THE 2015
 NAMM GLOBAL
REPORT
A MESSAGE FROM THE CHAIRMAN AND PRESIDENT/CEO
Results from our NAMM member surveys show that one of the top three reasons ...
CONTENTS
Message from the Chairman and President/CEO 2
Understanding the U.S. Data 4
U.S. Snapshot 5
U.S. Industry Reve...
METHODOLOGY
The NAMM Global Report is a collection of information gathered from many
sources, agencies and associations ar...
Demographics
65+
13.9%
0–14
19.4%
15–64
66.7%
Economy
GDP-Industry
19.5%
GDP-Agriculture
1.1%
GDP-Service
79.4%
Population...
0
4
8
12
16
20
JapanChinaMexicoCanada
Export Partners (2014)
AnnualPercentage
0
4
8
12
16
20
GermanyJapanMexicoCanadaChina...
U.S. INDUSTRY REVENUE AT A GLANCE
Product Sales Totals
(Retail 2013–2014)
0 300 600 900 1200 1500
Rhythm Machines
Home Org...
U.S. INDUSTRY REVENUE AT A GLANCE
-20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30%
Multi-Track Recorders
Keyboard Synthesizers...
INTRODUCTION
2014 Music Industry Analysis
Industry revenues rose 3.3%, thanks in part to an
improving economy, but gains w...
diminished. In the longer term, however, innovation and
improved product value have been a huge positive for the
music ind...
0
100
200
300
400
500
600
700
'14'13'12'11'10'09'08'07'06'05
Electric Guitars
RetailValuein$millions
Unitsx1,000,000
Retai...
0
50
100
150
200
250
300
350
400
'14'13'12'11'10'09'08'07'06'05
Instrument Amplifiers
RetailValuein$billions
Retail Value ...
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
'14'13'12'11'10'09'08'07'06'05
Total Fretted Instruments
RetailValuein$billions
Re...
The Piano and Organ Market
Includes acoustic grand pianos, acoustic vertical pianos,
electronic player pianos, digital pia...
0
100
200
300
400
500
600
'14'13'12'11'10'09'08'07'06'05
Total Acoustic Pianos
0
10
20
30
40
50
60
70
80
90
RetailValuein$...
0
100
200
300
400
500
600
700
800
900
'14'13'12'11'10'09'08'07'06'05
Total Pianos
0
50
100
150
200
250
RetailValuein$milli...
0
10
20
30
40
50
60
70
80
'14'13'12'11'10'09'08'07'06'05
Home Organs
0
1
2
3
4
5
6
7
8
9
RetailValuein$millions
Unitsx1,00...
Retail Value Market Share
Woodwind
Instruments
46.3%
Stringed
Instruments
16.6%
Brass
Instruments
37.1%
The School Music M...
0
25
50
75
100
125
'14'13'12'11'10'09'08'07'06'05
Stringed Instruments
RetailValuein$millions
Unitsx1,000
Retail Value Uni...
0
50
100
150
200
250
'14'13'12'11'10'09'08'07'06'05
Power Amplifiers
0
100
200
300
400
500
600
RetailValuein$millions
Unit...
0
100
200
300
400
500
'14'13'12'11'10'09'08'07'06'05
Speaker Enclosures
RetailValuein$millions
Retail Value
2014 Summary
1...
0
50
100
150
200
250
300
350
400
'14'13'12'11'10'09'08'07'06'05
Cabled Microphones
RetailValuein$millions
Retail Value
201...
0
20
40
60
80
100
120
140
160
180
'14'13'12'11'10'09'08'07'06'05
Drum Kits
0
50
100
150
200
250
300
RetailValuein$millions...
0
10
20
30
40
50
60
70
'14'13'12'11'10'09'08'07'06'05
Educational Percussion
RetailValuein$millions
Retail Value
Education...
0
10
20
30
40
50
'14'13'12'11'10'09'08'07'06'05
Drum Heads
RetailValuein$millions
Retail Value
2014 Summary
10-Year Trend
...
0
5
10
15
20
25
30
35
'14'13'12'11'10'09'08'07'06'05
CD Players
0
10
20
30
40
50
60
70
'04'03'02'01'00'99'98'97
RetailValu...
0
5
10
15
20
25
30
35
40
'14'13'12'11'10'09'08'07'06'05
Special Effects Lighting Units
RetailValuein$millions
Retail Value...
The Recording and Computer
Music Market
(Multi-Track, Software and Computer Music)
Includes hard disk multi-track recorder...
0
10
20
30
40
50
60
70
80
90
'14'13'12'11'10'09'08'07
Portable Digital Recorders
0
50
100
150
200
250
300
350
'04'03'02'01...
0
5
10
15
20
25
30
'14'13'12'11'10'09'08'07'06'05
Plug-In Software & Loops
RetailValuein$millions
Retail Value
2014 Summar...
0
20
40
60
80
100
120
140
'14'13'12'11'10'09'08'07'06'05
Keyboard Synthesizers
0
10
20
30
40
50
60
70
80
90
'04'03'02'01'0...
0
5
10
15
20
25
30
35
40
'14'13'12'11'10'09'08'07'06'05
Controller Keyboards
0
50
100
150
200
250
300
RetailValuein$millio...
The Print Music Market
Includes method books, instructional materials, popular
folios, and related print music products.
T...
0
20
40
60
80
100
120
'14'13'12'11'10'09'08'07'06'05
Keyboards Under $199
0.0
0.2
0.4
0.6
0.8
1.0
1.2
'06'05'04'03'02'01'0...
The Karaoke Market
Karaoke machines, excluding those machines sold through
mass merchants, increased 13.1% to $15.1 millio...
MUSIC AND SOUND
U.S. INDUSTRY SUMMARY
The purpose of the following data is to provide a review of the 10-year
trend of mus...
U.S. INDUSTRY SUMMARY (in millions of dollars)
*Multi-Track Recorders includes a new category, Portable Digital Recorders,...
U.S. INDUSTRY SUMMARY – UNITS SOLD (in thousands)
Segment 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Acoustic Guita...
U.S. Industry Summary
0
10
20
30
40
50
60
'14'13'12'11'10'09'08'07'06'05
0
10
20
30
40
50
60
GDPPerCapita(inthousandsof$)
...
0
100
200
300
400
500
600
'14'13'12'11'10'09'08'07'06'05
Acoustic Pianos
RetailValuein$millions
0
20
40
60
80
100
120
140
...
0
20
40
60
80
100
120
140
160
'14'13'12'11'10'09'08'07'06'05
Electronic Player Pianos
RetailValuein$millions
0
50
100
150
...
0
20
40
60
80
100
120
140
160
'14'13'12'11'10'09'08'07'06'05
Organs
RetailValuein$millions
0
100
200
300
400
500
600
'14'1...
0
50
100
150
200
250
'14'13'12'11'10'09'08'07'06'05
Portable Keyboards
RetailValuein$millions
0
2
4
6
8
10
12
14
'14'13'12...
U.S. IMPORTS OF MUSIC AND SOUND PRODUCTS
2014 Data
Description Commodity Code Quantity Value
Single Loudspeakers, Mounted ...
U.S. IMPORTS OF MUSIC AND SOUND PRODUCTS
2014 Data
2014 2013 Difference % Change
Import Values $5,521,662,741 $5,320,255,8...
U.S. EXPORTS OF MUSIC AND SOUND PRODUCTS
2014 Data
Description Commodity Code Quantity Value
Microphones and Stands 851810...
0
100
200
300
400
500
600
'14'13'12'11'10'09'08'07'06'05
Number of Import Units
(in millions)
5-Year Change
‘13 – ’14 Chan...
Top 15 U.S. Music Product Export Destinations
(in millions of Dollars)
$0 $50 $100 $150 $200 $250 $300 $350 $400
India
Ita...
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
'14'13'12'11'10'09'08'07'06'05
Upright Piano Exports
RetailValuein$millions
Unitsx...
0
5
10
15
20
25
30
'14'13'12'11'10'09'08'07'06'05
Brasswind Exports
RetailValuein$millions
Unitsx1,000
Export Value Units
...
International Data
INTERNATIONAL DATA
ARGENTINA 53
AUSTRALIA 62
AUSTRIA 74
BRAZIL 81
CANADA 88
CHINA 96
CZECH REPUB...
UNDERSTANDING THE INTERNATIONAL DATA
To present a global overview of the music products industry, we are pleased to featur...
International Data
ARGENTINA
ARGENTINA
We kindly encourage those who have not read our report last year to do so in order ...
In any case, importers are forced to move according to a fixed budget stated by the
government. Therefore most marketing e...
International Data
Argentina
DOING BUSINESS IN ARGENTINA
Market Overview
The U.S. and Argentina share a long history of bi...
request approval from the Argentine Tax and Customs Authority (AFIP) prior to making each
purchase for import from abroad,...
International Data
• U.S. companies exporting to Argentina typically market their products and services
through Argentine...
Demographics
65+
11.4%
0–14
24.9%
15–64
63.7%
Economy
GDP-Industry
29.5%
GDP-Service
60.1%
GDP-Agriculture
10.4%
Populatio...
International Data
Argentina Snapshot
0
5
10
15
20
25
ChileU.S.ChinaBrazil
Export Partners (2014)
AnnualPercentage
0
5
10
...
Argentina Imports and Exports
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
'14'13'12'11'10'09'08'07'06'05
Keyboard Instruments
Exports
...
International Data
Argentina
0
20
40
60
80
100
120
'14'13'12'11'10'09'08'07'06'05
Percussion
Exports
ValueinU.S.$thousands...
AUSTRALIA
AUSTRALIA
With a national economy that has been described as limping along, overall a result that will
please, a...
International Data
Australia
australia
The unit imports of grand pianos, which perhaps run parallel to the general state o...
australia
A level playing field for Australian retailers, both online and in the physically realm, remains
elusive; we com...
