Bad News for the Big G

[László]

Thanks fellas... I get bankruptcy in general, was more curious about this section:

According to the Gibson statement, "The Company has reached a 'Restructuring Support Agreement' with holders of more than 69.0% in principal amount of its 8.875% Senior Secured Notes due 2018, and its principal shareholders, that clears the pathway for the continued financing and operations of the musical instruments business as well as a change of control in favor of those noteholders."

This agreement with existing noteholders includes an additional $135 million in debtor-in-possession financing to allow the company to continue operations through this transitional period.

Chapter 11 Reorganization is a different type of bankruptcy than liquidation and dissolution. However, creditors and the company itself can change the nature of the bankruptcy from Chapter 11 to a liquidation under certain circumstances. So all is not necessarily dependent on management’s proposed filing.

A bankruptcy court has the power to assist in restructuring debt, to void certain contracts, to make management changes, to determine compensation of officers and employees, etc. The law gives the court considerable flexibility, but remember that the creditors have a lot to say about what happens.

Debtor-in-possession simply means that the debtor is in possession of the assets of the company during the Chapter 11 proceedings. If it becomes a liquidation, then all bets are off.

 

[matonanjin]

I've seen several interviews, mostly talking about gear, that makes him sound like a close minded jerk.

Edit: a perfect example:
https://reverb.com/news/joe-bonamassa-calls-pedalheads-lazy-in-new-interview

I've seen Joe B in at least two different live interviews (on the blues Cruise). Not TV but I was actually there in the room.

He is the furthest thing from a closed minded jerk possible. Is he opinionated? Yes. But I think he has earned the right to be and he always states when something is his opinion and not fact.

 

[Brad737]

Carvin sold direct, and they didn't capitalize in the internet age.

Guys....this isn't management. It's an industry thing. Gibson will only be the first domino to fall. Eventually the entire American made guitar market will crumble, unless changes are made to the business model. As peoples expendable income becomes less and less, they turn away from American made to Asian and Mexican made. I have preached on this forum that the only way for American made guitars to survive will be for all the brands to go direct to consumer. Don't be so naive to think that PRS doesn't have their own debt obligations and cash flow issues like everyone else. I've heard the stories from former employees. If PRS went direct to consumer and was able to slash guitar prices by 40%, it would be huge. I'd be so bold to say that the first big company that has the stones to make such a big change will be the one that survives for the long term. In this internet age, dealers aren't required. I'd bet most of us have bought plenty of guitars without having touched them first. Imagine if you could go to the PRS website, click on a market place link, and just get a tiled view of all the guitars ready for new homes? Or, being able to do a custom order using drop down menus?

 

[drdoom8793]

I happen to agree with every single word he said. Being honest is not being a d-bag. It's not like anyone needs to earn a right to have an opinion, but Joe has certainly earned it based on what he's done. There was nothing offensive in what he said.

Agree to disagree. I think anybody that tries to de-legitamize any other forms of art just because they don't agree with it is a tool.

 

[dcm_guitar]

Guys....this isn't management. It's an industry thing. Gibson will only be the first domino to fall. Eventually the entire American made guitar market will crumble, unless changes are made to the business model. As peoples expendable income becomes less and less, they turn away from American made to Asian and Mexican made. I have preached on this forum that the only way for American made guitars to survive will be for all the brands to go direct to consumer. Don't be so naive to think that PRS doesn't have their own debt obligations and cash flow issues like everyone else. I've heard the stories from former employees. If PRS went direct to consumer and was able to slash guitar prices by 40%, it would be huge. I'd be so bold to say that the first big company that has the stones to make such a big change will be the one that survives for the long term. In this internet age, dealers aren't required. I'd bet most of us have bought plenty of guitars without having touched them first. Imagine if you could go to the PRS website, click on a market place link, and just get a tiled view of all the guitars ready for new homes? Or, being able to do a custom order using drop down menus?

Fender already sells direct. You can go to the Fender website, pick a standard instrument or choose the mod shop and order to your heart's content. This is still not quite what you're describing because:

1. The Fender direct order pricing is still the same as retail. There is no discount for ordering direct. Fender did this to keep their dealer network from rebelling. A lot of Fender dealers were upset with Fender's decision to go direct, so this was a sort of "middle ground".
2. When you click on checkout after picking out your guitar you have an option to get it shipped to you or to buy local.

I don't know if the brick and mortar music store will ever completely go away. There's a still a very tactile component to buying a guitar. Even with instruments as consistent as those produced by PRS, there are still BIG variances in the sound and feel of each individual instrument. Some guitars are "magic" when you pick them up, and that's a part of the buying process that any semi-dedicated player is going to require.

I agree that the business model will have to change. Music retailers simply can't stay just a store to buy equipment. This is why Guitar Center is struggling.

Boutique guitar shops will survive assuming they can keep costs down, and they become a boutique "music experience" shop. They're not going to do huge volumes of guitars, but they will be a place for players to commune, they will be able to answer questions about amp selection and signal chain. They'll have "test drive" days and open jams. Something that should REALLY be embraced are clinics on how to get professional sounding recordings with your computer, your guitar and your amp. Music tastes are ever evolving and the smart retailers will embrace the change. Guitar playing may be shrinking, but music creation is expanding rapidly.

In the end, music retailers that simply provide selection and price are going to fail. No matter how big your store is, you can't compete with the price and selection of the entire internet. Music retailers that provide knowledge and experience and community and opportunity to learn AND have a reasonable selection of gear that you can try before you buy will succeed. The smart retailers will make it possible for you to order the guitar from their store. Why do this versus direct ship? Because the shop will make sure it is set up to your preferences, they have a relationship with the manufacturer and you can be assured that any transit issues or damage will be taken care of without any arguments. You'll get a chance to show off your nice, new instrument to an appreciative audience.

