Selling and Producing MI Gear in (and near) the City by the Bay: San Francisco/Bay Area

The San Francisco Bay Area is one of the largest, most vibrant, and most economically robust markets in the country.

While metropolitan San Francisco (San Francisco, Oakland, Hayward) can lay claim to over four and a half million residents – just behind metro Boston and ahead of metro Phoenix – with the entire Bay Area (including Sonoma, Napa, Solano, Marin, San Mateo, Santa Clara, Alameda, Contra Costa, and surrounding towns) added into the mix, that figure rises to over seven million, making it one of the largest in the nation.

“Economically robust” – what exactly does that mean? With a median income estimated at over $96,000 in a report that aired earlier this spring on NPR, San Francisco is the third most affluent city in the U.S. Moreover, a 2015 study by HSH, the largest publisher of mortgage and consumer loan information, finds San Francisco to be the most expensive American city to buy a home in, with a staggering median sale price of $748,300(!).

Not surprisingly, all that money is tied into a healthy dose of higher education – Business Insider recently shared an analysis of 150 of America’s largest cities, which found San Francisco to be the 14th “most educated.”

Add to all of that a rich musical legacy across all genres – Metallica, Jefferson Airplane, Grateful Dead, Santana, Michael Tilson Thomas, Etta James, NOFX, Sylvester, Sly Stone, and many others – and you’ve got a regional culture and MI retail climate unlike any other.

Bronstein Music

363 Grand Avenue

San Francisco, California

Rich Welker

What are some of the upsides to operating an MI retail store in San Francisco?

Well, just being the center of rock and roll with all the bands that started here – Santana, Jefferson Airplane, Journey, and all of that – there’s a lot of music happening here of all sorts. And then the school band programs here are relatively strong. It’s a wealthy, very diverse economy in the area, so even when there’s a downturn it’s not a drastic downturn.

As you’re noting, it’s an expensive area – that’s got to have both upsides and downsides.

It’s a double-edged sword. We do have a lot of people with a lot of wealth, but for normal people the discretionary spending is severely curtailed by housing and related costs. The economy has turned around, but it’s got to turn around a whole hell of a lot more before Joe Six-pack is going to have spending money on music gear again. Housing is just horrifically expensive here. A one-bedroom apartment in San Francisco is anywhere from $2,500 to $3,000 a month. It’s lunacy.

Could you describe the typical Bronstein customer?

It’s varied over time, but right now our typical customer is, in fact, a music student taking band or orchestra in school and the parents thereof. So we do lots and lots of rentals. So: middle class, the whole “2.5 kids” thing [laughs]. We have changed our model over the last few years a lot. In 2008 we had actually sold our building and were going to move our business down the peninsula about ten miles. We were going to become just a band & orchestra store with lots of studios because rock n roll retail sales had really diminished, but then the sale of the building fell through because of the banking crisis.

90 percent of our business these days is with schools and people who attend schools. In addition to sales and rentals, we do repairs across about a 200-mile reach.

We have around us really, really good combo stores. One of the issues with being in California is that there are more music stores in California than any other state [See Profile of the American Music Dealer on page xx – Ed.]. There are so many little Podunk little stores that were opened by somebody who wanted to be in the music business and their dad gave them money to set up shop and they all bleed off a little bit of the available business. So there are no stores in California that are big like Brook Mayes or Paige’s Music or whatever just because there are so many little stores in every little town. So I compete with 40 or 50 stores in my territory. That being said, we have some great, great rock and roll stores around us. We have, of course, Guitar Center in San Francisco, but we’ve also got Haight-Ashbury Music who is a very good friend of mine and does a fabulous job, and Gelb Music in Redwood City and they also do a fabulous job. Why compete with that? What we do best, and always have, is band & orchestra, so we have a real, good entrenched business there.

Universal Audio

4585 Scotts Valley Drive

Scotts Valley, California

Greg Westall

What are some of the challenges involved in operating as an MI supplier in Scotts Valley?

The main challenge we really have is being in direct competition for talent with Silicon Valley companies, which is 40 minutes away – Google, Adobe, eBay, Netflix – particularly in the engineering field. But I think the people we ultimately end up with are a great fit, because they are passionate about music and audio, and have certain vibe. They’re not the type of people who find joy in the venture capital-funded grind, where they might be working on a nebulous piece of code that’s invisible to the user. Everyone who works at UA can point at an end product, such as our industry leading Apollo audio interface line, and know they helped create something that helps people make music.