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Transcripts - NAMM Global Report 2015

  • 1. THE 2015  NAMM GLOBAL REPORT
  • 2. A MESSAGE FROM THE CHAIRMAN AND PRESIDENT/CEO Results from our NAMM member surveys show that one of the top three reasons for belonging to the association is access to important industry information and statistics, such as those found in this year’s NAMM Global Report. It’s easy to understand why. After all, the more knowledge our members have about the state of the industry, the better decisions they can make. That’s exactly what the NAMM Global Report is all about. This comprehensive report will help you to see industry trends, spot new opportunities and determine the best choices to make for your business in the coming year. This year’s Global Report captures a snapshot of 23 countries, including Argentina, Australia, Austria, Brazil, Canada, China, the Czech Republic, Finland, Germany, India, Italy, Japan, Mexico, Norway, Russia, South Korea, Spain, Sweden, Switzerland, the United Kingdom and, of course, the United States. This year, we’ve also added statistics from France and Hungary. On behalf of the NAMM Board of Directors and staff, we appreciate your continued support and membership. NAMM remains dedicated to your success, and we hope you find the 2015 NAMM Global Report useful to your business. Sincerely, Larry Morton, Chairman Joe Lamond, President/CEO 2
  • 3. CONTENTS Message from the Chairman and President/CEO 2 Understanding the U.S. Data 4 U.S. Snapshot 5 U.S. Industry Revenue at a Glance 7 Music Industry Analysis 9 U.S. RETAIL SALES Fretted Products and Effects Market 10 Piano and Organ Market 14 School Music Market 18 Pro Audio/Sound Reinforcement Market 20 Percussion Market 23 DJ Market 26 Recording and Computer Music Market 28 Electronic Music Market 31 Print Music Market 33 Portable Keyboard Market 33 Karaoke Market 35 General Accessory Market 35 U.S. INDUSTRY SUMMARY & IMPORTS AND EXPORTS Industry Summary 37 Import and Export Data 44 INTERNATIONAL DATA Understanding the International Data 52 Argentina 53 Australia 62 Austria 74 Brazil 81 Canada 88 China 96 Czech Republic 111 Finland 118 France 124 Germany 134 Hungary 144 India 152 Italy 161 Japan 174 Mexico 185 Norway 193 Russia 199 South Korea 206 Spain 212 Sweden 220 Switzerland 226 United Kingdom 232 NAMM EXECUTIVE COMMITTEE 240 & BOARD OF DIRECTORS ACKNOWLEDGEMENTS 241 MANAGING EDITORS Causby Challacombe Erin Block INTERNATIONAL AFFAIRS Betty Heywood RESEARCH ANALYST Erin Block LAYOUT/DESIGN Matt Stenberg Megan Nelson COPY EDITORS Deborah Brada Lara Severson Laurie Gibson 3
  • 4. METHODOLOGY The NAMM Global Report is a collection of information gathered from many sources, agencies and associations around the world. NAMM does not verify any of the information and cannot and does not guarantee the accuracy of the data. The statistics NAMM receives are summaries; NAMM personnel do not see or manipulate any individual company information. Sources for each piece of data are listed at the beginning of each section and can be summarized as follows: U.S. domestic sales information and commentary is provided by The Music Trades magazine, and import and export numbers are collected by the U.S. Census Bureau. Sales information and commentaries in the International section are provided by associations in each country. International economic, demographic and trade data are gathered from the CIA World Factbook, and the International music industry numbers are provided by The Music Trades magazine. UNDERSTANDING THE U.S. DATA The unit sales and retail values in this report were compiled by the staff of The Music Trades magazine, which provides the following overview of the methodology used. How do you get sales data in an industry where most business is done by privately held companies, and there are few, if any, reporting sources? The answer is, you spend a lot of time digging. The data in these pages comes from a variety of sources—import and export data as compiled by the World Trade Organization, retail sales data, filings from the industry’s 15 publicly held enterprises, association data, and a lot of informed estimates and “off the record” conversations. The result is a snapshot of the volume of product that moves through the specialized channel of approximately 6,000 MI retailers in the United States. Data in these pages reflects wholesale shipments to retailers. Using an average industry margin that varies from category to category, we estimate a retail sales value. This methodology, although not perfect, yields a consistent picture and allows for reasonable year-to-year comparisons. Please note that data on the following pages does not include any figures on the used instrument market, which is extremely substantial but difficult to measure with any accuracy. 4
  • 5. Demographics 65+ 13.9% 0–14 19.4% 15–64 66.7% Economy GDP-Industry 19.5% GDP-Agriculture 1.1% GDP-Service 79.4% Population in millions 318.9 Median Age 37.6 Population Growth 0.77% 0 2 4 6 8 10 12 14 16 18 '14'13'12'11'10'09'08'07'06'05'04'03 United States GDP (PPP) (U.S. $ in trillions) 0 1 2 3 4 5 6 7 8 9 10 '14'13'12'11'10'09'08'07'06'05'04'03 Unemployment Rate (Percent) -1 0 1 2 3 4 '14'13'12'11'10'09'08'07'06'05'04'03 Inflation (Annual Percent Rate) UNITED STATES SNAPSHOT Demographics Economy Data Source: Demographics, Economy and Trade from CIA World Factbook, Music Industry from The Music Trades. GDP (PPP): Gross Domestic Product based on purchasing-power-parity (PPP) valuation of country GDP in U.S. dollars. Age Male Female 0–14 31.58 30.22 15–64 105.20 105.71 65 & Over 20.30 25.87 GDP (PPP) $16.77 trillion GDP Per Capita $54,710 GDP-Real Growth Rate 2.40% Unemployment Rate 6.60% Inflation 1.70% United States Snapshot Music USA 5
  • 6. 0 4 8 12 16 20 JapanChinaMexicoCanada Export Partners (2014) AnnualPercentage 0 4 8 12 16 20 GermanyJapanMexicoCanadaChina Import Partners (2014) AnnualPercentage Music Sales Per Capita (U.S. $) 0 5 10 15 20 25 30 '14'13'12'11'10'09'08'07'06'05 0 10 20 30 40 50 60 '14'13'12'11'10'09'08'07'06'05 Share of Global Music Market (Percent) United States Music Market (U.S. $ in billions) 0 1 2 3 4 5 6 7 8 9 '14'13'12'11'10'09'08'07'06'05 Trade Total Export $1.6 trillion Export as % of GDP 9.78% Total Import $2.4 trillion Import as % of GDP 14.13% Music Market $7.0 billion Sales Per Capita $22.05 Global Share 40.60% Music Industry 6
  • 7. U.S. INDUSTRY REVENUE AT A GLANCE Product Sales Totals (Retail 2013–2014) 0 300 600 900 1200 1500 Rhythm Machines Home Organs Karaoke Products Institutional Organs Electronic Player Pianos Multi-Track Recorders Other Electronic Products Keyboard Synthesizers Stringed Instruments DJ Gear Digital Pianos Cables Instrument Amplifiers Portable Keyboards Effects Acoustic Pianos Computer Music Products Percussion Printed Music Microphones General Accessories Wind Instruments Sound Reinforcement Fretted Products $138.78 $104.34 $112.88 $106.77 $90.09 $66.90 $67.54 $103.47 $78.24 $15.12 $13.38 $28.20 $29.00 $8.96 $7.10 $13.34 $13.50 $163.04 $141.07 $163.00 $165.01 $189.12 $167.00 $107.90 $109.00 $186.62 $186.00 $229.16 $175.68 $292.81 $304.40 $224.25 $359.90 $360.00 $381.57 $376.71 $513.15 $518.33 $532.00 $501.00 $542.48 $521.80 $535.28 $510.77 $817.89 $794.99 $1,449.93 $1,323.19 2013 2014 (in millions of dollars) 7 Music USA
  • 8. U.S. INDUSTRY REVENUE AT A GLANCE -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% Multi-Track Recorders Keyboard Synthesizers Other Electronic Products Institutional Organs Instrument Amplifiers Percussion Home Organs Stringed Instruments Printed Music Electronic Player Pianos Computer Music Products Digital Pianos DJ Gear Effects Cables Sound Reinforcement Wind Instruments Acoustic Pianos General Accessories Microphones Portable Keyboards Fretted Products Karaoke Products Rhythm Machines 2014 Industry Sales Gains and Declines 26.18% 13.00% 9.58% 6.19% 6.23% 4.80% 3.96% 3.96% 2.88% 2.45% 2.19% 1.65% 1.21% -0.03% -0.95% -1.00% -1.01% -1.19% -1.27% -1.65% -2.76% -3.09% -7.56% -13.15% 8
  • 9. INTRODUCTION 2014 Music Industry Analysis Industry revenues rose 3.3%, thanks in part to an improving economy, but gains were not distributed evenly among different product categories. The improving technology that delivered better value to consumers also crimped sales growth by reducing average selling prices. The music products industry in 2014 continued its recovery from the financial crisis, posting its fifth consecutive year- over-year sales gain. The U.S. retail value of the broad array of musical instruments, recording gear and audio products reached $7.03 billion, a 3.3% gain over last year’s level of $6.8 billion. The rise closely tracks the trajectory of the national economy, which closed out the year with a 2.6% gain in gross domestic product. Like most other commercial activities, the sale of music products benefited from the combination of declining unemployment, rising wages and improved consumer confidence. However, the gains were not equally distributed among the diverse product categories tracked in this report. Fretted instruments and related products, including effects, the single biggest product category, notched a 7.3% gain in retail value, while electronic music products experienced a 4.4% slump. Current industry revenues are still about 10% below the record level set in 2005, which has raised some unsettling questions. Does the decline indicate that the act of making music lost popularity? Is the industry losing the battle for discretionary income? Or is the general public still reluctant to make discretionary purchases? A trove of data suggests consumer wariness holds much of the blame for the industry’s slow-paced recovery. The 30-and-under age group, a key buying demographic for music products, is laboring to pay off an estimated $1 trillion in college-related debt; housing starts are still well below levels of a decade ago; and incomes for much of the populace have stagnated. But does a lower sales volume reflect a decreased interest in music making? Not necessarily. The past decade has seen two technological trends that have been excellent for the buying public, but not so good for purveyors of music products. The first involves “Moore’s Law,” the prediction by Gordon Moore, the founder of Intel, that the capability of microprocessors would double every two years and the price would drop. Events have vindicated Moore’s forecast, and for the music products industry, it has translated into more powerful products at dramatically lower prices. The same forces that have pushed down the prices of laptop computers, flat panel TVs and smartphones have impacted the music industry. Last year, approximately $2.1 billion worth of goods included in this report, representing 30% of industry volume, were based on some combination of software and microprocessors, and thus subject to Moore’s Law. This list of products includes synthesizers, digital mixers, recording software, electronic drums, effects processors and even loudspeakers with built-in effects processors. To illustrate the impact of higher processing power at a lower price, consider the Alesis ADAT, the first accessible digital multi-track recorder. Introduced in 1992 with a retail price of $3,995 ($6,600 in current, inflation- adjusted dollars), the ADAT was an enormous success. Today, for a third of the price, an aspiring musician can assemble a far more powerful recording setup, with more tracks, built-in Digital Signal Processing (DSP) and no need to buy expensive tape. Advances like this have either saved consumers an estimated $1.5 billion a year, or cost the music industry’s suppliers and retailers $1.5 billion in lost annual revenues. However, sales declines traced to Moore’s Law don’t indicate a waning interest in music. The other transformative trend has to do with online marketplaces. Retailers used to joke that the world’s most popular piano brand was “good used,” because that was what customers most frequently requested. Musical instruments retain value like very few other products, as evidenced by the lofty prices paid for vintage stringed instruments. For this reason, the used market has always been sizable. However, with the advent of eBay and Craigslist, it has gotten even larger. The inventory on Craigslist in any top 50 market would fill several good- sized brick-and-mortar music stores. The increased availability of the “good used” brand has unquestionably taken a toll on the sale of new products. This is not, however, an indication that the industry has lost ground in public opinion. Interest in music making seems as robust as ever, but that unfortunately doesn’t pay the bills. In the short term, the fact that it takes less cash for consumers to address their musical needs is not good news. Compare it to photography: people are spending less in the era of digital technology, but the interest in taking pictures has not Music USA 9
