Gibson debt analysis

[Stringswinger]

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.

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.

You are assuming facts not in evidence. While Gibson has "territory" agreements that give a dealer a specific area, with guarantees of non competition in that area, those "territory" agreements only cover retail outlets in a specific geographical area. Gibson or any of it's dealers are still free to sell over the Internet. In addition, Gibson is free to open retail outlets in any area not covered by those dealer agreements.

Back in the 50's Gibson had carved up most of the US with dealer agreements (the agreements for many dealers covered an entire State!). Gibson screwed its dealers when they obtained the Epiphone brand by building the same guitars, at the same factory with minor cosmetic differences (under the Epiphone brand) and creating a whole new dealer network. Gibson got to sell more guitars and the pie for those in their dealer network shrank.

They did it before and very well could do it again by direct sales, or by company owned Gibson superstores in territories not covered by existing dealer agreements.

[Thumpalumpacus]

That was what Steve Jobs said. But Henry is not Steve. And Gibson isn't Apple.



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.

Exactly. He bought into companies invested in obsolete technology with no clear plan to bring them forward.

If you're going to buy a name, good, and good luck. But you'd better figure out how to pivot that name-recognition into product modern consumers want. Gibson clearly had issues with that -- witness them shutting down Cakewalk recently when almost all recording nowadays is digital.

They leveraged the company on these purchases but lacked the vision to make them pay off ... and look where they are now.

[Jazzstdnt]

You are assuming facts not in evidence. While Gibson has "territory" agreements that give a dealer a specific area, with guarantees of non competition in that area, those "territory" agreements only cover retail outlets in a specific geographical area. Gibson or any of it's dealers are still free to sell over the Internet. In addition, Gibson is free to open retail outlets in any area not covered by those dealer agreements.

Back in the 50's Gibson had carved up most of the US with dealer agreements (the agreements for many dealers covered an entire State!). Gibson screwed its dealers when they obtained the Epiphone brand by building the same guitars, at the same factory with minor cosmetic differences (under the Epiphone brand) and creating a whole new dealer network. Gibson got to sell more guitars and the pie for those in their dealer network shrank.

They did it before and very well could do it again by direct sales, or by company owned Gibson superstores in territories not covered by existing dealer agreements.

This sounds logical to me.

There are any number of brands that move the overwhelming majority of their product through large retailers - and yet - have their own retail boutiques - sometimes just down the street. Oh, and their own direct-to-consumer web sites as well.

This is especially true with clothing and watches. Brioni, Zegna, Ferragamo, Cole Haan, and many, many, many others. Their stores and their websites reflect their brand the way they want it represented. It's not necessarily cannibalistic in terms of sales channel (as they say in the marketing/sales biz), or at least it wasn't a few years ago. But now the big malls and big retailers are hurting, so.....

Times change, nothing stays the same. Kind of like jazz, eh?

[DRS]

Well, regardless of our debate, Gibson has a few short months to come up with over $500m usd.
Stones cast into ponds cause ripples. This will cause debt holders for other musical instrument producers to take note and become more cautious. I hope Fender has its house in order. Their ISP faultered a few years ago because of a poor debt ratio.

[Sean65]

Recent article with CEO

And I guess they aren't doing themselves any favours with these -