How important is Universal Audio’s geographical location to the company’s overall brand?

The UA brand isn’t so much tied to a geographical location so much as an era. UA was founded over 50 years ago and it has always stood for a high level of craftsmanship and quality. With each product we release, we want to keep up to that standard – we want to stay true to our analog heritage as well as have an eye on the digital age. California is a great place for that. We’re part of the high-tech revolution here in the Bay Area, but we have deep roots in Los Angeles as well. Our founder, Bill Putnam Sr., designed some iconic recording rooms that are still active today – including Ocean Way Studios and EastWest Studios.

Really the reason we’re located in Scotts Valley is because it’s a beautiful place. It’s an inspiring place to live and work. We’re surrounded by miles of redwood forest, and we’re just a 10-minute drive from some of the best surfing in the world. Our CEO Bill Putnam Jr., lives in Santa Cruz, as do many of our employees. And the folks who live in Silicon Valley get a reverse commute – granted, it’s over a winding highway!

The whole Bay Area is consistently ranked as one of the most expensive metropolitan areas in the country, with prices continuing to go up sharply even more so in recent years. What has that meant for your business?

It’s made it harder to hire someone from outside of California for sure. People in other places in the country can sometimes get sticker shock when they see how much it costs to buy a house here. With the exception, perhaps, of New Yorkers – prices are comparable, plus you have fantastic weather out here. While prices are rising here in the Bay Area, this isn’t just a recent phenomenon. California’s always been expensive, especially the Bay Area and L.A. But there’s a reason for that… it’s worth it!

Can you describe the current facility and how long has Universal been located there?

We moved into this building three years ago from another building in Scotts Valley. We’re loving it. Between 2010 and 2015, we’ve grown 30-40 percent. This new place gives us room to grow and we’ve been able to make some great improvements. We’ve built a state-of-the-art recording studio, installed eco-friendly solar lighting, built out an espresso bar in our atrium, and carved out a nice employee lounge and some communal couch areas.

The facility in Scotts Valley is not only our headquarters where we have product management, engineering, sales, and marketing, but it also our manufacturing facility for our analog hardware. We still hand build many of our original UA designs – such as the 1176 and LA-2A compressors – one unit a time right here in California.

Kala Brand Music Co.

1105 Industrial Avenue

Petaluma, California

Michael Upton

What are some of the challenges that go along with running an MI supply business out of Petaluma?

Well we almost got flooded during some very heavy storms in December, so that was a challenge! We are right behind the last stretch of the Petaluma River, which connects into San Francisco Bay. Like many companies on the West Coast we had to deal with the recent port closures and delays, which have been going on for months. This was a challenge as getting containers in was, and has been, a very slow process. Things are getting back to somewhat normal now. We currently have facilities here in Petaluma and in Honolulu. We just opened a third location in Ashland, Virginia. This will allow us to receive product into the East Coast and serve our Midwest and East Coast customers more efficiently.

How important is your location – the Bay Area – to Kala’s brand? 

I was born and raised in the Bay Area as many people at Kala were.

It’s home and we love it here. We use Petaluma locations and landmarks in much of our branding and marketing. We are 30 miles north of San Francisco, so we are close to a lot of what a big city has to offer yet we are really in the country here. Petaluma is in Sonoma County, which produces some pretty good wine – oh, and ukulele, too.

How long have you been at the current facility and could you describe it?

We have been at our present location for three years now. We have about 28,000 square feet and we do a lot in that space. We have office, audio/video, warehouse, manufacturing, shipping and receiving all happening right together. We are pretty cozy.

What are some advantages to being based in the Bay Area?

It is beautiful here! And there are tons of things to explore and do. Obviously it is a very musical area with lots of musical history. Many musicians and bands call the Bay Area home. We have a very good climate to build musical instruments in. There are many luthiers in Northern and Central California because it has such stable weather. We love here and are proud to call Petaluma and the Bay Area home.

Stanroy Music Center

850 Fourth Street

Santa Rosa, California

Dustin Heald and Steve Shirrell

What makes the Bay Area different than any other market?