  • 10. diminished. In the longer term, however, innovation and improved product value have been a huge positive for the music industry. We suspect that at some point in the not- too-distant future, this will become apparent. The industry has often been compared to a bank of elevators. Individual cars move up and down at different rates, but the bank of elevators doesn’t change much. In the following, we assess the movement of the various “cars” that make up the industry. Fretted Products and Effects Includes acoustic guitars, electric guitars, basses, ukuleles, amplifiers, strings, and guitar-related effects. Electronic Dance Music (EDM) may be enjoying a vogue, there’s a dearth of guitar-focused rock ’n’ roll bands in popular music, and smart phones are gobbling up an increasing share of discretionary income. Yet against this backdrop, sales of fretted instruments and related accessories posted their best performance in seven years, advancing 7.3% to an estimated retail value of $1.86 billion. The gains reinforce the guitar’s continued standing as the preeminent instrument in popular music. Sales increases were not evenly shared among diverse product types that make up the category, which include acoustic and electric guitars, strings, amplifiers, effects and ukuleles. However, revenues in all product groups, with the exception of amplifiers, edged up. Despite well-publicized increases in labor costs in China, price increases were minimal during the year. In every case, increases in average selling prices reflected a shift to higher-quality products. Acoustic guitars were the top performers in 2014. A 10% increase to 1,498,700 units translated into a 12.5% gain in retail value as customers opted for higher-priced instruments. It’s difficult to pinpoint a single catalyst for the improvement. Retailers and manufacturers interviewed cited a better economic climate; the rise of singer- songwriters such as Taylor Swift, who have attracted more female buyers; and consumers looking for an antidote to an increasingly digitized world. However, none of these opinions was advanced with absolute confidence. The ukulele market also rebounded, allaying fears that what’s been called the “third ukulele boom” had run its course. Simple, easy-to-play fretted instruments have apparently retained their appeal. In the realm of electric guitars, unit volume edged up 2% to 1,132,250, while estimated retail value increased 8.3% to $505.9 million. The shift to higher-priced products was generally welcomed by manufacturers and retailers; higher-priced guitars yield higher profits throughout the distribution channel. However, some still expressed concerns. “We’re seeing fewer first-time buyers and a lot more older guys adding instruments to their collection,” 0 1 2 3 4 5 6 7 8 '14'13'12'11'10'09'08'07'06'05'04'03 Industry Total RetailValuein$billions 2013–14 3.31% 10-Year 9.08% Source: The Music Trades 10
  • 11. 0 100 200 300 400 500 600 700 '14'13'12'11'10'09'08'07'06'05 Electric Guitars RetailValuein$millions Unitsx1,000,000 Retail Value Units 0.0 0.4 0.8 1.2 1.6 2.0 Electric Guitars category includes electric basses. 2014 Summary 10-Year Trend Retail Unit Average Price -18.66% -31.74% 19.16% 8.32% 2.02% 6.17% 0 100 200 300 400 500 600 700 '14'13'12'11'10'09'08'07'06'05 Acoustic Guitars 0.0 0.4 0.8 1.2 1.6 2.0 '14'13'12'11'10'09'08'07'06'05 RetailValuein$millions Unitsx1,000,000 Retail Value Units Acoustic Guitars category includes banjos, mandolins and other acoustic fretted instruments. 2014 Summary 10-Year Trend Retail Unit Average Price 26.42% -9.23% 39.27% 12.46% 9.96% 2.27% Retail Value Market Share Fretted Instrument Strings 10.3% Instrument Amplifiers 10.0% Acoustic Guitars 36.4% Electric Guitars 27.1% Ukuleles 3.9% Effects 12.3% said one retailer. “It makes me worry about where the next generation of players is coming from. Also, unlike kids, the guys buying ‘trophy guitars’ are gone the minute the economy gets soft.” Amplifier sales slipped, primarily due to increasing numbers of alternative technologies for cranking up the volume on a guitar. At the entry level, practice amps now have to compete against digital solutions, such as IK Multimedia’s iRig, which allows players to plug directly into any recording device. At the higher end of the market, some performers are using various types of DSP in conjunction with a powered speaker or p.a. system instead of an amplifier. Compounding the situation, the current trend is away from large (higher-priced) stacks in favor of smaller combo amps. One of the brightest spots in the market in 2014 was effects pedals, which enjoyed a robust 13.7% increase in retail value. Chalk up the gains to fickle guitarists. A decade ago, they were clamoring for high-tech multi- effects devices that packed dozens of processors into a single floor package. Today, they have returned to the tonal authenticity of the humble pedal. The category has also attracted dozens of entrepreneurs who, like micro-brewers, have found a market for their personal tonal preferences. A strong fretted market is particularly good for the retail channel, as guitars and related accessories offer higher margins than higher-tech products. Music USA 11
  • 12. 0 50 100 150 200 250 300 350 400 '14'13'12'11'10'09'08'07'06'05 Instrument Amplifiers RetailValuein$billions Retail Value Units 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Unitsx1,000,000 2014 Summary 10-Year Trend Retail Unit Average Price -53.16% -37.55% -25.00% -1.65% -1.65% 0.00% Instrument Amplifiers category includes tube, digital and solid-state amplifiers; amplifier heads; speaker enclosures; and other self-contained amplifiers for guitars, basses and other musical instruments. 0 10 20 30 40 50 60 70 80 '14'13'12'11'10'09 Ukuleles RetailValuein$millions Retail Value Units 0.0 0.3 0.6 0.9 1.2 '14'13'12'11'10'09 Unitsx1,000,000 2014 Summary 6-Year Trend Retail Unit Average Price 123.42% 101.60% 10.83% 5.97% 4.52% 1.39% Fretted Products and Effects, continued 0.0 0.2 0.4 0.6 0.8 1.0 1.2 '14'13'12'11'10'09'08'07'06'05 Total Guitars RetailValuein$billions Retail Value Units 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 '14'13'12'11'10'09'08'07'06'05 Unitsx1,000,000 2014 Summary 10-Year Trend Retail Unit Average Price 2.22% -20.51% 28.59% 10.66% 6.40% 4.00% 0 40 80 120 160 200 '14'13'12'11'10'09'08'07'06'05 Fretted Instrument Strings RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 17.00% 4.66% 12
  • 13. 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 '14'13'12'11'10'09'08'07'06'05 Total Fretted Instruments RetailValuein$billions Retail Value 2014 Summary 10-Year Trend Retail -4.87% 8.17% 0 10 20 30 40 50 60 70 80 '14'13'12'11'10'09'08'07'06'05 Effects Pedals 0.0 0.2 0.4 0.6 0.8 1.0 1.2 RetailValuein$millions Unitsx1,000,000 Retail Value Units 0.6 0.8 1.0 1.2 2014 Summary 10-Year Trend Retail Unit Average Price 45.07% 3.02% 40.82% 13.74% 7.14% 6.15% Effects Pedals category includes floor pedal units, tabletop units and other products that incorporate complex processing power. 0 10 20 30 40 50 60 70 80 '14'13'12'11'10'09'08'07'06'05 Multi-Effects Floor Processors 0 50 100 150 200 250 300 350 RetailValuein$millions Unitsx1,000 Retail Value Units 2014 Summary 10-Year Trend Retail Unit Average Price -20.12% -41.30% 36.10% -12.70% -9.57% -3.46% 0 20 40 60 80 100 120 '14'13'12'11'10'09'08'07'06'05 Rack-Mounted Processors RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -3.26% 3.35% Rack-Mounted Processors category includes compressors, limiters, pre-amps, EQs and multi-effects. Music USA 13
  • 14. The Piano and Organ Market Includes acoustic grand pianos, acoustic vertical pianos, electronic player pianos, digital pianos, and organs. The piano market posted a modest increase in both dollars and units in 2014. Uprights were the best performers, with unit sales rising 9.1% to 22,083 and retail value up 12.5% to $110.0 million. Grand units dropped 5.1% to 11,268 but dollar volume was essentially flat at $194 million as customers opted for larger instruments. Sales of digital pianos increased 3.7% to 135,257 units, but retail value rose only 1.2% to $165.0 million, reflecting lower average selling prices. Historically, a rising stock market has benefited the piano market, particularly in the sale of high-end grands. Why then were the gains in the piano business relatively tepid in 2014, a year that saw both the Dow Jones and NASDAQ indexes in record territory? Retailers cite two factors: reduced availability of consumer financing and a huge volume of readily available used instruments. As one dealer explained, “Customers used to seeing 0% financing in the car business are turned off when the best we can offer is a 7 or 8% APR.” As for used pianos, in many markets the inventory available on Craigslist often exceeds annual sales of new instruments. Unit volume gains in digital pianos are an encouraging indicator of interest in the keyboard. However, as with most other digital products, declining prices make it challenging to translate unit gains into higher revenue. The organ market continued to decline in 2014. Home organ sales slumped 3.3% to 1,450 units with a retail value of $13.3 million. Changing consumer preferences account for much of the downturn; however, the market also suffers from a shrinking distribution network. There are currently many major markets in the country where there are no retailers actively promoting home organs. Church organ sales have been adversely affected by a shift away from traditional worship styles and declining participation at mainline Protestant houses of worship. An increasing number of houses of worship have opted for guitars and keyboards instead of organs. This is reflected in sales, which dropped 2.8% to $28.2 million. 0 50 100 150 200 250 '14'13'12'11'10'09'08'07'06'05 Total Effects RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 3.39% 2.19% 0.0 0.5 1.0 1.5 2.0 '14'13'12'11'10'09'08'07'06'05 Total Fretted Products & Effects RetailValuein$billions Retail Value 2014 Summary 10-Year Trend Retail -3.93% 7.40% Fretted Products and Effects, continued 14
  • 15. 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Total Acoustic Pianos 0 10 20 30 40 50 60 70 80 90 RetailValuein$millions Unitsx1,000 Retail Value Units 30 50 70 90 2014 Summary 10-Year Trend Retail Unit Average Price -44.71% -60.17% 38.82% 3.96% 3.86% 0.09% Pianos 0 50 100 150 200 250 300 350 400 450 '14'13'12'11'10'09'08'07'06'05 Grand Pianos 0 5 10 15 20 25 30 35 40 RetailValuein$millions Unitsx1,000 Retail Value Units 14 2014 Summary 10-Year Trend Retail Unit Average Price -51.44% -68.00% 51.75% -0.33% -5.07% 4.99% Retail Value Market Share Electronic Player Pianos 12.5% Digital Pianos 30.8% Grand Pianos 36.2% Vertical Pianos 20.5% 0 20 40 60 80 100 120 140 160 '14'13'12'11'10'09'08'07'06'05 Vertical Pianos 0 10 20 30 40 50 60 '04'03'02'01'00'99'98'97'96 RetailValuein$millions Unitsx1,000 Retail Value Units 0 10 20 30 40 50 60 '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price -26.82% -54.49% 60.81% 12.50% 9.09% 3.12% Music USA 15
  • 16. 0 100 200 300 400 500 600 700 800 900 '14'13'12'11'10'09'08'07'06'05 Total Pianos 0 50 100 150 200 250 RetailValuein$millions Unitsx1,000 Retail Value Units Total Pianos category includes grand pianos, vertical pianos, electronic player pianos and digital pianos. 2014 Summary 10-Year Trend Retail Unit Average Price -38.45% -27.98% -14.54% 2.47% 3.56% -1.06% 0 20 40 60 80 100 120 140 160 '14'13'12'11'10'09'08'07'06'05 Electronic Player Pianos 0 2 4 6 8 10 12 14 '04'03'02'01'00'99'98'97'96 RetailValuein$millions Unitsx1,000 Retail Value Units 0 2 4 6 8 10 12 14 '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price -54.77% -66.88% 36.55% -0.95% -3.22% 2.35% 0 20 40 60 80 100 120 140 160 180 '14'13'12'11'10'09'08'07'06'05 Digital Pianos 0 30 60 90 120 150 '04'03'02'01'00'99'98'97'96 RetailValuein$millions Unitsx1,000 Retail Value Units 0 30 60 90 120 150 2014 Summary 10-Year Trend Retail Unit Average Price -4.51% -6.07% 1.67% 1.21% 3.70% -2.40% The Piano and Organ Market, continued 16
  • 17. 0 10 20 30 40 50 60 70 80 '14'13'12'11'10'09'08'07'06'05 Home Organs 0 1 2 3 4 5 6 7 8 9 RetailValuein$millions Unitsx1,000 Retail Value Units 5 7 9 2014 Summary 10-Year Trend Retail Unit Average Price -82.86% -83.24% 2.22% -1.19% -3.33% 2.22% 0 10 20 30 40 50 60 70 '14'13'12'11'10'09'08'07'06'05 Institutional Organs 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 '04'03'02'01'00'99'98'97'96 RetailValuein$millions Unitsx1,000 Retail Value Units 3.0 3.5 '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price -57.37% -69.87% 41.51% -2.76% -6.00% 3.45% Retail Value Market Share Institutional Organs 67.9% Home Organs 32.1% 0 20 40 60 80 100 120 140 160 '14'13'12'11'10'09'08'07'06'05 Total Organs 0 2 4 6 8 10 12 14 RetailValuein$millions Unitsx1,000 Retail Value Units 0 2 4 6 8 10 12 14 '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price -71.15% -79.69% 42.07% -2.26% -4.40% 2.24% Organs Music USA 17
  • 18. Retail Value Market Share Woodwind Instruments 46.3% Stringed Instruments 16.6% Brass Instruments 37.1% The School Music Market Includes woodwind instruments, brass instruments and stringed instruments. School music, which includes wind and stringed instruments, has consistently been the industry’s most stable product category. Sales closely correlate with school enrollment levels, and consequently tend to move gradually. In 2014, the Census Department reported a 1.4% increase in K–12 enrollment, and the National Conference of State Legislatures reported that the 50 states collectively saw tax revenues advance by 3.9% with commensurate increases in educational spending. These two macro factors translated into a 3.1% gain in retail value of woodwind, brasswind and stringed instrument shipments. Retail value also benefited from slightly higher average selling prices. This was apparently due to improved sales of “step-up” instruments rather than price increases. The rise of online retail, including Amazon, eBay and countless others, has had a disruptive effect on the way many music and audio products are sold. School music is a notable exception. Most of the business is still done by highly specialized brick-and-mortar stores that call on schools, provide service, and rent instruments to beginners. This is another factor that sets the market apart. 0 50 100 150 200 250 '14'13'12'11'10'09'08'07'06'05 Brass Instruments 0 50 100 150 200 250 300 RetailValuein$millions Unitsx1,000 250 300 Retail Value Units 2014 Summary 10-Year Trend Retail Unit Average Price 21.52% 14.00% 6.60% 3.24% 2.99% 0.24% 18
