The old adage in Napa Valley is that, if you want to become a millionaire in the wine business, start with $20,000,000. This is becoming truth in the specialty audio/video business, as well. This business was created and supported by Baby Boomers back in the late 1960s and early 1970s. To this day, many of the same engineers, designers, executives, and retailers run the business who ran it a generation ago. To add to that, there's a group of people who have made the audiophile business their retirement project--whether it's making exotic tube amps in their garage or handcrafting speakers in a local woodworking shop. You only have to make one trip to Rocky Mountain Audio Fest, T.H.E. Show in Newport, TAVES, or AXPONA to see countless examples of these new, small audiophile companies.
Before you bet your 401K on an audiophile dream (and I really have had people call me and ask for advice on making exactly such a bet), please do your due diligence. The concept of "build a better mousetrap and people will beat a path to your door" might have worked in the 1970s for the likes of Mark Levinson, Dan D'Agostino, and David Wilson, but today's marketplace is completely different. Yes, Dan D'Agostino was able to leave Krell and succeed on his own with Dan D'Agostino Master Audio Systems, but he's trading on a reputation that's built on more than 30 years of experience, as well as international connections who have customers looking for the next fantastic D'Agostino design. Newer designers don't have as smooth a road to travel on in today's saturated market. Back in the 1970s, one could make "the most expensive _____ (preamp, amp, turntable, speakers, etc.)," and there was room for such products in the audiophile market. Today, there is too much competition at the tippy top from established brands.
That's not to say there isn't hope to become a millionaire in the AV business today, because there is. William Wang, the founder of VIZIO, will likely become a billionaire when his company goes public. Companies like Snap AV (which distributes Episode speakers, Sunbright TVs, etc.) are killing it by providing unique products to the custom-installation market. There are audiophile success stories, too. Former regional retailer Gary Yacoubian took a small, high-performance subwoofer company called SVS and made it into one of today's call brands for speakers and especially subwoofers.
You don't have to be pulling in $10,000,000-plus to be a viewed as a success in the AV business. Utah-based Tekton Design is cranking out super-high-efficiency, low-cost speakers painted in custom colors and selling them as fast as they can make them. Another Utah-based company, Red Dragon Audio, makes affordable, high-power digital amps and electronics that are in short supply, thanks to high consumer demand. There are plenty of other examples: Orb Audio, Aperion Audio, Noble Fidelity, Power Sound Audio, Elac, and many others. (Feel free to post your favorite success stories in the Comment section below.)
One common thread between all of the companies I just named is that they offer the consumer extraordinary value. While there are modern examples of companies that have success going up-market--such as Constellation Audio, D'Agostino, and Magico--our list above builds consumer demand by providing consumers twice the performance for half the price. This, more than building a better mousetrap, is how you build a customer base in today's market.
The trickiest part of starting a new AV business today is creating a working distribution model. Twenty-five years ago, there were local, regional, and national AV stores in every market in North America. If you created the consumer demand, these dealers would hunt you down, and you and your new company were off to the races. Today, there are so many brands making very similar products. As a retailer, once you carry the A-list brand in a given product niche, how many additional brands do you need? Some, but not too many. This is why so many new companies start off by selling Internet-direct. Not only can they invest their profit margins in client acquisition (advertising, PR, trade shows, consumer shows, and beyond), but there is no reason why they can't also sell to dealers.
Another place to look for early success is international distribution. Overseas accounts pay for their orders in advance, and the orders tend to be large. With over 7,000,000,000 people on the planet, you only need to generate interest from a tiny fraction of one percent to be a resounding success.
Let's be clear: it isn't easy to make it in the specialty AV business. Technology is moving fast, and nearly everything is digital. Licensing new technologies, chipsets, and programming can be very costly. Distribution models are changing and becoming more democratic, but at the same time they don't allow for the traditional stereo-store demos that were once considered a ritual that was inseparable from the purchasing process.
As with most industries, the barrier to enter the specialty AV business is high, but it's not impossible to make it. If you've got the next new idea, perhaps it's time to get into the game. Maybe it will make you the next audio/video millionaire.
• Evolve or Die: The Changing Face of the CE Retail Landscape at HomeTheaterReview.com.
• How HAUS Is Helping Dealers to Make a Smarter Home at HomeTheaterReview.com.
• Trying to Beat Beats in the Headphone Category Remains a Challenge at HomeTheaterReview.com.
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