Will China Save the Piano?

It’s been a heady month for the piano business. Hedge fund billionaire John Paulson won a bidding war and took home one of our industry’s most iconic brands, Steinway & Sons, for a $40-per-share bid, twice the price of a share this past December (see story page 6). It sent us in the trades into high gear, and the mainstream media attention was unusual for our humble industry indeed.

The question arose: What do these deep-pocket, smart investors, who haven’t previously run a musical instrument company, see in us?  For some, there’s a one-word answer: China.

Yes, says the conventional wisdom, the acoustic piano market elsewhere is tapped out, but there’s China! Its rising cities, its growing middle class… China will be the new frontier.

But some developments this past year that might give some pause. In the August 15 New York Times, there was a feature on how the banks’ response to widespread default on loans has tightened money so severely that in once-booming Shenmu, a northwestern community, luxury retailers who were recently recording as much as $500,000 a day in sales are now shuttered. It’s not an isolated incident, and interest rates for the small- and medium-sized business as high as 125 percent are being felt there and elsewhere in the country.

Three days later, the Los Angeles Times reported another phenomenon: China’s slowing economy has led to a growing number of college graduates who can’t find work. They reported that the unemployment rate for graduates is 16 percent compared to four percent for blue-collar workers. When those grads do take a job, it’s often for lower wages than what the factory positions – which require no education – are offering.

The question might be, “Will that golden goose of China’s middle class really appear?”

China will always be worth pursuing, of course, but it does not seem to be the basket one should put all of one’s eggs – or pianos – in. It’ll be part of the answer but maybe not the answer. On the other hand, I dare anyone who follows the piano market here in the U.S. to read the feature on what is working in acoustic piano sales [page 24] and not be encouraged, even inspired. There are good things happening for smart manufacturers and even smarter dealers right here in the States.

Meanwhile, we all look forward to Steinway’s new chapter and continued success. With Paulson’s vast resources and emotional connection to the instrument (he owns three), we are confident he’ll do well with one of our most treasured brands.