  • 19. 0 25 50 75 100 125 '14'13'12'11'10'09'08'07'06'05 Stringed Instruments RetailValuein$millions Unitsx1,000 Retail Value Units 0 50 100 150 200 250 300 350 400 450 2014 Summary 10-Year Trend Retail Unit Average Price 7.21% -13.16% 23.47% -1.01% -3.21% 2.27% 0 100 200 300 400 500 600 700 '14'13'12'11'10'09'08'07'06'05 Total School Music 0 200 400 600 800 1000 1200 RetailValuein$millions Unitsx1,000 Retail Value Units '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price 13.90% -3.88% 18.50% 3.10% 0.66% 2.43% 0 50 100 150 200 250 300 350 '14'13'12'11'10'09'08'07'06'05 Woodwind Instruments 0 50 100 150 200 250 300 350 400 450 '04'03'02'01'00'99'98'97'96'95 RetailValuein$millions Unitsx1,000 Retail Value Units 0 50 100 150 200 250 300 350 400 450 '14'13'12 2014 Summary 10-Year Trend Retail Unit Average Price 10.80% -4.52% 16.05% 4.55% 2.99% 1.51% 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Total Wind Instruments 0 100 200 300 400 500 600 700 '04'03'02'01'00 RetailValuein$millions Unitsx1,000 Retail Value Units 0 100 200 300 400 500 600 700 '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price 15.33% 2.33% 12.71% 3.96% 2.99% 0.94% Total Wind Instruments category includes brass and woodwind instruments. Music USA 19
  • 20. 0 50 100 150 200 250 '14'13'12'11'10'09'08'07'06'05 Power Amplifiers 0 100 200 300 400 500 600 RetailValuein$millions Unitsx1,000 Retail Value Units 400 500 600 2014 Summary 10-Year Trend Retail Unit Average Price -44.09% -44.09% 0.00% -6.94% -6.23% -0.75% Retail Value Market Share Non-Powered Mixers 11.6% Powered Mixers 3.1% Speaker Enclosures 30.7% Cables 11.0% Cabled Microphones 26.0% Wireless Microphones 9.0% Power Amplifiers 8.6% The Pro Audio/Sound Reinforcement Market Includes speaker enclosures, power amplifiers, mixers, cables, and microphones. A 4.0% gain in the retail value of audio gear reflects the durable demand for high-quality sound, whether in performance venues, schools, houses of worship or any number of other settings. Demand for audio may remain constant, but thanks to evolving technology, the mix of products being purchased continues to shift. Digital technology and software have made it possible to cram more functionality into a single component, reducing or even eliminating the need for outboard effects and other devices. These advances create winners and losers. Discrete power amps are the most obvious loser. Sales for the category posted a 6.9% drop in retail value in 2014. More power amps are being sold than ever before; it’s just that most of them now come built into a speaker enclosure. The appeal of powered speakers is obvious: they’re less likely to blow out, and they make setup faster and easier. The retail dollar value of speaker enclosures advanced 5.9% to $465 million last year. The same digital technology that has made it possible to incorporate a rugged, high-powered amplifier in a speaker enclosure has also made it possible to include multi-channel digital mixers and signal-processing effects. These almost “self-contained” sound systems in a box have created other losers. The sale of powered mixers experienced a precipitous 23.7% decline in retail value because for some applications, a pair of speakers is sufficient. Outboard effects have also been adversely affected. The best-performing product group in the audio category is microphones. Sales of cable mics advanced 7% to $395 million. Chalk up the gain to audiences demanding better sound quality, which requires not only more microphones, but more application-specific mics. Mics tailored for bass drums, soprano vocals and acoustic guitars, along with USB mics, condenser mics, dynamic mics and ribbon mics, have dramatically expanded the model count over the past five years. Does an increase in SKUs drive demand, or is that increase simply a reflection of it? Probably a bit of both. Demand for wireless microphone systems was also brisk, but retail value lagged somewhat, because like every other digital product, average selling prices have dropped. Retail value for the category advanced 3.8% to $137.0 million. 20
  • 21. 0 100 200 300 400 500 '14'13'12'11'10'09'08'07'06'05 Speaker Enclosures RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 5.92% 10.54% 0 20 40 60 80 100 120 140 160 180 '14'13'12'11'10'09'08'07'06'05 Non-Powered Mixers 0 50 100 150 200 250 300 350 400 '04'03'02'01'00'99'98'97'96 RetailValuein$millions Unitsx1,000 Retail Value Units '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price 3.20% 3.20% 0.00% 13.65% 0.57% 13.01% 0 20 40 60 80 100 120 140 160 180 '14'13'12'11'10'09'08'07'06'05 Cables RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 2.45% 13.08% 0 20 40 60 80 100 '14'13'12'11'10'09'08'07'06'05 Powered Mixers 0 25 50 75 100 125 150 175 200 225 '04'03'02'01'00'99'98'97'96 RetailValuein$millions Unitsx1,000 Retail Value Units 0 5 0 5 0 5 2014 Summary 10-Year Trend Retail Unit Average Price -50.88% -58.99% 19.80% -23.75% -22.34% -1.80% Music USA 21
  • 22. 0 50 100 150 200 250 300 350 400 '14'13'12'11'10'09'08'07'06'05 Cabled Microphones RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 7.05% 20.74% 0 20 40 60 80 100 120 140 '14'13'12'11'10'09'08'07'06'05 Wireless Microphones RetailValuein$millions Retail Value Data represents estimates of only those microphones sold by the approximately 6,000 MI retailers in the United States, and excludes products aimed at broadcast markets. 2014 Summary 10-Year Trend Retail 3.79% 14.66% 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 '14'13'12'11'10'09'08'07'06'05 Total Sound Reinforcement RetailValuein$billions Retail Value 2014 Summary 10-Year Trend Retail 3.97% 0.21% All data represents an estimate of sound reinforcement products sold by the approximately 6,000 MI retailers in the United States. Excluded from data are sound products for the cinema, tour sound, broadcast and large fixed-installation markets. Data includes non-powered mixers, power amplifiers, powered mixers, speaker enclosures, cable, cable microphones and wireless microphones. 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Total Microphones RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 6.19% 19.09% Pro Audio/Sound Reinforcement, continued 22
  • 23. 0 20 40 60 80 100 120 140 160 180 '14'13'12'11'10'09'08'07'06'05 Drum Kits 0 50 100 150 200 250 300 RetailValuein$millions Unitsx1,000 Retail Value Units 2014 Summary 10-Year Trend Retail Unit Average Price -48.28% -50.69% 4.88% 0.42% -1.14% 1.57% Retail Value Market Share Educational Percussion 14.3% Sticks & Mallets 12.4% Individual Drums & Hardware 14.6% Drum Heads 9.6% Cymbals 15.4% Hand Percussion 9.9% Drum Kits 23.8% The Percussion Market Includes drum kits, educational percussion, individual drums and hardware, sticks and mallets, cymbals, heads, and hand percussion. Rhythm remains the essential foundation of all music, but the tools used to create it are changing, as reflected in the sales results of the percussion category. The total retail value of the category declined by 1.3% in 2014 to $376.7 million, due primarily to shifting product preferences. Continuing the trend of previous years, electronic percussion eroded sales of traditional drum kits, which experienced a unit decline of 1.1%. Traditionalists argue that there’s no substitute for the expressive capability of a vibrating drumhead moving a column of air, and they are probably correct. However, a large number of players seem willing to sacrifice some of this musicality in exchange for the volume control, portability and ease of recording offered by electronic alternatives. The appeal of electronic percussion is based on practical considerations, and as such, should not be viewed as a style-based fad. The impact of electronics has also affected the sales of most percussion accessory products, including sticks, heads, cymbals and hardware, all of which saw modest revenue declines in 2014. Hand percussion also saw a decline in 2014, as players shifted away from high-priced congas to cajons and other smaller, simpler instruments. Music USA 23
  • 24. 0 10 20 30 40 50 60 70 '14'13'12'11'10'09'08'07'06'05 Educational Percussion RetailValuein$millions Retail Value Educational Percussion category includes timpani, marching percussion, mallet instruments, snare drum kits and orchestral percussion instruments. 2014 Summary 10-Year Trend Retail -1.55% -3.02% 0 10 20 30 40 50 60 70 80 90 '14'13'12'11'10'09'08'07'06'05 Cymbals RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -2.00% -23.86% 0 10 20 30 40 50 60 70 80 '14'13'12'11'10'09'08'07'06'05 Individual Drums and Hardware RetailValuein$millions Retail Value Individual Drums and Hardware category includes individual snare drums, tom-toms and bass drums for drum kits, along with pedals, stands, and related percussion hardware products. 2014 Summary 10-Year Trend Retail -1.10% -27.83% 0 10 20 30 40 50 60 '14'13'12'11'10'09'08'07'06'05 Sticks and Mallets RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -1.50% 2.60% Percussion Products, continued 24
  • 25. 0 10 20 30 40 50 '14'13'12'11'10'09'08'07'06'05 Drum Heads RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -3.00% -17.87% 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Total Percussion RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -1.27% -26.75% 0 5 10 15 20 25 30 35 40 45 '14'13'12'11'10'09'08'07'06'05 Hand Percussion RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -2.00% -14.17% Music USA 25
  • 26. 0 5 10 15 20 25 30 35 '14'13'12'11'10'09'08'07'06'05 CD Players 0 10 20 30 40 50 60 70 '04'03'02'01'00'99'98'97 RetailValuein$millions Unitsx1,000 Retail Value Units 0 10 20 30 40 50 60 70 '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price -18.34% -19.30% 1.19% 6.25% 0.00% 6.25% CD Players 15.4% DJ Mixers 31.3% Turntables 7.4% Special Effects Lighting 13.4% Retail Value Market Share Digital DJ Controllers 32.5% 0 2 4 6 8 10 12 14 '14'13'12'11'10'09'08'07'06'05 Turntables 0 10 20 30 40 50 60 70 80 RetailValuein$millions Unitsx1,000 Retail Value Units 0 10 20 30 40 50 60 70 80 '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price -19.33% -17.21% -2.56% 7.18% 10.00% -2.56% The DJ Market Includes CD and digital media players, turntables, DJ mixers, digital DJ controllers, and special effects lighting units. The DJ market posted a modest gain, rising 1.7% in retail value to $141.0 million. Sales of CD players and DJ controllers advanced in spite of the popularity of software- based systems. DJ mixers declined, however. Revenues generated by popular production and performance software used by DJs are included in the Recording Software category. Big surprises during the year were the strong gains posted by traditional turntables and lighting. The renewed popularity of vinyl accounts for the improvement in turntables. More accessible LED lighting systems drove the gain in lighting. For retailers, the product category is once again profitable. 26
  • 27. 0 5 10 15 20 25 30 35 40 '14'13'12'11'10'09'08'07'06'05 Special Effects Lighting Units RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 14.55% -51.66% 0 10 20 30 40 50 '14'13'12'11'10 Digital DJ Controllers 0 10 20 30 40 50 60 70 80 90 '04'03'02'01'00'99'98'97 RetailValuein$millions Unitsx1,000 Retail Value Units 10 20 30 40 60 70 80 90 '14'13'12'11'10 2014 Summary 5-Year Trend Retail Unit Average Price 192.97% 243.48% -14.71% 6.25% 14.49% -7.20% 0 20 40 60 80 100 120 140 160 '14'13'12'11'10'09'08'07'06'05 Total DJ Sales RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 1.65% 14.56% A new category, Digital DJ Controllers, was added in 2010 and is included in Total DJ Sales. 0 10 20 30 40 50 '14'13'12'11'10'09'08'07'06'05 DJ Mixers 0 50 100 150 200 250 300 '04'03'02'01'00'99'98'97 RetailValuein$millions Unitsx1,000 Retail Value Units 0 50 100 150 200 250 300 2014 Summary 10-Year Trend Retail Unit Average Price -0.72% -23.38% 29.41% -9.76% 0.50% -10.20% Music USA 27
  • 28. The Recording and Computer Music Market (Multi-Track, Software and Computer Music) Includes hard disk multi-track recorders, portable digital recorders, sound cards and related hardware, recording and sequencing software and plug-in software and loops. The market for recording products faces the same challenge as much of the consumer electronics industry. As products are increasingly based on digital processors and software, prices continue to plummet. Just as the laptop that cost $1,250 five years ago can now be had for $650 (or less), the cost of recording systems has also trended down. There is probably more music being recorded today than at any time in history. For many musicians, a recorded file is the primary means for sharing their music. However, the demand isn’t reflected in growing revenues. Retail value for the category was down 2.6% in 2014 at $438.1 million. Sales of DAWS (digital audio workstations) software dipped 3.2% to $140 million. The decline can be attributed to reduced average selling prices, as well as the growing practice of bundling software with mixers and other hardware. As one manufacturer put it, “It’s hard to get $800 for a program when others are giving comparable products away for free.” Declines in software sales were offset by gains in the sale of audio interfaces—the boxes that allow you to plug a mic or an instrument into a computer. The interfaces are available in a variety of sizes and configurations, and they range in price from several thousand dollars for a large unit capable of handling multiple outputs to less than $200 for devices targeted at small project studios. However, they are the indispensable component for any recording system. Loops, sounds and other plug-ins also saw revenue gains, fueled in part by the interest in Electronic Dance Music. Electronic music creation and other commercial applications have led to a robust demand for virtual synths, sounds, loops and effects programs. Sales for the category were up 26.7% to $28.5 million in 2014. Retail Value Market Share Hard Disk Multi-Track Recorders 18.5% Portable Digital Recorders 81.5% 0 10 20 30 40 50 '14'13'12'11'10'09'08'07'06'05 Hard Disk Multi-Track Recorders 0 10 20 30 40 50 60 70 RetailValuein$millions 0 10 20 30 40 50 60 70 '14'13'12'11'10'09'08'07'06'05 Unitsx1,000 Retail Value Units 2014 Summary 10-Year Trend Retail Unit Average Price -68.53% -35.81% -50.97% -4.94% 22.58% -22.45% Sales results for dedicated recording hardware were mixed. Self-contained multi-track recorders face competition from inexpensive apps that can be used on a tablet or smartphone in conjunction with a USB mic. Retail value for the category dropped 4.9% to $14.4 million. Portable digital recorders as a product category probably continued to expand; however, the product is migrating away from the MI distribution channel into the mainstream consumer electronics outlets. Our data indicates that sales of the products in MI retailers dipped 15% last year. Multi-Track 28
