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Guitar Companies Caught Between Rock And A Hard Place

Musicians talk about why guitar companies like Gibson are struggling and how to revive them in the age of hip-hop.

By Tom Teodorczuk

“Anyone Can Play Guitar” was a memorable early Radiohead single from 1993. But times have changed, and leading guitar companies are struggling in the 21st century.

This was illustrated last week when Gibson Brands Inc, the Nashville-based maker of iconic guitars since 1894 — instruments that have been played by the likes of Elvis Presley and B.B. King — filed for Chapter 11 bankruptcy protection.

Between 2013 and 2016, Gibson’s revenue fell from $2.1 billion to $1.7 billion. The bankruptcy petition estimated its debt could be as much as $500 million

As one of the leading guitar companies, Gibson took the unusual strategy of pursuing a diversification strategy as a “music lifestyle” brand, pivoting unsuccessfully into the home entertainment and audio-equipment industries. The company has announced it will liquidate its consumer-electronics business while restructuring its business to focus on its musical instruments.

Gibson is not the only guitar company that is in peril. The debt of Fender Musical Instruments Corp, another leader in the industry renowned for its Fender Stratocaster guitar, is estimated at $100 million.

 

 

Guitar companies seek endorsements from music legends, such as Eric Clapton's endorsement of the Fender Stratocaster Signature model.

Eric Clapton Endorses the Fender Stratocaster Signature Model

 

 

Gibson’s most popular instrument, the Les Paul guitar, has been used by guitarists including Eric Clapton, Slash and Jimmy Page. Clapton himself even speculated at last year’s Toronto Film Festival that “maybe the guitar is over.”

 

The problem wasn’t people not buying enough guitars; it was the way they were running their business.” – Stevie Salas

 

The guitar, however, appears to be in better shape than some of the guitar companies. While in the past decade, sales of the electric guitar have fallen from 1.5 million to 1 million, according to the National Association of Music Merchants, a total of 2.6 million guitars, including both acoustic and electric guitars, were sold in the U.S. last year, 300,000 more than in 2009.

 

 

Stevie Salas, a former music director on "American Idol," says the Gibson guitar company made moves that can destroy companies.

Guitarist Stevie Salas is a former music director on American Idol

 

 

“Gibson was pressured to get super-rich, and they made moves that can destroy companies,” said Stevie Salas, a guitarist who has recorded with artists ranging from Mick Jagger to Justin Timberlake and was a music director and consultant on “American Idol.”

“They are an iconic American brand, but the people who ran the company got greedy and started doing things that weren’t what got them there. The problem wasn’t people not buying enough guitars; it was the way they were running their business,” he said.

Peter Hook, the former New Order and Joy Division bassist, who is presently touring the US with his band Peter Hook and The Light, says that guitar companies have discovered they aren’t too big to fail.

“You think of the wonderful music that has been made on Gibson guitars; everybody from The Who to David Bowie,” he said. “If you turn on the radio, you’ll hear a Gibson guitar within minutes. It’s unbelievable that they’re going bankrupt.”

“But I was recently talking to a guy at Yamaha who told me the total global revenue from musical equipment sales sold around the world doesn’t add up to one-thousandth of Apple’s daily turnover. It’s a small specialist market,” Hook said.

“Gibson guitars are expensive, and they have been taken over by so many cheap copies. That’s what has caused a lot of harm to such a luxury product,” he said.

 

 

The guitar companies sales of electric guitars has fallen drastically but acoustic guitars have become more popular.

Ed Sheeran

 

 

Promoted by the likes of Ed Sheeran and Jack Johnson, the acoustic guitar is increasingly becoming more popular at the expense of the electric guitar.

“The acoustic guitar is something you can travel with easier, and make money with easier,” Salas said. “When I used to tour with Rod Stewart, we had jets and gigantic trucks, but now there’s no record-company support, so there’s no tour support. Record companies aren’t offsetting the tour expenses because they can’t make their money back in record sales.”

 

“People can walk around with the acoustic guitar and play in people’s living rooms.” – Stevie Salas

 

Instead, Salas said, “Ed Sheeran grabs an acoustic guitar like a busker, plugs into a couple of digital boxes, and creates his own backdrops to his song. That’s the affordable way to tour for today’s musicians. You don’t need an amplifier and a PA system as you do for an electric guitar.”

“People can walk around with the acoustic guitar and play in people’s living rooms. I wouldn’t be caught dead doing that! Can you imagine Elton John or Rod Stewart playing in a living room? The whole idea of mystery is out the window,” he said.

