Strata-gee Editor’s Pick: The Top Stories of 2017

With this being the traditional end-of-year holiday period, there is an irresistible pull for editors to review their top stories reported on in the year that is now fading fast from view. I am certainly not immune from that pull. And while every year seems remarkable, I can say with certainty that 2017 appears to earn that lofty designation as well.

So here then is our list of 2017’s most important stories…

Normally, this is a purely mathematical exercise where I would go to Strata-gee’s stats package and pull out the listing showing a ranking of all the stories reported in the past year based on page views. This year, however, I’ m going to go with an “Editor’s Pick” version as so many of the stories were reported over multiple posts for an even greater overall impact that just the number of views for any one of them.

So while this ranking does not necessarily equate to the mathematical ranking of page views, I share with you what the top themes and stories were over the collective reports over the year. After selecting the top stories with this new process in mind, I checked back with the standard page view rankings and found that they correlate quite closely.

I can tell you that while the numbers tend to offer an apparent if artificial prioritization to the perceived impact of these stories, for the most part all of these stories were quite powerful and had a major impact on either a major segment, or all of the industry.

So here then is my take on the top stories of 2017…

1. The  Closing of Classé: I can honestly say I didn’t see this coming – the closing of Classé is indisputably the biggest story of the year and I am still not entirely sure why this is the case. Perhaps it is due to the fact that Strata-gee has been covering the continued struggles of the specialty audio business for years now. Or perhaps it’s lofty ranking is a result of the popularity of its parent company, Bowers & Wilkins (B&W). In any event, the power of this story blows my mind. One of the Classé posts is the most read story ever reported on in the history of Strata-gee – ever!Coming in the wake of our reporting on major changes taking place at Bowers & Wilkins (see this story below), in July we caught wind of, and reported that Classé may be in the process of being closed. As big as the B&W story was, the Classé saga, went on to even loftier heights – perhaps because it was a story of fatal consequences, while B&W remains in business.

   

   In any event, the company did a poor job of communicating to the market their intentions and this failure inflamed the rumor mill. It also created some new, knowing sources for Strata-gee. A letter to dealers seemed to raise more questions than it answered, and ultimately, in September we were able to confirm the closing of Classé. Then, perhaps in response to our coverage, company representatives told dealers that Classé was still in business. This tactic forced us to reconfirm the news that – while B&W may be sitting on substantial amounts of existing Classé inventory they’d like to sell off – the company was, in fact, closed.

   Everything appeared as though it was “Case Closed” until we learned that Sound United had recently emerged to make a bid for the company. We’ll see how that plays out and it could still fall apart, leaving Classé closed. But it is interesting to think there may be a new lease on life for Classé!

2. The Acquisition of Bowers & Wilkins (B&W): Although ultimately eclipsed by all of the interest surrounding its Classé division, in fact this whole story began back in May 2016 when it was announced that B&W was acquired by EVA Automation – a relatively unknown entity in our channel – buying a beloved and respected audio brand. EVA, a company founded by a relative Silicon Valley celebrity, Gideon Yu, was a company with a lot of promise, but not a lot of track record…and no experience in the specialty audio business.
   
   
   

   Ultimately, new products were promised that, the company said, would be “reimagining the audio/video experience by making products that will change how people interact and think about the home.” There was a lot of exciting talk about what kind of dramatic, innovative products that the company would be developing – however, nearly eighteen months later, the company has yet to launch their line of revolutionary new products.

   In the meantime, in July of 2017, the company dismissed B&W’s well-known and popular U.S. president, Doug Henderson. This set dealers nerves on edge, as Henderson’s steady hand on the tiller was the reason many of them hung in there with the new owners, giving them time to show what they can do with the brand. Before dealers could relax, just one month later, further shocking news emerged that multiple regional sales managers had quit the company at the same time.

   Since that time, the news shifted towards all of the drama surrounding Classé.

3. Gibson Brands Debt Struggles: Gibson Guitar, eventually Gibson Brands, was thrust onto our radar back in 2012, when we reported that they had purchased Onkyo USA and made a significant investment in Osaka, Japan-based Onkyo Corporation. We didn’t know it then, but quickly learned that the company was on a buying binge in a bid to expand their business beyond their core musical instrument business…a business that was in decline.Gibson, and its famous (some would say infamous) CEO Henry Juszkiewicz, went on to buy Teac/TASCAM, and WOOX, Philips’ accessory division…all of which joined a mind-boggling array of other brands owned and controlled by Gibson. These purchases were financed by Gibson taking on huge amounts of debt – banking on future growth to drive revenues to higher levels to pay off that debt. Unfortunately, industry growth has been modest at best, if at all. This means that all that debt is adding to overhead with high levels of debt service eating up meager profits.