  • 29. 0 10 20 30 40 50 60 70 80 90 '14'13'12'11'10'09'08'07 Portable Digital Recorders 0 50 100 150 200 250 300 350 '04'03'02'01'00'99'98'97'96 RetailValuein$millions Unitsx1,000Unitsx1,000 Retail Value Units 2014 Summary 8-Year Trend Retail Unit Average Price 7.77% 56.76% -31.25% -14.82% -3.97% -11.29% 0 20 40 60 80 100 120 '14'13'12'11'10'09'08'07'06'05 Total Multi-Track Sales 0 50 100 150 200 250 300 350 400 RetailValuein$millions Unitsx1,000 Retail Value Units A new category, Portable Digital Recorders, was added in 2007 and is included in Total Multi-Track. 2014 Summary 10-Year Trend Retail Unit Average Price 44.98% 140.82% -39.80% -13.15% -1.50% -11.83% Retail Value Market Share Plug-In Software & Loops 7.9% Sound Cards & Related Hardware 53.1% Recording/ Sequencing 39.0% 0 40 80 120 160 200 '14'13'12'11'10'09'08'07'06'05 Sound Cards and Related Hardware RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 6.11% 21.73% Sound Cards and Related Hardware category includes sound cards and related input/output devices, digital audio work surfaces (DAWS) and keyboard controllers designed expressly for use with computers. Recording and Computer Music Market Music USA 29
  • 30. 0 5 10 15 20 25 30 '14'13'12'11'10'09'08'07'06'05 Plug-In Software & Loops RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 26.67% 78.13% Plug-In Software & Loops category includes signal processing effects, tune correction software and mastering programs. 0 50 100 150 200 250 300 350 400 450 '14'13'12'11'10'09'08'07'06'05 Total Computer Music Market RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -0.03% -1.56% 0 50 100 150 200 250 '14'13'12'11'10'09'08'07'06'05 Total Software RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -6.17% -19.08% 0 25 50 75 100 125 150 175 200 225 '14'13'12'11'10'09'08'07'06'05 Recording & Sequencing Software RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -3.17% -21.03% Recording and Computer Music Market, continued 30
  • 31. 0 20 40 60 80 100 120 140 '14'13'12'11'10'09'08'07'06'05 Keyboard Synthesizers 0 10 20 30 40 50 60 70 80 90 '04'03'02'01'00'99'98'97'96 RetailValuein$millions 0 10 20 30 40 50 60 70 80 90 '14'13'12'11'10'09'08'07'06'05 Unitsx1,000 Retail Value Units 2014 Summary 10-Year Trend Retail Unit Average Price -6.70% 13.63% -17.89% -7.57% -6.13% -1.53% Keyboard Synthesizers 48.2% Electronic Drums 24.2% Electronic Pianos/ Professional Organs 8.5% Controller Keyboards 15.0% Rhythm Machines, Production Centers, etc. 4.1% Retail Value Market Share The Electronic Music Market Includes keyboard synthesizers, controller keyboards, electronic pianos, drum machines, and electric percussion instruments. The market for electronic musical products experienced a 4.4% decline in retail value to $217 million in 2014, buffeted by shifting musical trends and advancing technology. On the technology front, all products in this category face the same challenge currently plaguing the consumer electronics market: thanks to more powerful processors, everything keeps getting cheaper, which makes it difficult to maintain, let alone increase, sales volumes. Whether it’s keyboards, electronic drums or production stations, average selling prices continue to trend down in 2014. Within the category, the sales performance of different product groups was impacted by shifts in musical trends. Sales of keyboard synths and keyboard controllers trended down due to the fact that keyboards are not currently as prominent in popular music. Conversely, the popularity of EDM, which includes a broad range of sub-genres, fueled strong gains in the sale of drum machines and “production centers.” Anecdotal evidence suggests that unconventional controllers—tablets with multiple buttons that can be used to trigger other instruments or effects—enjoyed a banner year. However, accurate data for this product group is difficult to obtain and verify. The electronic percussion market saw an uptick, advancing 2.5% to a retail value of $52.5 million. 0 2 4 6 8 10 12 14 '14'13'12'11'10'09'08'07'06'05 Rhythm Machines / Production Centers 0 5 10 15 20 25 30 35 40 45 RetailValuein$millions Unitsx1,000 Retail Value Units 0 5 10 15 20 25 30 35 40 45 '14'13'12'11'10'09'08'07'06'05 2014 Summary 10-Year Trend Retail Unit Average Price -25.07% -31.04% 8.65% 26.11% 30.18% -3.13% In 2010, the Sound Modules and Drum Machines categories were merged to form this new category, Rhythm Machines/ Production Center. Music USA 31
  • 32. 0 5 10 15 20 25 30 35 40 '14'13'12'11'10'09'08'07'06'05 Controller Keyboards 0 50 100 150 200 250 300 RetailValuein$millions Unitsx1,000 Retail Value Units 2014 Summary 10-Year Trend Retail Unit Average Price 218.27% 1072.54% -72.86% -5.89% -15.48% 11.34% Starting from 2010, Controller Keyboards category includes both under 44 note and 44-88 note. Previously, this category only included 44-48 note. 0 10 20 30 40 50 60 70 '14'13'12'11'10'09'08'07'06'05 Electronic Pianos / Professional Organs 0 5 10 15 20 25 30 35 '04'03'02'01'00'99'98'97'96 RetailValuein$millions Unitsx1,000 Retail Value Units '14'13'121 2014 Summary 10-Year Trend Retail Unit Average Price -69.81% -70.61% 2.70% -12.18% -15.65% 4.11% 0 10 20 30 40 50 60 '14'13'12'11'10'09'08'07'06'05 Electronic Percussion RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail 2.54% 6.71% 0 50 100 150 200 250 '14'13'12'11'10'09'08'07'06'05 Total Electronic Music Sales RetailValuein$millions Retail Value 2014 Summary 10-Year Trend Retail -4.40% -11.26% The Electronic Music Market, continued 32
  • 33. The Print Music Market Includes method books, instructional materials, popular folios, and related print music products. The retail value of printed music dipped 1% to $513.1 million in 2014, though results varied among different product types. Anecdotal evidence suggests that sales of popular music, including artist-driven songbooks, took a bigger hit for two reasons: the online availability of guitar tab and lyrics, and fewer pop hits that are well suited to traditional piano/guitar/vocal arrangements. Hip-hop/ EDM/rap are heavily streamed and downloaded but don’t translate well into print. On the positive side, instructional texts, ranging from instrumental methods to band, choral and orchestral works, held up well, reflecting both the continued desire to make music and the strength of school programs. With this edition of the Industry Census, we have discontinued coverage of Notation Software. More often than not, notation programs are now bundled with other software programs and not sold separately. 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Printed Music RetailValuein$millions Retail Value Market Share Keyboards Over $199 67.7% Keyboards Under $199 32.3% The Portable Keyboard Market Portable keyboard sales rebounded in 2014, with a 10.2% gain in units to 1,006,000 and a 6.2% rise in dollar value to $186.6 million. The high end of the market, keyboards retailing for more than $199, saw a 5.2% increase in unit volume. The tonal quality and feature set of these “entry- level” products rival “pro” keyboards of a decade ago, and they have eroded synth sales. They can often be found on stage in performing venues. Lower-priced keyboards, those retailing for less than $199, are sold almost exclusively through a mass distribution channel. With an average retail selling price of $92, they have almost become impulse purchases. The 13.1% rise in volume to 655,000 units most likely reflects a strengthening economy. Music USA 33
  • 34. 0 20 40 60 80 100 120 '14'13'12'11'10'09'08'07'06'05 Keyboards Under $199 0.0 0.2 0.4 0.6 0.8 1.0 1.2 '06'05'04'03'02'01'00'99'98 RetailValuein$millions Retail Value Units Unitsx1,000,000 2014 Summary 10-Year Trend Retail Unit Average Price -45.03% -40.85% -7.07% 5.13% 13.13% -7.07% 0 25 50 75 100 125 150 175 200 225 250 '14'13'12'11'10'09'08'07'06'05 Total Portable Keyboards 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 '04'03'02'01'00'99'98 RetailValuein$millions Retail Value Units Unitsx1,000,000 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 '14'13'12'11'10'09'08'07'06 2014 Summary 10-Year Trend Retail Unit Average Price -19.57% -33.32% 20.62% 6.23% 10.25% -3.65% 0 20 40 60 80 100 120 140 '14'13'12'11'10'09'08'07'06'05 Keyboards Over $199 RetailValuein$millions Retail Value Units 0 50 100 150 200 250 300 350 400 450 Unitsx1,000 2014 Summary 10-Year Trend Retail Unit Average Price 3.23% -12.54% 18.03% 6.76% 5.25% 1.43% Portable Keyboards, continued 34
  • 35. The Karaoke Market Karaoke machines, excluding those machines sold through mass merchants, increased 13.1% to $15.1 million in 2014. Manufacturers attribute the gain to the continued popularity of vocal talent television shows like “The Voice.” “Every mother thinks their daughter is a singing star,” said one supplier. Tracking of karaoke software was discontinued last year because it has largely migrated from the retail environment to digital downloads. 0 10 20 30 40 50 60 70 80 90 '14'13'12'11'10'09'08'07'06'05 Karaoke Machines 0 200 400 600 800 1000 RetailValuein$millions Retail Value Units Unitsx1,000 2014 Summary 10-Year Trend Retail Unit Average Price -81.33% -88.27% 59.09% 13.05% 13.68% -0.56% 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 General Accessories RetailValuein$millions Retail Value General Accessories category includes a wide variety of accessory products, including instrument care products, metronomes, tuners, polishes, reeds, stands, cases, bags, straps, lighting equipment, pickups and specialty instruments like recorders, accordions and harmonicas. 2014 Summary 10-Year Trend Retail 4.80% 28.49% The General Accessory Market The accessory market is a broad category including cases, stands, tuners and scores of other items. It is also one of the industry’s most resilient categories. Retail value advanced 4.8% to $535 million. Most accessories are relatively inexpensive (less than $100) and wear out or break (like cases and stands), which helps explain why they seem immune to economic conditions. Sales growth has also been driven by an exceptional level of product innovation. To cite just one example, within months after its introduction, numerous accessory makers had come out with stands and brackets specifically designed for incorporating the iPad into musical applications. Today, there are dozens of iPad- and iPhone-related accessory products. The same inventive spirit has resulted in new interpretations of traditional products including tuners, metronomes, cases and capos that have delighted end- users and created new revenue opportunities. Music USA 35
  • 36. MUSIC AND SOUND U.S. INDUSTRY SUMMARY The purpose of the following data is to provide a review of the 10-year trend of music products activities in the U.S. music industry. The data comes from information gathered by The Music Trades magazine over the past decade. IMPORTS AND EXPORTS The import and export statistics are provided by the U.S. Census Bureau and offer a snapshot of U.S. music products import and export activities. This section also provides an overview of the countries where U.S. music products were exported, and the countries the United States imported music products from in 2014. 36
  • 37. U.S. INDUSTRY SUMMARY (in millions of dollars) *Multi-Track Recorders includes a new category, Portable Digital Recorders, as of 2007. Segment 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Acoustic Guitars $537 $548 $515 $473 $391 $419 $483 $532 $603 $678 Acoustic Pianos $551 $449 $424 $364 $201 $287 $291 $282 $293 $304 Cables $148 $151 $157 $159 $145 $157 $159 $162 $163 $167 Computer Music Products $366 $420 $432 $428 $351 $385 $365 $353 $360 $360 Digital Pianos $173 $144 $123 $121 $100 $130 $147 $159 $163 $165 DJ Gear $123 $125 $113 $105 $86 $104 $114 $120 $139 $141 Effects $222 $219 $238 $237 $209 $224 $241 $234 $224 $229 Electric Guitars $622 $563 $602 $566 $429 $420 $452 $468 $467 $506 Electronic Player Pianos $148 $133 $121 $81 $42 $56 $65 $60 $68 $67 Fretted Instrument Strings $164 $168 $173 $178 $170 $180 $190 $192 $183 $192 General Accessories $417 $428 $436 $446 $408 $436 $461 $485 $511 $535 Home Organs $78 $68 $59 $48 $28 $23 $19 $18 $14 $13 Institutional Organs $66 $63 $59 $54 $39 $38 $32 $30 $29 $28 Instrument Amplifiers $397 $360 $377 $340 $253 $230 $218 $192 $189 $186 Karaoke Products $81 $61 $29 $21 $18 $19 $16 $13 $13 $15 Keyboard Synthesizers $112 $115 $122 $118 $97 $106 $104 $99 $113 $104 Microphones $447 $459 $475 $466 $389 $432 $447 $474 $501 $532 Multi-Track Recorders* $54 $49 $97 $94 $90 $98 $103 $102 $90 $78 Other Electronic Products $121 $109 $114 $110 $92 $112 $110 $109 $107 $103 Percussion $514 $519 $497 $456 $402 $418 $423 $397 $382 $377 Portable Keyboards $232 $219 $186 $176 $150 $216 $169 $184 $176 $187 Printed Music $572 $582 $590 $598 $540 $545 $553 $547 $518 $513 Rhythm Machines $12 $12 $11 $10 $9 $8 $9 $8 $7 $9 Sound Reinforcement $919 $865 $904 $819 $654 $717 $752 $756 $795 $818 Stringed Instruments $101 $113 $121 $98 $81 $84 $107 $113 $109 $108 Ukuleles $33 $42 $63 $77 $70 $74 Wind Instruments $470 $486 $516 $512 $454 $447 $464 $507 $522 $542 Industry Total $7,646 $7,428 $7,489 $7,078 $5,860 $6,332 $6,555 $6,673 $6,808 $7,033 U.S. Industry Summary 37
