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This Old Guitar Gently Weeps

Aram Klijn
Aram Klijn is currently a first year Bsc Economics student. He is especially interested in macroeconomics, international trade and anything related to music.

As the guitar gods slowly die out, so do their guitars. The annual revenue of Gibson, the company that produced the iconic ‘Les Paul’ guitar, has fallen from $2.1 billion in 2014 to $1.7 billion (Edgers, 2017). Fender, who makes the ‘Stratocaster’, has seen total revenue fall from $675 million to $545 million (Edgers, 2017).

The market for guitars is heavily oversaturated by an unrelenting stream of guitars. The production of the ‘Big Three’, the three biggest guitar manufacturers (Gibson, Fender and Ibanez), has increased to a peak of 2,630,950 in 2016 (Trades, 2017). Since then, production has remained approximately the same. There are many more new guitars supplied than demanded. Guitars have long lifespans and older, vintage guitars are often more desirable than newer models produced in mass quantities. Instead of reducing production or lowering the price of new flagship models, the Big Three have started to produce ‘legacy’ or ‘50th anniversary’ reissues of their most sought-after vintage models, sold at similar prices as the original vintage guitars. Sadly, the Big Three have failed to realise that the originals are only sought-after because they were handmade with proper attention to detail, have stood the test of time and have ‘character’. Gibson especially has suffered a PR backlash due to many Anniversary models not being of the quality that a $5000+ guitar is expected to be.

The Big Three, in an attempt to entice more millennials to start playing guitar, have run extensive marketing campaigns and reduced the prices of their entry-level guitars by almost half. This segment has seen a slight increase in quantity sold, but has only further depressed their revenues, due to the heavily reduced prices. This decision also made it less appealing for beginner and novice guitarists to take the leap and purchase a mid-range, $1000 guitar, because the price difference between an entry-level and midrange guitar has only increased.

There has also been little innovation from The Big Three. Many small-scale boutique shops and luthiers have tried to innovate the guitar industry, from inventing fanned frets to experimenting with guitars made out of plastics. Sadly, these companies are relatively small and inaccessible to the general customer both due to pricing and the lack of brand awareness. The Big Three have refused to incorporate these innovations into their guitars and have chosen neither to change their original designs nor design new models.

Similar developments have occurred in other sectors, such as the shipbuilding and textile sectors. The Dutch shipbuilding sector has also experienced a decrease in orders for new large ships from 64 in 2015 to 42 in 2016, but the total order values are €693 million in 2015 compared to €642 million in 2016 (Redactie, 2017). Per ship, the order value has increased. This reflects a trend in shipbuilding across the world; fewer ships are being built, but the ships built are bigger in size and higher in value. The Dutch shipbuilding sector has also continually improved their designs to stay competitive.

This trend is also beginning to show in the guitar sector. The Big Three are slowly starting to lose their market shares to small-scale companies and luthiers. Gibson has purchased several innovative guitar start-ups in the past, but mostly with the intent of dissuading new start-ups and keeping their 25% market share. If the Big Three do not realise that they need to shift from oversaturating mass-production to a more innovative, boutique approach, their decline will continue, and other, smaller manufacturers will have to pick up their slack. If the Big Three want to survive, they should scale down and start innovating again.

 

References

Edgers, G. (2017, June 22). Why my guitar gently weeps. Retrieved from Washington Post: https://www.washingtonpost.com/graphics/2017/lifestyle/the-slow-secret-death-of-the-electric-guitar/?utm_term=.11f896c107ba

Redactie. (2017, May 18). Maritieme sector toont veerkracht in zwaar weer. Retrieved from Maritiem Nederland: http://www.maritiemnederland.com/nieuws/maritieme-sector-toont-veerkracht-in-zwaar-weer/item2275

Trades, M. (2017). The Annual Census of the Music Industries. Retrieved from The Musictrades online: http://www.musictrades.com/census.html

 

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