We are very fortunate here in Sonoma County to have a great density of musicians, schools, orchestras, jazz combos, rock bands, and marching bands. The amazing thing about this community is that in the age of the Internet, they support nine independent music stores in the county! We all have our specialties, and we refer customers to each other when needed. There’s a real sense of community in the North Bay.

Can you describe some of the challenges and advantages of operating a retail store in Santa Rosa?

The biggest advantage for us is that Stanroy Music Center has been a fixture in this community for 68 years. People who bring their kids in for lessons also remember taking lessons at Stanroy when they were kids. Even grandma remembers buying her first record at Stanroy when she was a teenager. Our deep roots here in Santa Rosa really make this a store for the whole family.

The challenges we face have a lot to do with schools who’ve lost their music programs, and of course the reality of online commerce. However, thanks to the hard work of dedicated teachers in the area, some of the schools are re-building programs which were lost over the last decade. As for the Internet, we stay relevant by offering comparable prices and a level of customer service and education that can’t be found online. It also seems like people are beginning to come around to realize the benefits of keeping your money in your community. Also, choosing an instrument is a very personal experience which should be done by putting your hands on instruments, not on a keyboard and mouse.

How have you managed to set yourself apart in this market?

Stanroy Music Center is home to a legendary brass and woodwind repair shop, which is unlike anything in the area. With four experienced master repairmen who have a reputation for being miracle workers, we even have members of the San Francisco Symphony making the hour drive north for their services.

Another thing that sets us apart is our focus on education. Every music store has a guy who gives guitar lessons in the back, but Stanroy has eleven clean, well-lit teaching studios and a well-respected roster of teachers offering private lessons for trumpet, tuba, trombone, clarinet, saxophone, bass guitar, upright bass, flute, ukulele, banjo, guitar, drums, piano, violin, viola, cello, recorder, and voice. Our instrument rental and service program also helps set us apart from many other stores.

Who is your typical customer?

Our tag line says it best: “Stanroy Music Center – serving Sonoma County Musicians and their families since 1947.” Our typical customer is the entire family unit: kids, parents, and grandparents. But with everything from Orange amplifiers to Breedlove guitars, we’ve got the serious players and the garage rockers covered. Still, this is not your average rock shop. We work hard to make sure this is a place where even non-musician relatives can come to pick up accessories for the family and not feel like an outsider.

Gallien-Krueger

2234 Industrial Drive

Stockton, California

Bob Gallien

What are some of the challenges of operating as an MI supplier in Stockton?

Stockton is removed from the music scene, however so is most of Northern California. In reality to gain benefits from being close to the music scene we would have to be in LA, New York, or some other major music market. San Francisco used to have a meaningful music scene, but it is not anything like it used to be.

Can you describe some of the cultural advantages?

Stockton offers a good supply of workers that are happy to have a good job with benefits. Real estate is reasonably priced so our workers can live in good conditions, many are able to own homes. Because of the cost advantages of being in Stockton we can manufacture all our products in the USA.

The whole Bay Area is consistently ranked amongst the most expensive metropolitan regions in the country, with prices rising even more so in recent years – how has the changing economic climate affected GK?

Three years ago GK manufactured the lower end products in China, we always manufactured the pro products in Stockton. Two years ago we moved all production to Stockton, which was a major cost issue, but the benefits of superior quality control far out weighed the additional costs. Stockton is fairly isolated from the Bay Area so costs here have remained moderate.

How long have you been at the current facility and can you describe it?

We built this facility in 2003 and have been here ever since. We occupy 33,000 feet, which includes all ware housing, manufacturing and offices. We also have a small facility in China for purchasing and vendor quality control. Like all electronic manufacturers most of the electronic parts come from China. We manufacture our own raw frame speakers, assemble all electronics and cabinets in this location. Two years ago we began utilizing robots for the repetitive operations, which enables our workers to be far more productive and keep quality very high. Currently we have three robots on the speaker assembly line and five auto mated test stations on the electronic line. An automated test station can make thousands of measurements per minute enabling us to test every design specification in great detail insuring that every unit is performing exactly as it is supposed to.

