How Would You Start a New AV Company?

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One thing the specialty AV business is missing these days is a meaningful level of new growth and new companies. There are a few success stories out there that come to mind, but they are few and far between compared with the number of private-equity-owned, bean-counter-run "investment vehicles" that masquerade as audio/video companies. You know the ones I am talking about - the ones that fire the face of their company, ditch their engineering departments, whack their PR firms, and yank all of their marketing in hopes that their pump-and-dump schemes lead to never-before-seen riches for a handful of people who've never had ties to the specialty audio/video business. Meanwhile, the consumer suffers.

The main problem in the specialty audio/video business is the distribution channel. In 2006 a flat HDTV bought at, say, Ultimate Electronics, Tweeter, or even Circuit City was a luxury-goods item costing thousands of dollars. Today Ultimate, Circuit, and Tweeter are dead, along with countless regional chains and standalone brick-and-mortar stores, as consumers have opted (or been forced) into buying their HDTVs, wireless audio, and most other AV products from big-box or warehouse stores. Gone is the commissioned salesman who studied the business and could help move the well-intentioned consumer from a mass-market receiver into something like an NAD integrated amplifier. As historically important as the NAD receiver was to the growth of specialty AV (I started my long journey with one when I was 14, as did most of my friends and many of my writers), the company is now guilty (like a host of other traditional AV companies) of focusing its marketing one dimensionally on the dealer only. Yes, dealers have influence, but nothing trumps consumer demand. Today's consumer assumes you should build great products, but making them fall in love with those products to the point where they skip Costco, Target, and Amazon to go to the specialty AV store is the trick...and it takes more than dealer trainings alone.

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This brings me to my question for you this week: If you were starting a new specialty AV business - say, a high-performance audio company - how would you go about it? Before you write a check for $1,000,000 (or much more) to jump into the pool to compete with companies like Bose, Sonos, Definitive Technology, GoldenEar, Paradigm, PSB, and so many others, what would you do? What specific products would you make? Who would you sell them to? What channels would you sell them through - and in what order of priority? Where are the new niches? We are seeing growth in the world of headphones and mobile high-performance audio. Is the speaker business too tough these days? (Many think it is.) Perhaps electronics or some other area offers better growth opportunity.

If it were me, I would start with making products that can solve a unique problem. Think: a soundbar with the dynamics of killer floorstanding speakers. Think: a video display with better black levels than the recently deceased plasma HDTVs. Think: a DAC that can convert legacy music files to HD levels. Then I would sell the product direct, worldwide. Consumers demand that they get more performance for half the price. Look to the likes of Oppo Digital, Orb Audio, Wyred 4 Sound, Outlaw Audio, and others for examples of modern specialty AV success stories, but there just aren't enough of them in a world where your 55-inch LED TV is sold alongside a 10-pound box of Cheerios under the sodium lights at your local warehouse store.

Going deeper into the business model, I would hire the best specialty AV PR firm, and I would partner with all meaningful specialty AV publications (not just the ones owned by me). Get the word out in a big way -- all day, every day -- to reach the people who care the most. Then, like SVS (another recent, key success story from the world of subwoofers and loudspeakers), start looking at other venues to sell through. SVS, powered by some of the best marketing people behind Beats Audio, knows the one elixir that solves all problems: consumer demand. They have it, and most others don't. Of course specialty brick-and-mortar dealers are calling SVS, and the company is opening up their products to said dealers - and rightfully so. Oppo Digital did the same thing years ago. You, the consumer, can buy an Oppo product via Amazon, via the company's own website, or via Simply Home Entertainment as a billionaire custom-install client. They've moved to Bose-like levels of distribution. Orb Audio has Manhattan- and Los Angeles-based retailers yet can also be bought on Amazon. Wyred 4 Sound sells through brick-and-mortar dealers but also goes Internet-direct. Others are looking at creative new distribution platforms, as this is key to future success. It's a brave new world.

What products get you to the specialty AV store today? What products could be made that inspire you to visit your local retailer? If you had investment money, would you get into the specialty AV business? For a generation between the rise of VHS over Betamax until the real-estate market crash in 2008, the specialty AV business knew nothing but good times. Are there niches left to "exploit" for smart, motivated entrepreneurs? If you were one of them, what would you make? What services would you sell and how? Comment below. We'd love to hear from you.

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