  • 38. U.S. INDUSTRY SUMMARY – UNITS SOLD (in thousands) Segment 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Acoustic Guitars 1,651 1,490 1,348 1,318 1,109 1,200 1,312 1,327 1,363 1,499 Acoustic Pianos 84 67 54 48 30 40 37 33 32 33 Digital Pianos 144 125 121 123 102 118 120 128 130 135 DJ Mixers 262 245 220 210 185 190 168 185 200 201 Drum Kits 282 271 222 200 168 180 174 158 141 139 Effects 1,991 1,902 1,960 2,009 1,777 1,800 1,769 1,705 1,259 1,314 Electric Guitars 1,659 1,501 1,520 1,452 1,163 1,176 1,201 1,163 1,110 1,132 Electronic Player Pianos 12 10 9 6 3 4 4 4 4 4 Home Organs 9 7 6 5 3 3 2 2 2 1 Institutional Organs 3 3 3 2 2 2 1 1 1 1 Instrument Amplifiers 1,241 1,092 1,112 1,096 873 901 890 844 788 775 Karaoke Machines 920 420 200 145 118 110 105 88 95 108 Keyboard Synthesizers 71 80 77 80 74 88 85 82 87 81 Multi-Track Recorders* 136 122 296 275 285 310 336 348 333 328 Portable Keyboards 1,509 1,413 1,210 1,120 1,072 1,344 1,109 1,078 913 1,006 Rhythm Machines 42 33 29 26 23 24 24 21 22 29 Stringed Instruments 382 409 421 351 291 297 370 378 343 332 Ukuleles 501 581 895 1,087 966 1,010 Wind Instruments 572 589 613 629 569 564 578 591 568 585 *Multi-Track Recorders includes a new category, Portable Digital Recorders, as of 2007. 38
  • 39. U.S. Industry Summary 0 10 20 30 40 50 60 '14'13'12'11'10'09'08'07'06'05 0 10 20 30 40 50 60 GDPPerCapita(inthousandsof$) 10 20 30 40 50 60 Music Sales Per CapitaGDP Per Capita GDP Per Capita and Music Sales Per Capita MusicSalesPerCapita(inDollars) 0 1 2 3 4 5 6 7 8 '14'13'12'11'10'09'08'07'06'05'04'03 Industry Total RetailValuein$billions 2013–14 3.31% 10-Year 9.08% Source: The Music Trades 0 10 20 30 40 50 60 '14'13'12'11'10'09'08'07'06'05 GDP Per Capita (in thousands of Dollars) 2013-14 3.62% 10-Year 31.51% Source: CIA Factbook 0 5 10 15 20 25 30 '14'13'12'11'10'09'08'07'06'05 Music Sales Per Capita (in Dollars) 2013–14 3.25% 10-Year 16.24% Source: The Music Trades 39
  • 40. 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Acoustic Pianos RetailValuein$millions 0 20 40 60 80 100 120 140 160 180 '14'13'12'11'10'09'08'07'06'05 Cables RetailValuein$millions 0 50 100 150 200 250 300 350 400 450 '14'13'12'11'10'09'08'07'06'05 Computer Music Products RetailValuein$millions 0 20 40 60 80 100 120 140 160 180 '14'13'12'11'10'09'08'07'06'05 Digital Pianos RetailValuein$millions 0 20 40 60 80 100 120 140 160 '14'13'12'11'10'09'08'07'06'05 DJ Products RetailValuein$millions A new category, Digital DJ Controllers, was added in 2010 and is included in Total DJ Products. 0 20 40 60 80 100 120 140 160 180 '14'13'12'11'10'09'08'07'06'05 Drum Kits RetailValuein$millions 40
  • 41. 0 20 40 60 80 100 120 140 160 '14'13'12'11'10'09'08'07'06'05 Electronic Player Pianos RetailValuein$millions 0 50 100 150 200 250 '14'13'12'11'10'09'08'07'06'05 Effects RetailValuein$millions 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 '14'13'12'11'10'09'08'07'06'05 Fretted Instruments RetailValuein$billions 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 General Accessories RetailValuein$millions 0 10 20 30 40 50 60 70 80 90 '14'13'12'11'10'09'08'07'06'05 Karaoke Machines RetailValuein$millions 0 50 100 150 200 250 300 350 400 '14'13'12'11'10'09'08'07'06'05 Instrument Amplifiers RetailValuein$millions U.S. Industry Summary 41
  • 42. 0 20 40 60 80 100 120 140 160 '14'13'12'11'10'09'08'07'06'05 Organs RetailValuein$millions 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Microphones RetailValuein$millions A new category, Portable Digital Recorders, was added to Multi-Track Recorders in 2007 by The Music Trades. 0 20 40 60 80 100 120 '14'13'12'11'10'09'08'07'06'05 Multi-Track Products RetailValuein$millions 0 20 40 60 80 100 120 140 '14'13'12'11'10'09'08'07'06'05 Other Electronic Products RetailValuein$millions 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Percussion RetailValuein$millions 0 20 40 60 80 100 120 140 '14'13'12'11'10'09'08'07'06'05 Keyboard Synthesizers RetailValuein$millions 42
  • 43. 0 50 100 150 200 250 '14'13'12'11'10'09'08'07'06'05 Portable Keyboards RetailValuein$millions 0 2 4 6 8 10 12 14 '14'13'12'11'10'09'08'07'06'05 Rhythm Machines / Production Centers RetailValuein$millions 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 '14'13'12'11'10'09'08'07'06'05 Sound Reinforcement RetailValuein$billions 0 25 50 75 100 125 '14'13'12'11'10'09'08'07'06'05 Stringed Instruments RetailValuein$millions 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Wind Instruments RetailValuein$millions 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Printed Music RetailValuein$millions U.S. Industry Summary 43
  • 44. U.S. IMPORTS OF MUSIC AND SOUND PRODUCTS 2014 Data Description Commodity Code Quantity Value Single Loudspeakers, Mounted In Their Enclosures 8518210000 44,874,724 526,200,658 Multiple Loudspeakers, Mounted In the Same Enclosure 8518220000 28,054,798 1,398,386,472 Headphones, Earphones, Microphone/Speaker, Nesoi* 8518302000 360,347,456 1,625,279,265 Audio Frequency Electric Amplifiers, Nesoi* 8518402000 11,328,988 687,355,886 Upright Pianos 9201100011 18,032 42,337,758 Grand Pianos 9201200011 13,762 83,347,479 Harpsichords and Other Keyboard Stringed Instruments, Nesoi* 9201900000 597 1,001,940 Stringed Musical Instruments Played with a Bow 9202100000 396,687 35,192,838 Guitars Under $100, Excluding the Value of the Case 9202902000 1,723,147 64,720,111 Guitars, Nesoi* 9202904000 312,287 60,740,943 Stringed Musical Instruments, Nesoi* 9202906000 1,040,939 36,549,325 Brasswind Instruments Valued Not Over $10 Each 9205100040 19,530 110,955 Brasswind Instruments Valued Over $10 Each 9205100080 186,750 61,458,162 Keyboard Pipe Organs 9205901200 452 4,814,043 Keyboard Instruments, Nesoi* 9205901400 11,825 426,881 Piano Accordions 9205901500 36,157 3,198,416 Accordions, Nesoi* 9205901800 23,814 4,018,545 Mouth Organs 9205901900 222,352 7,739,732 Bagpipes 9205902000 1,538 485,093 Clarinets 9205904020 116,377 25,879,820 Saxophones 9205904040 88,975 40,656,248 Flutes and Piccolos (Except Bamboo) 9205904060 128,541 19,558,888 Woodwind Instruments, Nesoi* 9205904080 3,234,974 11,168,542 Wind Instruments, Nesoi* 9205906000 350,524 1,639,824 Drums 9206002000 1,058,361 56,807,609 Cymbals 9206004000 329,899 16,871,000 Sets of Tuned Bells, as Chimes, Peals or Carillions 9206006000 825,006 7,784,842 Percussion Musical Instruments, Nesoi* 9206008000 3,513,717 26,396,258 Musical Synthesizers (Under $100 Each) 9207100005 129,096 4,835,973 Musical Synthesizers ($100 or Over Each) 9207100010 75,255 33,232,127 Keyboard Instrument (More Than 1 Keyboard Under $200) 9207100045 637 61,182 *Nesoi: Not Elsewhere Specified Or Indicated. Source: The U.S. Census Bureau, 2014 44
  • 45. U.S. IMPORTS OF MUSIC AND SOUND PRODUCTS 2014 Data 2014 2013 Difference % Change Import Values $5,521,662,741 $5,320,255,899 +$201,436,842 +3.8% Export Values $1,828,146,164 $1,925,545,602 –$97,399,438 –5.1% U.S. Imports and Exports *Nesoi: Not Elsewhere Specified Or Indicated. Source: The U.S. Census Bureau, 2014 Description Commodity Code Quantity Value Keyboard Instrument (More Than 1 Keyboard $200 or Over) 9207100055 1,919 5,249,218 Keyboard Instrument (More Than 1 Keyboard Hand-Held) 9207100060 68,354 443,549 Keyboard Instrument Except Accordions (1 Keyboard Under $100) 9207100065 665,693 35,673,481 Keyboard Instrument Except Accordions (1 Keyboard $100 or Over) 9207100075 351,875 107,125,959 Fretted Stringed Instruments 9207900040 1,762,230 207,192,392 Musical Instruments, Electrically Amplified, Nesoi* 9207900080 212,861 32,050,274 Music Boxes 9208100000 4,572,024 29,958,977 Other Musical Instruments 9208900040 236,271 842,641 Mouth-Blown Sound Signalling Instruments, Nesoi* 9208900080 36,524,382 12,286,471 Musical Instrument Strings 9209300000 13,930,816 27,663,622 Tuning Pins for Pianos 9209914000 8,913 384,079 Parts and Accessories for Pianos, Nesoi* 9209918000 - 7,706,167 Mutes, Stands and Music Holders of Stringed Instruments 9209922000 - 4,069,412 Tuning Pins for Stringed Instruments 9209924000 2,176 1,920,994 Parts of Bows, Chin Rest and Parts for Instruments Played with Bow 9209926000 - 12,211,476 Parts and Accessories for Stringed Instruments, Nesoi* 9209928000 - 17,896,872 Collapsible Keyboard Instrument Stands 9209944000 - 5,707,227 Other Parts and Accessories for Keyboard Instruments 9209948000 - 44,597,215 Metronomes, Tuning Forks and Pitch Pipes 9209990500 - 3,294,622 Mutes, Pedals, Dampers, and Spurs for Drums Pedals 9209991000 - 27,057,454 Parts and Accessories for Pipe Organs 9209991600 - 2,596,528 Parts and Accessories for Harmoniums and Similar Keyboard Instruments 9209991800 - 51,263 Parts and Accessories for Bagpipes 9209992000 - 665,534 Parts and Accessories for Woodwind Instruments 9209994040 - 24,348,059 Parts and Accessories for Other Wind Instruments 9209994080 - 5,286,915 Mechanisms for Music Boxes 9209996100 - 336,366 Parts and Accessories for Musical Instruments, Nesoi* 9209998000 - 16,789,159 45
  • 46. U.S. EXPORTS OF MUSIC AND SOUND PRODUCTS 2014 Data Description Commodity Code Quantity Value Microphones and Stands 8518100000 - 97,539,340 Single Loudspeakers, Mounted in Their Enclosures 8518210000 3,511,789 104,952,816 Loudspeakers, Nesoi* 8518290000 9,993,629 222,271,010 Headphones, Earphones, Microphones/Speakers, Nesoi* 8518302000 5,293,668 166,165,167 Audio Frequency Electric Amplifiers, Nesoi* 8518402000 694,765 164,008,700 Electric Sound Amplifiers Sets 8518500000 218,433 85,013,491 Microphone, Loudspeaker and Amplifier Parts 8518903000 - 315,568,126 Upright Pianos 9201100000 1,043 2,371,111 Grand Pianos 9201200000 1,239 13,684,332 Pianos, Nesoi* 9201900000 1,198 1,682,613 Stringed Musical Instruments, Played with a Bow 9202100000 3,201 4,195,703 Guitars 9202903000 131,513 97,534,536 Stringed Musical Instruments, Nesoi* 9202906000 63,459 18,839,479 Brasswind Instruments 9205100000 22,727 25,705,148 Woodwind Instruments, Nesoi* 9205901000 38,564 16,528,765 Keyboard, Pipe Organs, Etc., with Free Metal Reeds 9205901300 414 2,370,124 Accordions And Similar Instruments 9205901600 8,109 1,624,615 Mouth Organs 9205901900 3,894 289,757 Wind Instruments, Nesoi* 9205906000 13,814 1,264,075 Percussion Musical Instruments 9206000000 1,083,397 62,116,587 Music Synthesizers, Other Than Accordions 9207100020 17,626 10,827,815 Keyboard Instruments, Other Than Accordians, Nesoi* 9207100080 18,486 8,129,248 Fretted Stringed Instruments 9207900040 219,520 165,387,107 Musical Instruments, Electrically Amplified, Nesoi* 9207900080 159,485 27,990,186 Music Boxes 9208100000 107,789 3,585,136 Mouth-Blown Sound Signalling Instruments, Nesoi* 9208900080 328,329 7,351,972 Musical Instrument Strings 9209300000 24,966,240 78,770,066 Parts And Accessories for Pianos 9209910000 - 2,022,430 Parts And Accessories for Stringed Instruments 9209920000 - 44,686,316 Parts And Accessories for Keyboards 9209940000 - 41,846,451 Metronomes, Tuning Forks and Pitch Pipes 9209990500 - 604,474 Other Parts and Accessories 9209997000 - 33,219,468 *Nesoi: Not Elsewhere Specified Or Indicated. Source: The U.S. Census Bureau, 2014 46
  • 47. 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Number of Import Units (in millions) 5-Year Change ‘13 – ’14 Change 27.5% 9.8% 0 100 200 300 400 500 600 '14'13'12'11'10'09'08'07'06'05 Number of Export Units (in millions) 5-Year Change ‘13 – ’14 Change 20.9% 3.6% 0 1 2 3 4 5 6 '14'13'12'11'10'09'08'07'06'05 Value of U.S. Exports (in billions of Dollars) 5-Year Change ‘13 – ’14 Change 0.7% 5.1% 0 1 2 3 4 5 6 '14'13'12'11'10'09'08'07'06'05 Value of U.S. Imports (in billions of Dollars) 5-Year Change ‘13 – ’14 Change 49.1% 3.8% U.S. IMPORTS AND EXPORTS OF MUSIC AND SOUND PRODUCTS U.S. Imports and Exports 47
  • 48. Top 15 U.S. Music Product Export Destinations (in millions of Dollars) $0 $50 $100 $150 $200 $250 $300 $350 $400 India Italy France Brazil Singapore China Australia S. Korea U.K. Hong Kong Netherlands Germany Mexico Japan Canada Export Value The United States exported music products to a total of 183 countries in 2014. Canada 20% Japan 15% Mexico 12% Netherlands 5% Others 43% Germany 5% Top 15 Sources of Music Product Imports to the United States (in millions of Dollars) $0 $500 $1000 $1500 $2000 $2500 $3000 $3500 Vietnam Italy U.K. Hong Kong France S. Korea Canada Malaysia Thailand Taiwan Germany Japan Indonesia Mexico China Import Value The United States imported music products from a total of 97 countries in 2014. Mexico 15% Japan 3% Germany 2% Indonesia 3% Others 14%China 63% 48
  • 49. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 '14'13'12'11'10'09'08'07'06'05 Upright Piano Exports RetailValuein$millions Unitsx1,000 Export Value Units 0.0 0.4 0.8 1.2 1.6 2.0 0 10 20 30 40 50 '14'13'12'11'10'09'08'07'06'05 Upright Piano Imports RetailValuein$millions Unitsx1,000 Import Value Units 0 5 10 15 20 25 30 35 0 20 40 60 80 100 120 '14'13'12'11'10'09'08'07'06'05 Guitar Exports RetailValuein$millions Unitsx1,000 Export Value Units 0 25 50 75 100 125 150 175 200 '14'13'12'11'10'09'08'07'06'05 2.0 0 20 40 60 80 100 120 140 '14'13'12'11'10'09'08'07'06'05 Guitar Imports RetailValuein$millions Unitsx1,000,000 Import Value Units 0.0 0.5 1.0 1.5 2.0 2.5 3.0 '14'13'12'11'10'09'08'07'06'05 2.0 0 3 6 9 12 15 '14'13'12'11'10'09'08'07'06'05 Grand Piano Exports RetailValuein$millions Unitsx1,000 Export Value Units 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 '14'13'12'11'10'09'08'07'06'05 0 10 20 30 40 50 60 70 80 90 '14'13'12'11'10'09'08'07'06'05 Grand Piano Imports RetailValuein$millions Unitsx1,000 Import Value Units 0 4 8 12 16 20 '14'13'12'11'10'09'08'07'06'05 2.0 U.S. Imports and Exports 49
  • 50. 0 5 10 15 20 25 30 '14'13'12'11'10'09'08'07'06'05 Brasswind Exports RetailValuein$millions Unitsx1,000 Export Value Units 0 5 10 15 20 25 30 35 40 45 '14'13'12'11'10'09'08'07'06'05 2.0 0 10 20 30 40 50 60 70 '14'13'12'11'10'09'08'07'06'05 Brasswind Imports RetailValuein$millions Unitsx1,000 Import Value Units 0 50 100 150 200 250 300 '14'13'12'11'10'09'08'07'06'05 2.0 0 4 8 12 16 20 '14'13'12'11'10'09'08'07'06'05 Woodwind Exports RetailValuein$millions Unitsx1,000 Export Value Units 0 10 20 30 40 50 0 20 40 60 80 100 120 '14'13'12'11'10'09'08'07'06'05 Woodwind Imports RetailValuein$millions Unitsx1,000,000 Import Value Units 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0 10 20 30 40 50 60 70 '14'13'12'11'10'09'08'07'06'05 Drum & Percussion Exports RetailValuein$millions Unitsx1,000,000 Export Value Units 0.0 0.2 0.4 0.6 0.8 1.0 1.2 '14'13'12'11'10'09'08'07'06'05 0 20 40 60 80 100 '14'13'12'11'10'09'08'07'06'05 Drum & Percussion Imports RetailValuein$millions Unitsx1,000,000 Import Value Units 0.0 0.4 0.8 1.2 1.6 2.0 '14'13'12'11'10'09'08'07'06'05 50
