When the Big Three automakers were begging for money on Capital Hill a few weeks back, the biggest threats they had going for them were that not only could 3,000,000 jobs be lost if they closed their doors but upwards of 6,000,000 other jobs could be lost at companies who supply them. The Big Three are not going to go Chapter 7 anytime soon with an understanding President coming to office in mere days and bailout money coming their way, Ford being the exception, and they are likely to be OK. Audio and video companies might have a more difficult time of it with the passing of big-box retailer Circuit City as well as the Chapter 7 death of mid-level retailer Tweeter.
Simply put – there are not as many places to sell audio video products as there were just one year ago.
MartinLogan is trying to rebuild their dealer distribution domestically after Tweeter failed catastrophically. Specialty dealers are going out of business too, so going back to the well with them isn’t as easy as one might think. Anthony Gallo Acoustics and Energy Speakers suffered greatly when 77 stores operated by regional chain The Good Guys went out of business. Energy’s parent company was sold to Klipsch at a greatly reduced value. Like many other speaker companies, Gallo rallied international sales to make up for losing significant domestic sales.
How will Bose and Polk fare with their biggest retail partner lying dead cold in a meat locker at the retail morgue? Bose is so diversified into markets that they have smartly built up resistance to a loss as large as Circuit going Chapter 7. Polk is well managed as part of Directed, a public company, but will be challenged going forward to find new places to sell a large volume of speakers to a client who has historically paid well. The video companies like Sony, Vizio and Panasonic will likely the pain even if the mainstream, mass-market appetite for their HDTVs can be somewhat satisfied by the warehouse stores who are able to reach the average Circuit customer. In the end, the video guys will recover from this disaster sooner.