Gibson Guitar embraces China, Latin markets

Mon Apr 9, 2007 12:07am EDT

LOS ANGELES (Billboard) - Selling music may be tough these days, but there's no shortage of people who want to make music. The latest figures from the National Assn. of Music Merchandisers, the trade group for the international music products industry, show sales of instruments and gear hit a record value of nearly $8 billion in 2005.

But to Gibson Guitar chairman/CEO Henry Juszkiewicz, instrument sales are about more than just cranking out Les Pauls. Since he and fellow Harvard Business School alumni David Berryman (Gibson's president) and Gary Zebrowski took over the struggling company in 1986, Gibson has expanded aggressively. The company now owns Baldwin, Wurlitzer, Slingerland, Epiphone and several other music brands. It has also invested in research and development, particularly in the digital jukebox and digital guitar. Gibson has beefed up artist relations as well, and in 2005 bought the naming rights to Los Angeles' former Universal Amphitheatre.

In addition to increasing the reach of the 113-year-old brand, Gibson has been involved in many charitable efforts. Music Rising, a fund Juszkiewicz co-founded with U2's the Edge and producer Bob Ezrin, has helped more than 2,400 musicians (and more than 20,000 students and parishioners) replace instruments destroyed in the wake of Hurricanes Katrina and Rita.

Gibson opened its newest showroom in Miami last month. Juszkiewicz -- who supported himself in college by playing a Gibson at weddings -- spoke to Billboard shortly after a trip to China.

WHAT TOOK YOU TO CHINA?

It is simply a question of time when China emerges as the world's largest consumer market. It has a population roughly four to five times the size of the United States, which is the world's current largest consumer market. It is going from underdeveloped to a developing -- and with time, will be a developed -- economy. As people (in China) translate into the middle class, the numbers speak for themselves.

HOW HAS GIBSON ADAPTED TO THE INFLUX OF CHEAP INSTRUMENTS

FROM ASIA?

All Gibson brand guitars are made in the U.S. At the same time, we are expanding our factories overseas and the relationships we've had overseas. The ability for a young player to get an instrument that's really good for not a lot of money has improved. When I was young, the low-end guitars were really not that great. You really had to have a Gibson to get a great guitar. Today, consumers in all product categories, including guitars, can get a much better instrument for a very affordable price. This means a young player who is struggling to get their chops together now has a great instrument to do that, and it makes it so much easier to get involved in guitar, both from a standpoint of price and a standpoint of quality.

Looking at the low end, we have several brands aimed at mass-merchandising channels. We have a specific brand at Target, Circuit City; it's very low-cost. It meets the requirements of the merchant as well as being a superb value for typically a young player.

GIBSON SPONSORS MANY HIGH-PROFILE LATIN MUSIC ARTISTS AND

EVENTS, INCLUDING PROVIDING INSTRUMENTS FOR THE LATIN GRAMMY

AWARDS. WHY IS IT GOING TO SUCH LENGTHS TO CONNECT WITH THIS

AUDIENCE?

In the short term, the Latin market is a much bigger deal. The number of albums being sold by Latin artists is mind-boggling. Additionally, the Latin market is driven by a quality concern. (It's) not as affluent as some other markets might be, but the Latin consumer is very, very driven by getting the best. It means more to them, and consequently, they've become a very good customer of Gibson brand product. We don't have statistics on who specifically buys a product in many cases, but we are getting anecdotal information that it's a substantial part of our purchases.

WHAT ELSE ARE YOU DOING TO CORNER THOSE CONSUMERS?

We've put an office in Miami that is an entertainment relations office aimed primarily at the Latin market. We've been doing a lot of work in San Antonio, Austin, Los Angeles, New York. And we've been hiring staff that's dedicated to the Latin market in terms of promotions and sponsorships.

WHAT ARE THE SHOWROOMS USED FOR?

The showroom is as an embassy to the entertainment and media communities. They're not commercial ventures. We don't sell products through them, we don't have sales agents. It's about relationships and supporting people in the communities. That might be artists or charities that we're very supportive of, (or) it might be community events.

ARE YOUR BRANDING EFFORTS GENERATING INCOME?

We've been financially successful for a while. We're actually gaining market share. I would say the reason is that we've been very aggressive in marketing and branding. So is the fact that we are building really great instruments. You can promote all you want, but if you have a bad product at the end of the day, the consumer is going to throw up.

HOW ARE YOUR DIGITAL PRODUCTS DEVELOPING?

When you're investing in high-risk, high-potential growth activity, you win some and you lose some. One of the areas we are extremely interested in is the whole area of consumer electronics. A lot of the technology we've been developing is specifically aimed at that marketplace. The digital jukebox is evidence of that. In June, we bought the (manufacturer) of a commercial jukebox product, Deutsche Wurlitzer. I'm a little frustrated because we had hoped to release (the digital jukebox) in time for Christmas sales. We continue to have development issues in that product line.

YOUR DIGITAL GUITAR HAS FINALLY SHIPPED TO RETAIL. HOW ARE

YOU INTRODUCING THIS NEW PRODUCT TO CONSUMERS?

One of the things we're doing at the store level is putting up demos. Because it's such a radically new product, we have to be able to demonstrate it and have the equipment available for people to fully check out. There is an enormous amount of technology that hasn't been tapped for the player and the creator. The guitar hasn't really changed much since the '50s, so it's kind of like progress has been on hold.

WHAT IS THE PLACE OF TRADITIONAL INSTRUMENTS WHEN MUSIC CAN

BE MADE ON A COMPUTER?

It all starts with the input device. It will be some time before the creation process is anything but human and anything but inspired (by) people. It starts with the tools they have to create musically relevant content, whether it be voice or guitar or whatever. So our new guitar, which starts with a digital signal -- it's not just the fact that it's digital -- is a much better guitar as a result of that technology. It gives you a lot more to work with in terms of making music.

Reuters/Billboard

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