  • 51. International Data INTERNATIONAL DATA ARGENTINA 53 AUSTRALIA 62 AUSTRIA 74 BRAZIL 81 CANADA 88 CHINA 96 CZECH REPUBLIC 111 FINLAND 118 FRANCE 124 GERMANY 134 HUNGARY 144 INDIA 152 ITALY 161 JAPAN 174 MEXICO 185 NORWAY 193 RUSSIA 199 SOUTH KOREA 206 SPAIN 212 SWEDEN 220 SWITZERLAND 226 UNITED KINGDOM 232 51
  • 52. UNDERSTANDING THE INTERNATIONAL DATA To present a global overview of the music products industry, we are pleased to feature 22 countries in the International section this year: Argentina, Australia, Austria, Brazil, Canada, China, Czech Republic, Finland, France, Germany, Hungary, India, Italy, Japan, Mexico, Norway, Russia, South Korea, Spain, Sweden, Switzerland, and the United Kingdom. The demographic, economic and trade data shown in each country/region’s “Snapshot” section are gathered from the CIA World Factbook, unless otherwise noted. The music industry data are provided by The Music Trades, also unless otherwise noted, and reflects a 10-year historical trend, with the year 2013 being the most recent published by The Music Trades. Top Global Market Sales Share 0 5 20 25 30 35 40 45 Netherlands Mexico Russia S. Korea Brazil Australia Italy U.K. France Canada Germany China Japan U.S. 40.6% 13.0% 5.8% 4.4% 4.3% 7.5% 3.2% 2.3% 2.2% 1.7% 1.7% 1.1% 1.1% 1.3% 0 4 8 12 16 20 '13'12'11'10'09'08'07'06'05'04 Global Music Products Sales Valuein$billions 52
  • 53. International Data ARGENTINA ARGENTINA We kindly encourage those who have not read our report last year to do so in order to understand the update below. Import Restrictions Our previous report explained how importers in Argentina needed to apply for a DJAI (import permit) for each single shipment. This document is requested not only to make an importation but also to get approval from the Central Bank for the necessary wire transfer. Until early 2014, the importer had 360 days after the date of the wire transfer to enter the goods into the country. This encouraged importers to wire future shipments as soon as they had the DJAI in their hands in order to secure the exchange rate of the Argentine peso, forcing the Central Bank to dispose foreign currency reserves in advance. By the middle of the fourth quarter of 2014, the 360-day period was shortened to 120 days, thus creating far more difficult restrictions and complications. That was a drastic change that affected the planning of imports since most manufacturers take orders from three to four months in advance. When adding 60 days for transit time (could be a few days faster) we get to a 180-day cycle, so the typical process of requesting an import permit before placing an order became impossible, forcing importers to assume the risk of placing the orders for manufacturing while trusting that the government would issue the requested permit in due time. When the import permit is not issued in time, the shipment has to be sent to a temporary free zone, severely increasing final costs. Several companies from different areas have closed or gone bankrupt. In an effort to stop the loss of jobs from so many companies that were closing the Secretary of Commerce in charge of this complex process started to call each importer (which number in the thousands) in mid-2014 for a meeting. The purpose of the meeting was to determine a yearly fixed amount (generally way below the needs), securing the necessary funds, providing predictability to the importer for the approved annual budget. Imports then began to flow better for some importers, but not all of them; the reason for this is not known. “Import restrictions” is the term used as the cause of many products disappearing from the market. The Chamber of Importers of Musical Instruments and Pro Audio in Argentina (CAIMAVI) met the Minister of Culture (a very popular singer) to discuss the difficulties of our group and the financial impact of our needs on the whole national economy. The Minister agreed and met the Secretary of Commerce, who took care of the case. After this, our importers were included into the calling described above. Demand Is Active Demand for musical instruments and pro audio products is steady. The Argentine peso is perceived as highly overvalued, which might be encouraging consumers to buy the most possible before a big devaluation occurs. The size of that devaluation is hard to determine, but if we simply compare the inflation that has occurred during the last 10 years, way above 1,000%, and the official exchange rate of the peso against the USD in the same period (devaluated by a 300%), the gap seems to be enormous. In fact, exports have fallen very much because the current exchange rate does not allow local producers to be competitive. What will finally happen is hard to predict. Argentina 53
  • 54. In any case, importers are forced to move according to a fixed budget stated by the government. Therefore most marketing efforts like clinics, promotions, etc., have disappeared. There is no sense in boosting a demand that no one can attend. Extra Import Restrictions In addition to the above, there are other non-written restrictions that have not even been announced but are nonetheless firmly in place. That is, when a local manufacturer requires protection for his products, the company presents its case to the government, which responds by closing imports of that article without considering quality, volume of production or impact on the consumers. So drum sets, cymbals and strings have fallen into this situation in 2014. Import permits were not issued for those products for almost a year, very much against the WTO rules. Argentina was recently found guilty of not respecting the WTO rules. By the end of 2014, the Secretary of Commerce understood the complaints coming from the importers about the result of the policies: local manufacturers were becoming a monopoly (as we say in Argentina, “hunting in the zoo,” making prices escalate severely and leaving an increasing unsatisfied demand). Government reacted by approving a small portion of the requested importation amounts. In 2015 larger amounts were approved (still 50% below needs), with promise to “double those amounts by the middle of the year if the importer did not fire any employees.” Importers are used to accepting any rules in order to get the necessary import permits (e.g., when they were forced to balance imports with exports from 2012 to mid-2014, exporting whatever products in order to get the strong currencies needed for their imports). Fortunately, export balance is no longer required. Upcoming Election The business community very much expects a change in direction with a new administration in 2016, but that may not happen if the new government is from the same party that has run Argentina over the last 12 years. As of May 2015, the primary elections are showing a more business-friendly party in first place, the PRO party, headed by the Buenos Aires Governor Eng. Mauricio Macri, but it is still too soon to determine a clear trend. For further information on the election, visit www.lanacion.com.ar/1787651-elecciones-2015- resultados-de-las-paso-portenas-en-un-mapa-interactivo. Commentary by Alfredo Campanelli, Founder of Import Music Argentina argentina 54
  • 55. International Data Argentina DOING BUSINESS IN ARGENTINA Market Overview The U.S. and Argentina share a long history of bilateral commercial relations both in trade and investment. The United States is Argentina’s third largest trading partner and U.S. companies are among Argentina’s top investors, with some U.S. companies maintaining local sales and manufacturing subsidiaries in the country for more than a century. As the fourth most populous country in Latin America with a population of 42 million, Argentina is one of the largest economies in South America and, as such, remains an important export market for U.S. companies in a number of industries. The United States and Argentina share a mutually beneficial trade relationship with total trade in goods reaching US$14.8 billion in 2013. Two-way trade in private services between the countries totaled an estimated US$9.0 billion in 2013 (latest data available), with the U.S. exporting US$7.1 billion to Argentina and importing US$1.9 billion. The U.S. supplies raw materials, intermediate goods and capital goods to feed Argentina’s industrial sector; Argentina exports food and agricultural products as well as intermediate goods to U.S. industry. The U.S. enjoys a trade surplus with Argentina. Approximately 90 percent of its exports to Argentina are destined for local industry and agriculture such as computers, industrial and agricultural chemicals, agricultural and transportation equipment, machine tools, parts for oil field rigs, and refined fuel oil. Argentine exports to the U.S., meanwhile, include goods such as wine—Argentina is one of the largest exporters of wine to the U.S.— fruit juices, crude oil and intermediate goods such as seamless pipe, tubes and other iron and steel products. U.S. investment makes a large contribution to Argentina’s economy. Over 500 U.S.–based companies currently operate in Argentina, employing more than 155,000 Argentines. The stock of U.S. investment in Argentina reached US$14.4 billion in 2012 (latest data available) and is concentrated in the energy, manufacturing, information technology and financial sectors. U.S. firms operating in Argentina continue to make a positive impact on the Argentine economy and society and are widely respected for their corporate governance, the quality of the work environment provided to Argentine employees, their transparency and their work in corporate social responsibility. In 2013, U.S. companies comprised one- third of the 100 most respected companies in Argentina published annually by MERCO, a local research company. Market Challenges The primary market challenges arise from slowing economic growth and import and foreign exchange restrictions the Government of Argentina (GOA) imposed in late 2011 and early 2012. Growth slowed markedly in 2012 to 1.9% (from 8.9% in 2011) and continued at 3.0% in 2013, according to official GDP statistics (the IMF and some private analysts dispute the official statistics). Strong commodity prices and automobile exports to Brazil had contributed to Argentina’s rapid growth over the past several years. Non-automatic import licenses (NAILs) were ended in late 2012 for all but a few products, but a regime erected by the GOA in February 2012, whereby all importers are required to argentina 55
  • 56. request approval from the Argentine Tax and Customs Authority (AFIP) prior to making each purchase for import from abroad, is still in effect and constitutes import licensing in all but name. This system is the subject of a WTO complaint by the U.S., EU and Japan against Argentina. Moreover, the GOA’s policy of tying import application approvals to changes in the trade balance and foreign exchange levels has added to the uncertainty. Sustained inflation generally estimated at over 30% has raised unit labor costs and resulted in a more challenging business environment. Limits on profit, royalty and licensing remittances have also discouraged new investment in Argentina. Lack of transparency and a public comment period for new regulations adds to business uncertainty. As a result of the aforementioned government policies, many local and international firms based in Argentina have delayed plans for expansion or the adoption of new product lines until the economic climate and regulatory regime become more clear, consistent and predictable. Despite current problems and uncertainty, Argentina remains an attractive market for American exporters given its relatively large and educated population, abundant natural resources such as in agriculture, mining and unconventional hydrocarbons, and important infrastructure needs. As Argentina resolves its issues going forward, having already taken important steps to this end, opportunities will increase. This is an excellent time to begin exploring the market and establishing relationships that will enable profitable operations in the future. Market Opportunities This year’s top commercial sectors are agricultural machinery parts; electronic security equipment; food processing equipment; information and communication technology; medical equipment and supplies; mining machinery and equipment; technologies for development of unconventional gas resources; and travel and tourism to the United States. Within the agribusiness sector, animal genetics, natural origin food ingredients, and planting seeds are key areas that demonstrate high potential. We encourage you to work with the U.S. Embassy to explore opportunities in all sectors. Services offered to U.S. firms in Argentina include help with market-entry or expansion strategies and advocacy for tender bid and policy obstacles. The U.S. Embassy also stands ready to help U.S. companies understand and address market challenges. In addition to the services of the U.S. Embassy, the U.S. Export-Import Bank is open for short- and medium-term financing for U.S. exports to private sector clients in Argentina, but not for entities tied to the GOA. The Overseas Private Investment Corporation (OPIC) offers assistance to U.S. private investors in the form of political risk insurance, as well as loans and loan guarantees for their direct investment in Argentina. Market-Entry Strategies • Marketing U.S. products and services in Argentina requires a high level of research, preparation and involvement. • Companies intending to export to Argentina need to ensure that their customers fulfill all import requirements before they ship any product, and must be careful to follow all regulations precisely. argentina 56