Yes, current music product retailers will change or die. I'm not convinced music product retailers are going to go extinct.

 

[Elliot]

I think the PRS model will be adopted by more than a few companies in the future. Some big companies mass produce to try to meet demand immediately. They’re successful when the demand is great. But they really take a hit when the demand is lower than predicted. Companies like Apple experience it (not that Apple isn’t wildly successful), Gibson of course, and Ford found that out with cars (not trucks or SUVs).

PRS takes the opposite approach and doesn’t ramp up until they have the orders. When the quality is good, people are willing to make this compromise. It almost adds to the experience knowing the guitar/item is being made just for you.

Elon musk is using the same model with Tesla. Although Tesla hasn’t turned a profit yet, the interest is high and they might have turned a profit by now if they weren’t trying to do so many other things at once.

I’m not saying the model is better, but I think it has the potential to be very good across a few different product types.

 

[CVS]

Fender already sells direct.
I don't know if the brick and mortar music store will ever completely go away. There's a still a very tactile component to buying a guitar. Even with instruments as consistent as those produced by PRS, there are still BIG variances in the sound and feel of each individual instrument. Some guitars are "magic" when you pick them up, and that's a part of the buying process that any semi-dedicated player is going to require.

I agree that the business model will have to change. Music retailers simply can't stay just a store to buy equipment. This is why Guitar Center is struggling.

Boutique guitar shops will survive assuming they can keep costs down, and they become a boutique "music experience" shop. They're not going to do huge volumes of guitars, but they will be a place for players to commune, they will be able to answer questions about amp selection and signal chain. They'll have "test drive" days and open jams. Something that should REALLY be embraced are clinics on how to get professional sounding recordings with your computer, your guitar and your amp. Music tastes are ever evolving and the smart retailers will embrace the change. Guitar playing may be shrinking, but music creation is expanding rapidly.

In the end, music retailers that simply provide selection and price are going to fail. No matter how big your store is, you can't compete with the price and selection of the entire internet. Music retailers that provide knowledge and experience and community and opportunity to learn AND have a reasonable selection of gear that you can try before you buy will succeed. The smart retailers will make it possible for you to order the guitar from their store. Why do this versus direct ship? Because the shop will make sure it is set up to your preferences, they have a relationship with the manufacturer and you can be assured that any transit issues or damage will be taken care of without any arguments. You'll get a chance to show off your nice, new instrument to an appreciative audience.

Yes, current music product retailers will change or die. I'm not convinced music product retailers are going to go extinct.

Guitar shops will survive, because of "service". If they don't provide it both with respect to selling you new gear, teaching you how to play it, and repairing gear, they will be "toast". The internet is just a click away. The only guitars that I have ever purchased without playing it first are (you guessed it) PRS. All other brands , must play before buying..........too much variability

 

[Deleted member 5962]

I've seen several interviews, mostly talking about gear, that makes him sound like a close minded jerk.

Edit: a perfect example:
https://reverb.com/news/joe-bonamassa-calls-pedalheads-lazy-in-new-interview

I happen to agree with every single word he said. Being honest is not being a d-bag. It's not like anyone needs to earn a right to have an opinion, but Joe has certainly earned it based on what he's done. There was nothing offensive in what he said.

Yeah, I agree with Drew. I don't think he's being a d-bag there as much as calling out something he doesn't like. When I first read this article, I didn't even know what he was talking about. Then I heard some examples and I can see what he's talking about. But I can also see some people being offended by his remarks. He's talking about guys who hit a note or few notes or a chord, and then start turning dials on pedals to manipulate that. Remember the response when I said that someone who couldn't play any instrument wasn't a musician? I do. These guys are hitting SOME notes on a guitar. But several of the examples I was given of the music he's talking about, I didn't hear much "guitar playing." I heard "effects manipulation. " He's not talking about a guy like most of us, who uses pedals as part of their tone, but PLAY the guitar. He's talking about guys who use pedals instead of playing. But I'm sure that will offend someone so... I'm not stating any of my own opinions, just clarifying what he said so it isn't taken out of context.

 

[jxe]

‘the edge’?

 

[Herr Squid]

I think the PRS model will be adopted by more than a few companies in the future. Some big companies mass produce to try to meet demand immediately. They’re successful when the demand is great. But they really take a hit when the demand is lower than predicted. Companies like Apple experience it (not that Apple isn’t wildly successful), Gibson of course, and Ford found that out with cars (not trucks or SUVs).

PRS takes the opposite approach and doesn’t ramp up until they have the orders. When the quality is good, people are willing to make this compromise. It almost adds to the experience knowing the guitar/item is being made just for you.

Elon musk is using the same model with Tesla. Although Tesla hasn’t turned a profit yet, the interest is high and they might have turned a profit by now if they weren’t trying to do so many other things at once.

I’m not saying the model is better, but I think it has the potential to be very good across a few different product types.

Yeah, I think a reasonable amount of wait adds anticipation and some air of exclusivity to the product. IOW, "they're building it for me" is a good feeling as long as the wait isn't too long. Paul has said that if a price point gets too high, then sales just fall off the cliff, and I think the same applies to wait times. People do wait for Apple products, sometimes or months after theyr'e announced. The Fractal Audio Axe-FX III is another product that has a great reputation and isn't cheap, but delivers tremendous value. People are currently waiting 4-5 months to get one and it's (mostly) working out.

 

[Tonart]

OMG I’ve been sleeping in a cave. I crawl out, look at the carnage, take a yawn, and I’m crawling back in....

I’m getting old...