Ace Products Group

3920 Cypress Drive

Petaluma, California

Dave Andrus

What are some of the challenges – financial or otherwise – of being an MI supplier based in Petaluma?

I don’t think our challenges are necessarily unique to the region, and are probably not much different from any MI company doing what we do. You still have the same operational issues – finding and keeping good people, maintaining reliable supplier relationships, and controlling costs. At the same time we are also fortunate to have a vibrant musical culture here that provides a great pool of creative and talented people.

How important is Ace’s geographical location to your brand?

It’s probably more important to the company culture than to our brands, but there’s definitely a regional influence in how we market our brands and what we say about them. Reunion Blues was started in San Francisco in the 1970s so we also have deep roots here.

The whole Bay Area is consistently ranked as one of the most expensive metropolitan areas in the country. What has that meant for your business?

I think you have to adapt, just like any business. We’ve developed better systems, we continue to automate where we can, and we invest in our best people. Also, unlike the East Coast or Midwest, we’ve only had to close once in the last 10 years due to weather… so you could say there is a “sunshine dividend.”

Can you describe the current facility and how long have you been there?

We’ve been in Petaluma since 2004. Our office handles sales, marketing, product development, accounting, administration, and planning. But our products are largely manufactured overseas, and we have a 3PL in the Midwest to handle all incoming and outgoing shipments.

Colton Piano Gallery

2858 Stevens Creek Blvd.

San Jose, California

Dave Gatt

Can you describe some of the cultural advantages to operating an MI retail store in the Bay Area?

People in the Bay Area have a love for music and the arts, and are very supportive. This combined with the diversity of nationalities and cultures has proven to be beneficial.

Statistical Facts: Music is very mathematically oriented. Students that take up piano, develop the mathematical part of the mind better than those who don’t. They learn the discipline of working for the fruits of their efforts. They become more self-confident and more self-expressive. They do better in school, and they generally do better in life. The diversity and sophistication of our market seems to grasp the essence of these values.

The whole Bay Area is one of the most expensive metropolitan areas in the country, with prices continuing to go up sharply even more so in recent years. What has that meant for your business?

We are located in the heart of Silicon Valley, and across the street from the number one grossing mall in the United States. It’s the old saying: “Location-Location-Location.” People in the tech industry have really taken to the latest digital technology in today’s digital pianos, and seven out of 10 pianos going out the door, in my market, are digital, although 70 percent of the revenue is still created by acoustic piano sales. The features and educational advantages of digital pianos today are a wonderful place to start, but thankfully their are those who understand a felt hammer striking a metal string, being amplified through a piece of wood, has a soul not fully captured in a digital piano. For those people, only the real thing will suffice. With a market big on music and the arts, comes a level of sophistication that appreciates a truly great instrument.

Who is your typical customer?

No such thing as typical customer any more, in our market. It used to be the family unit, mom, dad, and 2.3 children, which still occupy the largest percentage, but there has been a large increase of college students looking for a digital piano to continue playing in their dorm, single professionals just starting out, who appreciating the culture of music, and wanting to acquire something of great quality, to the retired person wanting to purchase their last and best piano of their lifetime.

EMG Pickups

PO Box 4394

Santa Rosa, California

Rob Turner

EMG (Initially as “Dirtywork Studios” and then “Overland”) has been in Santa Rosa pretty much since day one. What’s unique to doing business based out of the Bay Area?

Actually EMG was started in Long Beach, California. I had come through Sonoma County playing in a band and decided this was a great spot to live. My brother ended up staying in the area, so I decided to partner with him, move the business from L.A. to Santa Rosa and enjoy the good life.

When I moved the business here, the community was very agriculturally driven, not really conducive to “manufacturing.” We actually relied on our original L.A. suppliers for the first couple of years, then found suppliers in the Northern California Area. We are North of San Francisco, but in the mid to late ‘70s Silicon Valley (South Bay) was a hotbed of innovation in electronics, so it didn’t take long to fall into the Northern California way of doing things. We are in one of the most expensive areas of the USA for doing business, but re-locating here in the mid ‘70s kind of put us here on the ground floor before major growth arrived.

I would say the thing that makes our area unique is its broad variety of industry. Hewlett Packard at one time had four divisions in the Santa Rosa area, we had the “Telecom Gulch” in Petaluma, and then there’s the whole agricultural side of things that is really flourishing: grapes, wine, cheese, all the artisan growers, brewers, and all the rest. If you like recreation, it’s right outside your door. Truly a great area to live.

