Breaking Up Is Hard To Do

5/23/2014 5:20:00 PM
By Clive Young
It’s been a time of changes in pro audio—one filled with new beginnings, like Harman buying AMX, and endings, such as Todd-Soundelux filing for Chapter 11 and reportedly having its Oscars repossessed (apparently awards given to companies go back to the Academy if the companies close down—who knew?). But the most public change has been the acrimonious falling out between major MI/pro audio retailer Guitar Center and major MI/pro audio manufacturer Music Group, which owns the Behringer, Bugera, Midas, Turbosound and Klark-Teknik brands. Business relationships end all the time; whether for good reasons or bad, it happens and usually you don’t hear about it. That didn’t happen this time.
 
On May 19, a lengthy comment attributed to an unnamed Guitar Center executive appeared on various MI industry news sites, including at our UK sister magazine, UK Pro (Guitar Center did not respond to our query as to the veracity of the quote and no official press statement appears to have been released by GC). The quote stated that the retailer would no longer carry Music Group brands due to the manufacturer’s “…revision to unreasonable business terms late last year and a continuous history of attempting to force unfavorable changes into agreements.”

The comment goes on, eventually adding, “It’s not the way we like to work with people and it’s not productive. They made some questionable choices that put us into a position to develop a contingency plan. As we re-evaluated that plan several weeks ago, we found that it would allow us to build better relationships with other vendor partners in the category. When Plan B starts to make this much business sense, it became clear we didn’t need to tolerate this anymore. We’re focused on where we can succeed in partnership with our new vendors and we’re excited about the future.”

Two days later, Music Group’s founder and CEO, Uli Behringer, stepped into the ring, releasing an official press release of his own that kicked off with, “We were surprised by a recent public statement issued by Guitar Center. Over the last year, due to GC’s highly publicized financial situation, we were forced to evaluate their credit worthiness. As a result of their credit rating, it was determined that they were a high risk and we were forced to put them on business hold. We certainly respect GC’s decision to discontinue business with us and we thank them for our excellent 20 year relationship.”

The release continues and closes by addressing availability concerns, noting, “Our US distributor Starin is in the process of rolling out a new free-freight program as well as extended payment terms, making it even easier to get access to our high demand products. I want to personally thank all our US dealers for their tremendous support and loyalty.”

How this dissolution will affect each company’s bottom line remains to be seen and will probably never really be known. As with the end of any 20-year relationship, there may well be reasons for a little venting, but ultimately, everyone involved is now faced with moving on. At least both companies can do so with recent successes under their belts: GC, now under ownership of equity firms Ares Management and Bain Capital, continues to open new stores and is said to have found its financial feet again. Meanwhile, Music Group has seen its x32 console sell more than 150,000 units since its debut nearly two years ago, and will finish building its $100 million, 3 million-square-foot manufacturing campus in China later this year.

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