   

   This began a downward spiral, with Moody’s Investors Services downgrading Gibson’s credit status to junk status…once in 2016, and another downgrade in our August report of this year. In March of this year, we reported that Gibson had successfully refinanced what we called a “significant” tranche of their debt. However, this addressed $185 million of their debt, but did not touch upon a bigger problem, their $500+ million debt coming due in 2018. This is why Moody’s offered yet a further downgrade of their credit position, leading us to ask if Gibson was heading towards default.

   In July, we reported, based on regulatory filings in Japan, that in the midst of their credit troubles, Gibson had taken majority ownership of Onkyo Corporation. Then in November, again based on regulatory filings, we learned that Gibson was no longer a majority owner of Onkyo Corporation. November kicked off a month where Gibson began an aggressive campaign to sell off assets to raise money, while also shutting down Cakewalk to cut overhead.

   The company put warehouses and factories up for sale, ultimately successfully selling off some of them. Still, by our count, Gibson is still way off of the half a billion dollars needed to retire their debt.

4. Sonos, Inc. v. D&M Holdings, et al: Although we’ve been diligently reporting on this case for three full years, recently in 2017, things really heated up as the parties approached the first of what we eventually learned will be three trials. This case is extremely important, as it tests the power that Sonos has to define the wireless multiroom music system market, and the cost to other brands who wish to play in it.
   
   
   

   Although we had written something like six stories on this case in 2017, in early December, we sounded the alarm that the trial was rapidly approaching and the outcome, after all this time, was still uncertain. Sure enough, the trial on the first three of a total of eight Sonos patents came to pass, with Sonos earning a resounding win.

   Then, in a bit of a surprise, we learn that Sonos intends to seek an injunction halting sales of all infringing HEOS by Denon branded products. Unaffected by Sonos’ bluster, Denon, for their part, told us the looked forward to their day in court where they would demonstrate that Sonos had, in fact, infringed on several Denon patents. It made for some fascinating discussion in our report on the current state of the situation in the wake of Sonos’ initial win.

5. CEDIA: We reported on several matters surrounding the Custom Electronic Design & Installation Association (CEDIA) some 20+ times in 2017. All of this coverage was well read according to our stats, as the organization was clearly undergoing some major changes, including the sale of their show to Emerald Expositions, the commitment to build a new headquarters building, the creation of a new strategic plan (by a U.K. based consultant), and more.The stories that hit the biggest included our exclusive on CEDIA layoffs and the new headquarters (which had not yet been disclosed to members)…as well as a post on our interview with CEDIA’s powerful chairman (he controls both the board of directors AND the executive committee), who corrected a previous Strata-gee story – but in a way that many readers did not appear to appreciate. Ultimately, Chairman Dennis Erskine refused to agree to any more Strata-gee interviews, demanding that all questions be submitted in advance in writing to be answered in writing.

   

   You might want to check out all of our 2017 CEDIA coverage. I believe we were able to uncover some really pertinent and, at times, troubling details about the management of the organization you may find interesting. I also think 2018 may bring further fascinating news about the organization, so stay tuned!

6. Significant Passings: In 2017, I wrote about two significant industry passings – sales rep Steve Zaboji and audio executive Stephen DeFuria. Both of these deaths were shocking and unexpected with Steve Zaboji dying abruptly in a plane crash, and Stephen DeFuria passing away after a long but mostly undisclosed illness. Each of them also were impactful on the industry in dramatically unique ways and if you didn’t see Strata-gee’s coverage, I recommend you take a moment and read about the lives of these two well-respected and loved individuals.I don’t enjoy writing these – they are emotionally wrenching to write – but I feel a strong sense of purpose in bringing their stories to light for a broader audience than they might normally touch. While some outlets cover the Akio Moritas or Ray Dolbys…we try to shine the light on those whom, while they may be lesser known to the industry overall, are equally important (if not more so) in their corners of the industry.

There are, of course, many, many more significant stories, including our coverage of Thiel, coverage on the continued decline of the major Japanese brands such as Sharp and Toshiba, coverage of Emotiva, LG, Apple, Samsung, RMR programs, Russound, the Internet of Things, Control4, Crestron, Savant, Lenbrook, Bluesound, and on and on…

It seems that 2017 was a very interesting year! What surprises does 2018 hold?