The high price of guitars, Salas added, doesn’t help. “When I was a kid, I could buy a [Gibson] Les Paul guitar for 400 bucks,” he said. “Is a 16- year-old going to spend $3,000 on a Les Paul guitar? Are you kidding me? The prices have gone bananas on guitars.”

Salas, who recently produced “Rumble,” a documentary about Native American influence on rock music, said he recently met with a Korean guitar company in Amsterdam who said they could make a Fender Stratocaster for $23. A standard Fender Stratocaster retails for around $1,300.

 

 

 

 

Salas added at the other end of the market; the budget guitar market is harming the industry. “It doesn’t do a brand well when you see Gibson, Fender, and Epiphone guitars flooding Costco and Walmart in those $99 packages.”

Hook, who covered the economics of running a nightclub in his 2009 book, “The Hacienda: How Not To Run a Club,” predicted: “The guitar companies are going to restructure and get smaller. The true artist in the company — the guy who builds a guitar by carving it out of a piece of wood will hopefully be the one celebrated, not the middle management.”

 

 

Australian jazz guitarist and teacher at the NYC Guitar School says guitar companies are struggling as the era of the guitar hero and rock star disappears.

James Wengrow – Australian jazz guitarist and teacher at the NYC Guitar School (Photo by Eric Thachuk, courtesy of the New York City Guitar School)

 

 

The popularity of hip-hop and rap music has also affected the guitar’s popularity.

“The era of the guitar hero and rock star being a central part of the pop culture lexicon is long gone,” said James Wengrow, an Australian jazz guitarist and a member of the Kinsmen and Strangers band, whose new album is entitled Faustian Pact.

Wengrow, who also teaches at the New York City Guitar School, said: “Since the 21st century, “electronic music production has increased with software facilitating new terrain for creators. Synthesizers, keyboards and electronic drums are now the norm in pop music sound.”

“Hip-hop has essentially replaced rock ‘n’ roll as the music of youth,” he added. “I think this is a good thing and there is a lot of groundbreaking music of this kind being created, but it does mean there are less kids idolizing electric guitarists, so fewer guitars are being bought.”

Wengrow said that Gibson got outmaneuvered by the competing guitar companies.

“In the 1950s and 60s, it was really just Fender and Gibson as the two main guitar makers, and they became the standard bearers. But other guitar companies, such as Ibanez, Jackson, Yamaha, and Paul Reed Smith, came to existence and copied their standards, but continually updated many features and customizations that better reflected the idiosyncrasies of the times, often for cheaper prices.”

 

“The guitar hero will never go away.” – Peter Hook

 

He added, “Gibson simply rested on their laurels of the great models they had built decades past, and didn’t keep up with the innovation of the times both in the guitar-builder market, and broader cultural trends.”

That’s not to say Gibson always met expectations during its storied past. “I dreamed of having a Gibson guitar, and I achieved that dream,” Hook said. “It was a hollow-bodied EB-1, [a bass guitar] but it was medium scale, so it was a shit guitar, and it sounded like shit, and I had to put new strings and a new bridge on it. It still sounded duff, so I copied the shape and amalgamated it with a Yamaha.”

“I had a custom guitar made with a Gibson body, because it allows it to feedback, with a Yamaha neck and Yamaha electric. I still play it today.”

 

 

Peter Hook, English bassist with Joy Division and New Order. He thinks the guitar companies will make a comeback after they concentrate on the product that made them iconic.

Bassist Peter Hook

 

 

Hook isn’t worried the current challenging economic pressures facing guitar companies will jeopardize the guitarist’s iconic status.

“The guitar hero will never go away,” he said. “People adore this image of the guitarist almost being like a cowboy. You will always see the odd-looking kid walking down the street holding a guitar — there just might not be as many of them.”

Salas is also bullish about the guitar’s prospects.

“My 10-year-old son is at school in Austin, Texas, and he and his friends are rocking out to 1970s funk,” he said. “A new generation is getting into guitar and rock’n’roll. I believe there’s going to be a massive comeback and that means with that style of music the electric guitar is going to make a comeback.”

“Whether Gibson can fix its business practices is another story,” he said.

 

What do you think the future of the guitar is? Tell us your thoughts in the comments below and share with your friends. Please follow us on Facebook and Twitter.

 

This article was initially published by Marketwatch on May 3, 2018.