How long has EMG been at the current location and can you describe the facilities?

We’ve been in our current location since the beginning of 2005. It’s a 30,000 sq. ft. building. Our previous building was purchased by VooDoo Labs, the pedal effects maker. We are basically a factory with offices. We currently employ about 85 people in total with 65 on the factory floor. We build everything here, and are totally vertically integrated.

If we need a plastic part molded, we make the mold and produce the part. We do our own surface mount assembly, we even build our own coil winders and controllers, the only thing we don’t do is etch PC Boards. The office part is your typical sales & marketing, accounting, documentation, R & D design, et cetera.

How important is your location to the overall identity of EMG’s brand?

What’s most important to me is not where we do business, but where I (we) want to live. People move to our area for the lifestyle not because they can make a million overnight.

In some markets, a product that “represents” California is a plus. We are where the boundaries are pushed, pulled, challenged, questioned and, all the rest. It keeps things dynamic. I think those attributes are reflected in the products that we make. When you live in paradise, what else are you going to do?

What’s on the horizon for the second half of 2015?

The sales and marketing team they have plenty of new products completed and more that I am developing, so there’s much to talk about. For them the challenge is bringing the right product to market and getting it moving in the various sales channels. For me, on the engineering side, there’s development of more products that put the power in the hands of players by giving them tools to improve their tone.

Cap: Famed guitarist Lulo Reinhardt with Lilliana Urosevic

Saga Musical Instruments

137 Utah Avenue

South San Francisco, California

Liliana Urosevic

What are some of the challenges that come with being an MI supplier in San Francisco?

There are financial challenges, as we are located in one of the most expensive real estate areas in the world. However, our close proximity to the Oakland port and Northern California’s mild climate help ease some of our high expenses.

There are many other MI businesses located in California that face the same challenges we do. One such challenge is shipping products from the West Coast across the country. Therefore, our shipping department is constantly looking for the most economical and efficient ways to get our products into the hands of our customers.

How important is your location to Saga’s overall brand and image?

 San Francisco is perfectly representative of Saga’s image. We are a multicultural company located near famously international city on the coast of the Pacific Ocean. Saga was one of the first companies in the U.S. to cross that ocean in search of musical instruments in the Far East. Even our company logo is a ship!

Further exemplifying Saga’s San Francisco roots is our “Golden Gate” line of musical instrument products. We are proud to be a thoroughly American company with Kentucky, Diamond Head, Boulder, Blueridge, Flinthill, and Bristol lines, named after locations all across the U.S.

Can you describe the current facility and how long you’ve been there?

Saga Musical Instruments is conveniently located in South San Francisco, close to the San Francisco airport, major freeways, and the busy Oakland port. We have been in the area for many years and moved to our current address in 2002. It is a 40,000 square-foot facility with adjoining office and warehouse spaces. Saga encompasses marketing, graphics, product development, purchasing, accounting, and four sales departments, as well as a photo station and fully equipped instrument set up area. Our warehouse uses state-of-the-art, computerized processes in which new orders are turned around in less than one hour.

Cap: Mickie Zekley

Lark in the Morning

P.O. Box 1176

Mendocino, California

Mickie Zekley

What are some of the challenges to operating in Mendocino?

We are doing strictly mail order at this point. We made that move because retail simply wasn’t working. The death of the music industry is spelled “M-A-P.” As soon as the manufacturers and suppliers started making those adjustments, it made it unprofitable to have a retail music store. We couldn’t even buy some of the stuff for the prices that some of the suppliers were selling the same product for online. We’re not discounters, we sell online, we sell unusual things.

How important is your geographic location to your overall brand identity?

Well, as things stand now, since we’re a mail order and online operation, we could be located anywhere in the world.

Given that, have you considered moving Lark in the Morning to a less pricey area?

For us, we own our warehouse and we own our home, we don’t owe anybody a penny, so it doesn’t affect us in the least bit. We’re not paying rent, property taxes are fine because we’ve had our property a long time. However, if I was a renter and I had to operate a store in San Francisco or the San Francisco area right now? We’d be done.