny thing; it keeps getting stupider so that:
a) people with no talent can become professional entertainers, and
b) people with no talent or ambition to become entertainers can listen to it and not be made to feel dumb and untalented. Microcosm of Western society's recent direction in general.
Is it an Amazon Alexa commercial that says "hey, play that hipster song with the whistling"? Very few commercials nowadays make me laugh like hell, but that one did. Anyway yeah: Rock Band was just the first pioneering step; plugging in your brain and actually being onstage flailing out them sweep-picking face-melting solos for the adoring thousands - we'll get there. As for Gibson, it's pretty sad, but que sera, sera. Hang onto your guitars tight as the OP of another thread said.
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I thought the video was poor. Since it was produced by an entity that puts out so many business videos, I was surprised that the narrator did not know how to pronounce EBITDA, and that he'd had no clue about the nature of bank performance covenants. He got both wrong.
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A lot of VERY VERY good points, here. (More than the ones in the quote above.) Originally Posted by Jabberwocky
The LBO craze of the '80's was bigly about reversing M & A mania of the '60's. And absolutely, many many conglomerates had no clue what they were doing with the varied companies they bought.
And yes, accounting and tax artifacts can only take you so far. And yes, MBA-ism can be quite ridiculous. (Robert McNamara, one of the Ford Whiz Kids, who rescued Ford went on to implement quantitative analysis in defense strategy and conduct....During the Vietnam War, he was fed raw, inaccurate information, and guess what....came up with bad conclusions for a long time. Also, most astute observers think the defense establishment ran rings around him with defense procurement. I admire the US military generally, BUT, they are a bureaucracy after all, and like all bureaucracies, tend to expand and obscure their primary function.)
The way I see it, Henry J. gave Gibson another 30 yr. lease on life.
Going forward, I hope they find a way to keep producing.
PS: Numbers are just a means of keeping track...and often not a very good one at that. All really great financiers are visionaries, IMO. The really big money is always made on paradigm shifts, and not marginal adjustments. In a way the central premise of financial analysis, that valuation can be based on cash flows, is often just not borne out. The future of the cash flows is not assured, and yes, at some point it can become an exercise in wishful thinking, or quantitative theology.
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> The really big money is always made on paradigm shifts, and not marginal adjustments.
The problem is that the big paradigm shifts in guitar building have been the advent of CNC machining and foreign manufacturing, and much of Gibson's profitability has been based upon marginal price adjustments.
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Here's some actual journalistic reporting from the LA Times, with just a couple sprinkles of pixie dust courtesy of notable Gibson guitar-owners who have nothing to do with the story.
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Yeah, that IS a better article, but not as solid as some might think, IMO. A few points that don't necessarily add up:
1. "growing pressure from new import regulations on rosewood, a crucial material for Gibson's high-end instruments, according to S&P. "
My questions are - how new, and what pressure? Either they can import the stuff legally or they can't. So are we talking about higher prices to Gibson which get passed on? Reduced supply? This journalist didn't know so had to quote S&P. Does S&P know a lot about Rosewood imports for guitars? It's not clear that this isn't referring back to the alleged Expanded Lacey Act violations of a decade ago.
2. Hollow bodies, like King's Lucille, are crafted at its Memphis plant.
The guitars are shaped, sanded, painted and polished by hand. Wood chips fly, sending the scent of cut rosewood into the air.
The hollow bodies are made out of rosewood? Why would wood chips fly if we are only talking about fretboards, which cannot be fretboard blanks? Wood dust maybe, but chips?
3. Another obstacle to the company's resurgence is its broken relationship with some retailers. A number of them have stopped selling the brand, citing unmanageable demands that include annual credit checks and upfront orders for a year's merchandise.
"You have to eat so much garbage in order to be a Gibson dealer that it's not worth it," said George Gruhn, who owns Gruhn Guitars in Nashville.
Other vendors echoed that sentiment, including Frank Glionna, who said he'd been a Gibson dealer since the 1970s and called his decision to cut ties last year "bittersweet."
"In the last couple of years, everybody bailed," said Glionna, owner of the Music Gallery in Highland Park, Ill. "The company is in the worst place I've ever seen it in my decades as a dealer."
I don't know about the Music Gallery in Chicago (Highland Park to be exact), but as long as Gibson's are still sold in large numbers in GC stores, the smaller retailers likely don't move the needle much for Gibson, and may not be worth the effort. Or maybe they are in some cases. Rest assured, if Gibson and GC were to part ways it would be very ugly for both.
It continues to sound like the odds of Henry J. being the owner in 6-9 months from now are very slim.
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I went to GC in Santa Clara yesterday on a non-guitar related issue and caught myself looking at the "Guitar Wall" Unbelievable.... Not a single Gibson!! Originally Posted by Jazzstdnt
What?? So I looked again, D'Angelico's, Guilds, A TON of both Fender and Epiphone,
but not a single Gibson... WTF?? I thought Gibson had some sort of a deal here??
Scratching my head and old-guy muttering to myself I turned around and beheld....
Entire "Guitar area" floor had 4 to 5 large white pedestals... On each pedestal was ~15-20 Gibsons
One was full of Les Pauls, the 2nd one full of high $$ Les Pauls, the 3rd one held Flat-tops with another
full of 335 type semi-hollow bodies... Very nice presentations, every guitar shiny and right in front of
you to grab or ogle. BTW, I didn't see (or expect to) any Gibson Archtops...
So if you go to GC looking for a Gibson, don't look on the wall...
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Interesting, I'm used to seeing them on the walls, with the exception of the platinum room. Maybe this is a change.
Many designers/manufacturers work with retailers in this way, to have a say in how their product is presented. It makes sense. Next step would be opening their own boutiques or stores so as to completely control the customer experience. Obviously Gibson doesn't have the expertise - or money - for that.
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I don't think the contracts with their retailer vendors allow Gibson to open their own selling points. Originally Posted by Jazzstdnt
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OK, what are you basing that on, just curious.
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To sell Gibson in the US, you need to apply for dealership: you sign a contract which establishes the conditions: you need to acquire a certain amount every year as a minimum, and you have to pay for'em, sold it or not, to be able to have the merch at an advantageous price. Originally Posted by Jazzstdnt
All contracts of this kind have a "no concurrence" clause, which impedes Gibson to coming to your town and open a branded outlet or franchised selling point that can sell the same items you sell at half the price you're asking.
I'm talking generally; I haven't actually seen the contract that GC and affiliates group have signed, so I don't know the actual conditions; I only know that they're quite behind in payments with all their suppliers, so the banks or financing institutions providing the needed capital to keep the wheel turning, are NOT happy. And you just know, if your bank is NOT happy, then you're miserable.
In Italy the sales are made through a distributor, so basically any music shop or even private persons with a VAT number can buy anything from them to sell, although the profit margins are NOT even in the same galaxy as the american dealers. The only accepted advantage is delayed payment. The merch you buy, you pay three months after the invoice is generated.
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