  • 57. International Data • U.S. companies exporting to Argentina typically market their products and services through Argentine agents, representatives and distributors. • Close personal relationships are important for success, as Argentines prefer to do business with people they have met face-to-face and know well. • U.S. companies must consider the unique economic, demographic and cultural characteristics that distinguish Argentina from other Latin American countries. • It is increasingly difficult to establish a “typical customer” due to new consumption habits and also the dynamics of income distribution and demography. • An important component of the marketing mix is promotion. Companies are encouraged to attend or exhibit at local and regional trade shows as well as visit trade shows in the United States attended by Argentine buyers. • Protect your intellectual property and engage qualified local professionals and lawyers in contract negotiations. “Doing Business in Argentina” article is provided by the U.S. Commercial Service, the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration. For more information on doing business in Argentina, you may visit their website at www.export.gov/Argentina. The following charts are based on import and export data obtained from the website of theInternational Trade Centre (ITC) argentina Argentina 57
  • 58. Demographics 65+ 11.4% 0–14 24.9% 15–64 63.7% Economy GDP-Industry 29.5% GDP-Service 60.1% GDP-Agriculture 10.4% Population in millions 43.0 Median Age 31.2 Population Growth 0.96% 0 200 400 600 800 1000 '14'13'12'11'10'09'08'07'06'05'04'03 Argentina GDP (PPP) (U.S. $ in billions) 0 2 4 6 8 10 12 14 16 18 '14'13'12'11'10'09'08'07'06'05'04'03 Unemployment Rate (Percent) 0 5 10 15 20 25 30 35 40 '14'13'12'11'10'09'08'07'06'05'04'03 Inflation (Annual Percent Rate) ARGENTINA SNAPSHOT Demographics Economy Age Male Female 0–14 5.49 5.23 15–64 13.69 13.71 65 & Over 1.90 2.02 GDP (PPP) $927.4 billion GDP Per Capita $22,100 GDP-Real Growth Rate -1.70% Unemployment Rate 7.70% Inflation 36.40% Data Source: Demographics, Economy and Trade from CIA World Factbook, Music Industry from The Music Trades. GDP (PPP): Gross Domestic Product based on purchasing-power-parity (PPP) valuation of country GDP in U.S. dollars. 58
  • 59. International Data Argentina Snapshot 0 5 10 15 20 25 ChileU.S.ChinaBrazil Export Partners (2014) AnnualPercentage 0 5 10 15 20 25 30 GermanyChinaU.S.Brazil Import Partners (2014) AnnualPercentage Music Sales Per Capita (U.S. $) 0.0 0.5 1.0 1.5 2.0 2.5 '13'12'11'10'09'08'07'06'05'04 Argentina Music Market (U.S. $ in millions) 0 20 40 60 80 100 '13'12'11'10'09'08'07'06'05'04 Trade Music Industry Share of Global Music Market (Percent) 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 '13'12'11'10'09'08'07'06'05'04 Total Export $76.5 billion Export as % of GDP 8.25% Total Import $65.9 billion Import as % of GDP 7.11% Music Market $79.0 million Sales Per Capita $1.84 Global Share 0.50% 59
  • 60. Argentina Imports and Exports 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 '14'13'12'11'10'09'08'07'06'05 Keyboard Instruments Exports ValueinU.S.$millions Export Value 0 1 2 3 4 5 6 '14'13'12'11'10'09'08'07'06'05 Fretted & Stringed Instruments Imports ValueinU.S.$millions Import Value 0 5 10 15 20 25 '14'13'12'11'10'09'08'07'06'05 Keyboard Instruments Imports ValueinU.S.$millions Import Value 0 50 100 150 200 250 300 350 400 450 '14'13'12'11'10'09'08'07'06'05 Fretted & Stringed Instruments Exports ValueinU.S.$thousands Export Value 0 200 400 600 800 1000 1200 '14'13'12'11'10'09'08'07'06'05 Acoustic Pianos Imports ValueinU.S.$thousands Import Value 0 20 40 60 80 100 120 140 '14'13'12'11'10'09'08'07'06'05 Acoustic Pianos Exports ValueinU.S.$thousands Export Value 60
  • 61. International Data Argentina 0 20 40 60 80 100 120 '14'13'12'11'10'09'08'07'06'05 Percussion Exports ValueinU.S.$thousands Export Value 0 1 2 3 4 5 6 7 8 '14'13'12'11'10'09'08'07'06'05 Percussion Imports ValueinU.S.$millions Import Value 0 1 2 3 4 5 6 7 '14'13'12'11'10'09'08'07'06'05 Accessories Imports ValueinU.S.$millions Import Value 0 20 40 60 80 100 120 '14'13'12'11'10'09'08'07'06'05 Wind Instruments Exports ValueinU.S.$thousands Export Value 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 '14'13'12'11'10'09'08'07'06'05 Accessories Exports ValueinU.S.$millions Export Value 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 '14'13'12'11'10'09'08'07'06'05 Wind Instruments Imports ValueinU.S.$millions Import Value Argentina Imports and Exports 61
  • 62. AUSTRALIA AUSTRALIA With a national economy that has been described as limping along, overall a result that will please, as we saw units and demand strengthened with a strong last quarter. Volumes were up 11%, value was up 4% adding approximately AUD$30m to the industry at retail. This represented a 7% drop in average unit value. The increase outpaced that of the Australian economy, which grew by 2.5%. Entry-level instruments seem to be very strong – record numbers of acoustic guitars and portable keys were up significantly over the previous year. This perception may be tempered by the fact that more low-value instruments are appearing in mass merchants and at a greater level than for many years. The result also may show a consolidation following a turbulent time in the industry during the 2011–2013 period. Margins are under increasing pressure as the industry broadly keeps its nose in front of deflationary levels as a whole. Given the change in the value of the Australian dollar versus the U.S. dollar in particular, we thought we might have seen an increase in the overall average unit value. While there is some evidence of increases in the cost of imports in the final two quarters of 2014, they were not sufficient to see the overall average unit value lift. It is most likely that the full effect of price rises on the entire industry is yet to be fully felt. Nor are reported cost increases in low-cost markets such as China being felt entirely yet. Larger distributors with forward cover were probably getting through that stock, delaying widespread price increases. In comparing 2014 and 2009, which we do frequently with the five-year time scale comparisons, it needs to be realised that 2009 (and 2010) were the peak years in a 10-year cycle that began immediately after the 1999/2000 recession. Of course, the following year AMG started having its issues, the consequences of which the industry is still dealing with now, although supply sources for the major brands have settled as the industry gets to a new level of normal. Imports were the better part of AUD$20 million more than they were in 2013, the equivalent of around AUD$50 million at retail. Guitar imports in particular were strong, while digital pianos and digital drums gained significant numbers of customers. Overall, 2014 showed continuing improvement. Unit growth increased by 10% and once again exceeded the 2 million–item mark; the last time this occurred was in 2010. Import value was also up, by nearly 5% to AUD$237 million, again, our best result since 2010. There were some product segments with reasons to be optimistic and others for various reasons that did not fare as well. The keyboard sector was up, with digital piano units up 8.5%, while segment value rose by a little more than 2%. Acoustics overall held their ground. A sharp increase in the value of portable keyboards may indicate some leakage of digital piano figures into the category, but the electronic keyboard sector did well overall. Electronic (portable) keyboard imports were up in 2014 by 4% (units) and 18% (value), the value result due to a 13% increase in the average unit value. The longer-term trends show this to be a declining segment; it has been losing both volume and value for much of the last decade, but this year’s result gives room for optimism. 62
  • 63. International Data Australia australia The unit imports of grand pianos, which perhaps run parallel to the general state of the economy, were flat. Upright piano imports rose marginally in unit terms in 2014 to record a second successive year of small but incremental growth. An increase in average unit values, however, saw import value rise by 9%. The guitar market saw an increase in units of nearly 7%, while the average unit value fell markedly. The acoustic guitar market underpinned a strong performance, more than offsetting the softness in the electric market. Amplifiers continued their upward trend with a near 7% rise in units, and the bellwether of guitar and bass strings rose over 11% in import value. The 2014 number represented a very healthy 20% increase over 2012. Acoustic percussion posted an overall category rise, mainly due to Educational and other percussion segments increasing by 22% year on year. Imports of drum kits and cymbals, however, continued in a downward direction. Electronic kits, on the other hand, reported a large increase. Computer music software was flat in units, and down in average value, as products in these categories experience continued price deflation. The DJ Products segment continued its recent resurgence with strong increases in numbers of over 25% plus 15% in average value. Imports into the Brass category have been in decline for the last five years or so, so a strong 2014 result – a nearly 10% increase in unit imports and a near 4% increase in import value – was very welcome. Likewise, instruments in the Woodwind category collectively rallied somewhat in 2014. Overall units increased by 12% and import value rose by 10%. However, of the major three segments, flutes, clarinets and saxophones, only the clarinet recorded a result in 2014 above that of 2013. Stringed instruments did not fare as well, with a 10% drop in units, but a corresponding rise in value, as fewer more-expensive instruments were imported. Sound and Recording registered good growth of over 11% in units but a flat result in value, as cheaper technology drove down the average unit value of signal processors and multi-track. A strong result in PA, with reduced unit numbers in self-contained amps being more than offset by the amps going into powered speakers, with a healthy 18% increase in speakers recorded. Microphones continued on the upward trend over the past three years, in large part due to suppliers stocking up for increased consumer demand caused by the new frequency allocations that took effect January 1, 2015. General Accessories were up in value by more than 5%. In dollar terms, the National Australian Bank (NAB) estimates Australians spent AUD$16.4 billion (up from AUD$14.7 billion) on online retail in the 12 months to December 2014. This level is equivalent to 6.8% of spending at traditional brick-and-mortar retailers (excluding cafés, food, etc.) as measured by the Australian Bureau of Statistics (ABS). There are certainly categories that suffer more from cheaper overseas imports: electric guitars, electronic percussion, cymbals and other products that are more durable and better withstand the rigours of shipment. 63
  • 64. australia A level playing field for Australian retailers, both online and in the physically realm, remains elusive; we compete increasingly against countries with lower rents, wages, superannuation and much higher economies of scale. We do not know how much business goes offshore via small parcel delivery and escapes the low-value Goods and Services Tax (GST) Threshold, but given that the average unit value of all imports is around AUD$300, it is fair to say that a significant portion of our imports fall below the AUD$1,000 GST Free Threshold. This continues to affect different product segments. For example, electric guitars are softening, but amp sales are on the rise. As members know, the AMA has been fighting for the GST Threshold on low-value imports to be lowered or abolished with a consistent lobby to the federal and state governments. As national conversations are commenced on tax structures, there is no doubt that the GST Threshold on imports will be part of any government tax review. The AMA has been lobbying all MPs and Senators, again emphasising our industry’s concern over the fact that overseas sellers largely have a 10% advantage over those retailers that are obliged to levy the GST on those who buy in Australia. It is perhaps worth looking at a comparison with the U.S. market results in 2014. The Music Trades magazine reports that the U.S. music products industry in 2014 continued its recovery from the financial crisis, posting its fifth consecutive year-over-year sales gain. The U.S. retail value of the broad array of musical instruments, recording gear and audio products recorded a 3.3% gain over 2013. The rise closely tracked the trajectory of the national economy, which closed out the year with a 2.6% gain in Gross Domestic Product. This is the first parallel of note, as Australia’s market outgrew its own national modest rise in GDP. The improving technology that delivered better value to consumers also limited value growth by reducing average selling prices. A similar trend of reduced average unit value is apparent in the Australian market. Fretted instruments posted their best performance in seven years, advancing 7%, and reinforced the guitar’s continued standing as the preeminent instrument in popular music. Acoustic guitars led the charge with a 10% gain, a parallel to the Australian result. Like in Australia, electronic percussion eroded sales of traditional drum kits, which experienced a more modest 1.1% unit decline. The piano market posted a modest increase in both dollars and units in 2014. Uprights were the best performers, with unit sales rising 9.1%. Grand units dropped 5.1% but dollar volume was flat as customers opted for larger instruments. Sales of digital pianos increased in units, but value reflected lower average selling prices. A 3.1% gain in retail value of woodwind, brasswind and stringed instrument shipments reflected school enrolment increases and perhaps a trend toward step-up instruments. A similar result can be seen in the Australian market. Comparing Western economies, however broadly, gives a guide as to the increasing demand for making music in the community. It is interesting to note a rise in both economies of units 6464

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