AV Companies Didn’t See a Post-COVID Correction Coming

A Post-Covid World AV Companies Didn't Plan For, Now What?

The day that I sold HomeTheaterReview.com and AudiophileReview.com in late 2019, this looked like a serendipitous move only a few months into the new year. The few months after I turned over my AV publications to new owners were an odd time, as these M&A-type deals often are, but what complicated the situation was the advent of what turned out to be the rise of a global respiratory pandemic that would turn the world on its head. 

As a family, we were planning to do a long Spring Break trip to Tuscany (a lifelong dream is to learn to make pasta with real Italian grandmas) in early April of 2020. That got canceled pretty enthusiastically, as Italy was the only place in the world that was suffering from COVID as badly as Wuhan, China.

What nobody saw coming was how COVID was going to change the world, in many ways, more than 9/11 did. For starters, we all  began working from home. Zoom wasn’t a globally-understood concept at the time, but it sure became one quickly. Ordering in groceries had never been so relevant. 5:00 PM on the 405 freeway on a Friday night provided enough room to install a few pickleball courts across the lanes, with no risk of anybody getting run over. Things had gotten very weird in this fine world of ours, and all of this change came upon us very quickly. The rebirth of vinyl was giving some new life to the audiophile hobby, but nothing like what the home confinement sentence that was COVID did to sales. Like a Peloton bike or a standing desk, people were buying things for their homes that helped transition them and their lives into this new reality. Upgrading one’s audio system was also very much on that list on the personal side of the ledger. What I could see from my balcony were four or five dozen packed container ships floating in the Pacific Ocean off of the coast of Malibu and Santa Monica, just waiting to get into the Los Angeles and Long Beach Harbors. These incoming vessels were often filled with the goods that were now replacing our services within the worldwide economy. Money had been spent on sports, traveling and concerts went into items like UHD TVs, stereo preamps, phono stages, and speakers. AV dealers struggled to find inventory, thanks to supply chain issues that had never been seen before in the modern economy. Consumers were being told that if they saw something that they wanted and it was in inventory, buy it now, and figure out how to pay for it later. This caused all sorts of runs on often nonsensical products, as well as shortages of all kinds of audio-video gear. Semiconductors were in short supply. Demand was through the roof. Parts suppliers were going bankrupt, or simply running out of parts. Labor was the trickiest part of the COVID world. How do you assemble four times the number of DACs when everybody is wearing a mask and justifiably scared of catching a novel virus that ultimately killed over 1,000,000 Americans?

Making Market Adjustments

This wasn’t an easy time, but eventually, the AV industry adjusted, and the supply of products got back to normal at some point early in 2022. Sales were up in ways that nobody ever saw. People were reliving their past with vinyl. OG original audiophiles were upgrading their systems using other budgets (like travel, sports or concerts), thus were able to make upgrades that normally might have been out of reach. Streamers were selling like hotcakes, as people were binge-watching shows, with many also getting government money that had never flowed through to them before. 

The predictable issue the audio-video business had ignored was what actually happens when COVID ends. Let’s be clear, COVID isn’t over as a virus. I finally caught the malady at the 2023 CEDIA Expo in Denver last September, and it kicked my ass for eight straight days. A year ago, my friend Garry (a former president of the Audio Engineering Society, record engineer, and a driving force behind SACD at the format’s launch), died of complications from COVID. The idea that it is “the sniffles” is simply anti-fact. COVID has morphed and mutated enough that it is easier to catch, but not nearly as deadly as at the start of the pandemic. People are traveling again in huge numbers. The Tuesday before Thanksgiving is normally the busiest travel day of the year and, in 2023, the new record number of travelers was up 13 percent above last year’s record volume. Hotel prices today are many times higher than in 2019, and not showing signs of backing off any time soon. In 2023, Taylor Swift’s Eras Tour showed our collective willingness to spend more money on a concert ticket than ever before. NHL, NBA, and NFL stadiums are full of in-person crowds, which people from every corner of the world are thrilled about. The problem is that many in the specialty audio-video industry didn’t see this inevitable correction coming.

What I Learned from Getting a Fortune 500 Job During COVID

When I sold my most recent group of publications, I had no idea what I wanted to do with my career, thus a pending midlife crisis seemingly was inevitable. I always wanted to take my enthusiasm for all things luxury, not just audio and home theater, into other media platforms. I was excited to interview to be the President and Publisher of a very print-oriented Los Angeles Magazine, but that didn’t end up being the gig that I hoped it would, and I bailed. I interviewed with another luxury lifestyle publication, owned by people who we know from the terrestrial radio business, but they were also highly focused on print over online publishing, and I am more of an online publishing guy. Ultimately, a very dear friend of mine presented me with an opportunity to work for Thomson Reuters’ legal marketing business, FindLaw. My job was going to be to revive an abused Beverly Hills territory and make it profitable again, and that I did. They offered crap for salary, but if you met your sales numbers (and two of my friends who worked there did), you could make high six-figure to nearly seven-figure yearly compensation. 

