2018 Music Products Market Analysis & Sales Performance Trends

2. An Up-Tempo 2018 Sales Performance • The music products market continues to benefit from the positive performance of the general economy, as total 2018 sales increased 2.4% to $7.6 billion, the 10th year of increase since the Great Recession. • Today’s market is divided into two main product categories: traditional and technology-based. Of particular significance in the 2018 sales data is a 5.5% increase in fretted instruments, which is the industry’s largest product segment. • The strength of fretted instruments surprised many attendees at the January 2019 National Association of Music Merchants (NAMM) trade show because of a perceived threat from the availability of more used instruments.

3. First Half of 2019 Sales Jumpstarts Another Good Year • Considering how poorly some retail sectors performed during Q4 2018, music products suppliers and retailers should be happy with its 4.0% increase, or a total of $2.91 billion. • Q1 2019 retail sales were almost as good as Q4 2018, with a 3.9% increase to a total of $1.5 billion, with the West region (+4.1) and the East region (+4.0%) exceeding the national increase. • Q2 2019 continued the sales growth of the previous quarters, but at a more modest 2.8%, or $1.38 billion, with much of the increase attributed to fretted instruments.

4. It’s Good To Be the Leader of the Band • Although not quite as much as 2017, the top 200 music products retailers, as published by Music Trades, enjoyed a 5.2% sales increase for 2018, to a total of $5.9 billion. • Guitar Center (#1) and Sweetwater (#2) were responsible for more than 50% of the total 2018 increase of $239 million for the top 200 retailers, with Guitar Center accounting for 22%, or $65 million, and Sweetwater, 36.5%, or $107 million. • The significant increase in sales among the top 200 was evident in the 5.9% increase in sales per employee (from $271,047 to $287,169) and the 2.6% increase in sales per location (from $5.40 million to $5.54 million).

5. Top 100 Suppliers’ Downturn Blamed on Gibson’s Division Failure • Music Trades’ annual report of the top 100 industry suppliers revealed the $1.0 billion liquidation of Gibson’s consumer electronics division accounted for the entire decrease in the 100 suppliers’ total 2018 sales, from 2017’s $10.1 billion to $9.2 billion. • The top 10 suppliers were relatively unchanged, but others had an exceptional year: (#16) Taylor Guitar, +17% to $120.2 million; (#34) Hoshino (electric guitars), +10% to $66.7 million; and (#41), Paul Reed Smith (guitars), +16% to $58.5 million. • A very positive trend for suppliers at the January 2019 NAMM event was the spike in old-fashioned floor orders, which were more than many suppliers had written at the event during more than a decade.

6. The Market Would Suffer Significantly from Delayed Tariffs • The US government’s proposed 25% tariff on “List 4” products, which include almost all music products, was among those postponed until December 2019, to reduce any effect the tariff might have on the holiday shopping season. • Much like the US apparel industry (which is huge compared to music products), almost 40% of US imports of music products originate in China, or $3 billion of the $7.5 billion in 2018 retail sales. A 25% tariff could prove catastrophic for music products. • Music product manufacturers are increasing their direct sales to consumers. The Catch-22 is retailers think such a practice is detrimental to them, but manufacturers complain retailers won’t stock less-popular items, which manufacturers can easily sell online.

7. Other Market Sectors Are Members of the Chorus • Attendees of the March 2019 National Association of School Music Dealers shared an almost universal positive outlook, as total 2018 school music sales increased 3.5% to $763.8 million, and continued to increase during Q1 and Q2 2019. • Many of the dealers attributed the growth to exposing children to more “serious” than “popular” music and parents’ strong attitude that the band or orchestra experience is an excellent source of intellectual and social development. • The printed music sub-sector experienced decreasing sales during 2018 and the first half of 2019, and digital alternatives are generally to blame; however, school music programs and self-teaching, especially for keyboards, continue to drive sales.

8. Advertising Strategies • With an industry-wide sales increase during the first half of 2019, music products retailers can build on this momentum with aggressive Q4 2019 advertising campaigns. One can concentrate on traditional instruments and another on technology-based products. • Depending on the actual tariff schedule on Chinese imports, music products retailers may find it beneficial to emphasize how little (or how much) they may affect prices. If the tariffs do cause price increases, then retailers must find ways to offset those increases. • A local music products retailer might consider a pop-up store at a shopping mall during the holiday season with a few musicians playing seasonal music and/or an opportunity for shoppers to try an instrument with some brief coaching.

9. New Media Strategies • Influencer marketing could be a useful strategy for music products stores. Video uploads to social media from a few local musicians, music teachers and others explaining a new instrument or accessory and how they use it can distinguish a store from its competitors. • Help stores discover the Hit Like a Girl International Drum Contest and use it as a theme/topic for multiple social media posts. Cross-promote it in the store not only to generate interest in percussion among girls/women, but also to create a new market. • Use social media to promote music as an art form for personal expression, much like enrolling in a local drawing or painting class. Ask customers/private citizens to share their joy of learning/playing music for themselves with short video uploads to social media.