Podcast #1179: Could Legacy Audio Brands Disappear Next Year?

On this week's show we ask "Could Legacy Audio Brands Disappear Next Year?" We also read your emails and take a look at the week's news.

News:

• Peacock to Stream First Ever Animated Madden NFL Cast During Texans vs. Chiefs
• AT&T Sets a Date to Shut Down DSL Internet & Traditional Phone Service in Most Areas
• Max password-sharing restrictions coming soon

Other:

• Hisense 85" Class R6 Series 4K UHD Roku Smart TV

Could Legacy Audio Brands Disappear Next Year?

Major audio brands, including Denon, Marantz, Klipsch, and Pioneer, are facing potential extinction as their parent companies, Masimo and Voxx International, struggle with significant financial difficulties.

Masimo, having acquired Sound United's brands for $1.532 billion in 2022, reported a decline in consumer audio revenue from $171.5 million to $161.4 million, leading to a loss of $31.3 million, including $12.9 million in Q3 alone. Similarly, Voxx International witnessed a 35% drop in consumer electronics sales and a 15.4% overall revenue decline, exacerbated by a $40 million court judgment and halted production of key brands due to licensing issues.

The declines are attributed to a post-COVID market slump, where the surge in sales during the pandemic is now reversing, alongside structural corporate issues and shifting consumer preferences.

The post-COVID slump

The pandemic created a surge in home audio sales as people built home offices and upgraded their living spaces. But those golden days are over. Since 2022, sales have crashed by up to 30% in some cases.

For example, Voxx International's consumer electronics dropped by 35% partly because people aren't spending like they used to. Even turntables, which were flying off the shelves during lockdown, are now collecting dust in warehouses.

The corporate structure problem

The problems run deeper than just sales.

Masimo, a medical tech company, lacks the expertise to run an audio business. They're experts at hospital equipment, but high-end speakers are a different game entirely.

Voxx faces similar challenges. They can't even make Pioneer products anymore because of licensing issues!

Perhaps because of these misalignments, both companies are trying to squeeze unrealistic profits out of these brands (around 300% to 500% margins).

That's like trying to sell a $100 pair of headphones for $500.

Voxx did manage to cut costs by $5.3 million in Q2, but their operating losses continue to mount.

Basically, managing multiple classic brands under one corporate umbrella has only added to their struggles, spreading resources thin and diluting brand identities.

The changing consumer market

Consumer preferences have also changed dramatically:

• Young music fans prioritize convenience over traditional hi-fi setups. They're not looking for massive speaker setups anymore. Instead, they look for portable, budget-friendly solutions that fit their lifestyle better.
• Serious audiophiles are turning to vintage equipment, which often matches or exceeds new products in quality and value.
• Some Chinese manufacturers have come in to offer the same things luxury audio brands do but at less cost. So, customers have been leaning towards them more in recent years.