The lessons learned at TR were many and valuable. The most important lesson learned was that I missed the specialty AV business, and when my non-compete was up, I wanted back into my old world. Another was the importance of having a pipeline flush with sales opportunities. TR wanted you out prospecting and were willing to micromanage their sales team (they were never bad with me, thank God), with quotas for creating opportunities in Salesforce.com and much more. One attitude that TR had then and still likely has to this day, which is shared in the AV world, is the idea that if you can “do it once – you can do it again.” That is total bullshit, by the way. My old AV publication was better in every way than my first one that I sold to Internet Brands in 2008, other than in the most important category – top-line revenue. In my best year at HomeTheaterReview.com, I brought in about half as much revenue as I did in 2007, the year before I sold AVRev.com. HTR was better at everything, be it content, SEO, or backend. It was superior, but there just wasn’t the business to be done. Companies like Runco, Mitsubishi, and Pioneer (people still hang on to Kuro plasmas to this day, oddly), as well as the Blu-ray Association or the HD-DVD Consortium, spent $15,000 per month back then, and that revenue simply couldn’t be replaced. Trust me, I’ve tried. So did Gene. We both failed to relive 2007, no matter how hard we tried. I should have put Gene on a performance improvement plan… that would have fixed him (or not).

Speaking of revenue that can’t be replaced, today the audio-video business can’t seem to find how to get 65-plus-year-old enthusiasts to spend as if they are locked up in their homes again. Much like my “special time in history” in 2007, this is likely one for AV manufacturers, and many of them have taken a Thomson Reuters outlook to things, meaning they say, “If you could sell it once, you can sell it again.” No, you can’t, and it isn’t even cute to suggest that it is possible. The whole premise of my new publication is to find new, younger, and more diverse audiophiles. This is no simple task, nor is it fast, but it is needed so that there is a base of young people who are closer to the start of their audiophile journey than to the end of it. 

How Have the Audio-Video Companies Reacted?

Some AV companies have fired upwards of 20 percent of their staff. Others have slashed their marketing budgets. Prices have been raised to react to an inflationary market in some cases and, in others, prices have been slashed to (it is hoped) liquidate inventory that was never around during COVID’s heyday. Black Friday 2023 saw some very deeply discounted products from respected AV companies in ways that the higher-end audio companies never had to deal with before.

What is the Right Reaction in a New Economic Reality for the World of Specialty AV?

We haven’t had a technical recession in the U.S. economy in over 15 years. With a strong economy, a killer job market, and much lower inflation in 2023 than in 2022, we are in more of a “correction” than a traditional recession. In a down economy, there are always market opportunities. Audiophile companies need to keep a keen eye on their older-male demographics and evolve into younger and more diverse people. The home theater market needs to keep pushing its low-margin “white goods” products that deliver wonderful performance to the masses. The idea of being able to live off of a subscription model was very relevant during COVID, but today people have become fatigued with the subscription model that results in the old death-by-1000-cuts on our monthly credit card statement.

Marketing is the key to specialty audio-video. Old-timers think that they can build a better mousetrap and that consumers will beat a path to their door in the hopes of being allowed to buy one. Or at least that’s what every 70-year-old audiophile company-owner/engineer would like to believe. The reality is more based in the ultra-successful career of speaker guru Sandy Gross. He co-founded Polk Audio and Definitive Technology, as well as the recently sold GoldenEar speakers. His speakers always had performance and value, but he never failed to present them in a way that drove traffic to his retailers. 

In the end, the idea that things will ever be the same as they were before COVID or, in this case, during COVID, is simply impossible. The way we, as a global market, consume goods and services changed during the pandemic in ways that we could have never seen coming. What we have today is a return to a normal supply chain, but the global marketplace is never going to be the same. With that in mind, finding new, qualified customers for specialty AV should be the highest priority, but unfortunately, what many in corporate America do is slash advertising in tough times. Now is the time to smartly double down, and take that market share that is being handed out like a Reese’s Peanut Butter Cup on a cold Halloween evening. For those who embrace the massive changes, not just in our economy but in our society, there are big gains to be had.

What do you think the solution is? Please share your thoughts in the related forum thread below.