Re-Imaginings at Two MI Icons Point Towards a Changing Future

The two most iconic brands in MI, Fender and Gibson, are in the process of remaking themselves.

These aren’t cosmetic makeovers – the companies are making moves that will fundamentally alter what they are. They will also point towards the future of MI retail.

Servco Pacific, longtime majority investor in Fender, along with more recent equity partner TPG Growth, has been nudging the company into a more diverse digital future for some time. In 2011 they unveiled an automotive sound system in conjunction with Volkswagen, built by Panasonic but with a Fender twist that configures the eight-speaker system so as to put a virtual stage on the dashboard and create a “concert in a car” experience. That live-sound concept may get taken further by Ethan Kaplan, who recently came on board as Fender’s chief digital products officer. Kaplan, who had previously run Live Nation Labs, the hoped-for-but-failed digital innovation hub for the world’s largest concert promoter, also worked for Warner Music Group and Gracenote, a music-database company. As per an interview with Kaplan in TechCrunch, his immediate mandate seems to be to build a bridge from the company’s existing products into an online, software-based community. A digital tuning app under construction may also track a user’s genre preferences and intuit some future preferences and make song and product recommendations.

Kaplan’s presence suggests not only further leveraging of the live-music trend that has remade the music industry, with concert and merch revenues struggling to replace the huge drop-off in recorded music sales, but other digital ventures down paths far from Stratocaster-land.

As disruptive, and as digital in its own way, was Fender’s decision late last year to begin selling directly to musicians through its website, a move that has considerably riled its foundational base of brick-and-mortar retailers, who were already looking over their shoulders at e-commerce sites such as Amazon and eBay. But in doing so, it looks like Fender is listening more attentively to retail analysts, who saw it as a strategy to connect more deeply and directly with its customers.

Gibson’s Buying Spree

Gibson has been getting deeper into pro audio and lifestyle verticals. In 2011 it bought the Stanton Group’s portfolio of KRK Systems, Cerwin-Vega and Stanton DJ; since then, its acquired Onkyo, TEAC, Tascam and Cakewalk, and most recently the audio, video, multimedia and accessories businesses of Philips. The TEAC investment (they actually own a controlling interest in what is, in Japan, a publicly traded company) adds more depth on the professional side than meets the eye: its range of products includes data recorders, medical devices, video image recorders, disc publishing, in-flight entertainment systems on airlines, and a storage device business.

The company entered the crowded consumer headphone market at the last CES, but with a twist: an emphasis on fitness and an endorsement deal with speedster Usain Bolt. An official name change last year, from Gibson Guitars to Gibson Brands, is confirmation of a strategic shift to a consumer orientation as well as an assertive perceptual signal of change. As the local newspaper in Nashville, Gibson’s HQ city, expressed it last August, the company “has emerged as a consumer electronics manufacturer first and foremost, and a guitar producer second.” A credit opinion by Moody’s Investors Service indicates that 75 percent of the company’s consolidated revenue is now derived from consumer electronics.

The guitars that have been both companies’ avatars – Gibson’s Les Paul and Fender’s Stratocaster and Telecaster – will continue to be at the center of their respective heraldries, but over time they may become as much a trope as a core product. Guitar sales overall, while trending slightly up in recent years, have trended downward over 30 percent in the last decade, as per NAMM data, as musical tastes change and computers continue to become the platforms for more music creation and production. Both companies are doing what any intelligent corporate entity would do: diversifying across market verticals and product categories. No need to try to imagine a world without Fender or Gibson guitars, because plenty of people will always want them. But probably not enough of them to sustain either company’s growth going forward.