Gibson Guitars Files for Chapter 11 Bankruptcy Protection

On Tuesday 1st of May 2018, Gibson Guitars filed for Chapter 11 Bankruptcy Protection. Those in the business knew it was inevitable - but what does it mean for the electric guitar market? Eastwood Guitars CEO Michael Robinson reflects on the news.

Gibson Guitars

After more than 100 years in the business, Nashville-based Gibson has finally filed for Chapter 11 bankruptcy protection - struggling with $500m (£367m) of debt.

Lenders will now take control of Gibson Guitars, which was founded in 1902, and aim to focus the company on musical instruments once again.

Chief executive Henry Juszkiewicz, said the Chapter 11 filing would assure the company's "long-term stability and financial health".

Does the news mean something is wrong not just with Gibson, but with the market for electric guitars in general - after all, Gibson is not the only key player in this market.

Michael Robinson, President/CEO of Eastwood Guitars, INC, doesn't think so and has issued the following statement:

"In light of today's news, I thought it time to revisit the commotion from June 2017 stirred up by a report in The Washington Post entitled Death of the Electric Guitar. At that time, many people in the industry were concerned about the future of electric guitars, as were many employees and fellow guitar players. 

Below is a response I wrote at the time to address the unrest, with the hope of putting a few things into perspective. Today’s news is simply the natural progression of things. All is fine in this industry and also for us passionate guitar players. Strum onward and upward!"

Death of The Electric Guitar? I Think Not.

(July 29, 2017 By Mike Robinson)

The Parrots band

A recent article in The Washington Post titled, “Why my guitar gently weeps. The slow, secret death of the six-string electric. And why you should care,” has stirred up a lot of emotions, discussion, and lively debate. You might want to read this first.

In the article, George Gruhn said: “What we need is guitar heroes.” In my opinion, that has nothing to do with it. 

The basic premise of the article circled around the opening argument:

‘In the past decade, electric guitar sales have plummeted, from about 1.5 million sold annually to just over 1 million. The two biggest companies, Gibson and Fender, are in debt, and a third, PRS Guitars, had to cut staff and expand production of cheaper guitars. In April, Moody’s downgraded Guitar Center, the largest chain retailer, as it faces $1.6 billion in debt.” 

Later in the article, the author notes: 

“Over the past three years, Gibson’s annual revenue has fallen from $2.1 billion to $1.7 billion, according to data gathered by Music Trades magazine. The company’s 2014 purchase of Philips’s audio division for $135 million led to debt — how much, the company won’t say — and a Moody’s downgrading last year. Fender, which had to abandon a public offering in 2012, has fallen from $675 million in revenue to $545 million. It has cut its debt in recent years, but it remains at $100 million.”

OK. Let’s talk about the elephant in the room. It’s Guitar Centers $1.6 billion in debt. It’s not about needing new guitar heroes; it’s about Greed vs. Passion. 

The question should be “What went wrong?” not “Who is going to save the electric guitar?”

To answer that question, let’s go back more than two decades and take a look at the industry. In fact, we need to go back to the years before Guitar Center.

With people now speculating that the electric guitar is going the way of the piano, you might find it ironic that Guitar Center was originally named Organ Center. No kidding. It started in 1959 and was renamed to Guitar Center in 1971.

It’s safe to say that the electric guitar industry was growing at a healthy rate from the early 1960s with new brands, new shops and new players entering every year. Even through the 70s, it continued to grow worldwide – but especially in USA – at a manageable rate, with the keyword being “manageable.”

Fast-forward to the early 90s when Guitar Center started a non-stop parade of acquisitions and grand openings – similar to many other Big Box retailers in other industries - until it gradually wiped out most of the independent guitar dealers, making it almost impossible for most small music stores to survive. 

Guitar Center

Pic: Guitar Center - perhaps not the best business model for the guitar market?

Here is an excerpt from the Guitar Center website:

“During the '90s, Guitar Center underwent monumental growth period opening nearly 70 stores throughout the decade, earning the company the moniker, "The largest musical instrument retailer in the world." During this fast-paced growth period, store grand openings took place at a rate of one or two stores a month, surpassing all other musical instrument retailers.”

In parallel to this activity, the Internet was born and along with it came monster online retailer Musicians Friend - which in 1999 was acquired by Guitar Center - further nailing the coffin closed for the traditional North American retailers, who were in the early stages of understanding how to utilize the Internet to their advantage. 

Before we knew it, a behemoth marketing machine kicked into gear and started offering everybody with an inkling to own a guitar the means to own one, or multiple. This meant aggressive discounts and credit terms extended to everyone and anyone who walked into their stores. It was just another death punch to the undercapitalized independent stores who could not compete on these levels.

To the big dogs like Fender and Gibson, this was a dream come true. The industry quickly grew from around 600,000 to over 1.5M guitars being sold every year. Meanwhile, Fender and Gibson continued to pile on to their massive debts to keep up with demand and expand their businesses. 

And so here we are today. Mainstream news is writing the eulogy for the electric guitar. 

But is this the death of the electric guitar? Of course not. 

Jack White live

Pic: Guitarists such as Jack White continue to inspire people to pick up the instrument

For argument's sake, let’s go back and look at what might have happened if Guitar Center never existed.

Imagine it’s 1987 and the industry is selling 400,000 guitars a year.  It continues to grow at a manageable year over year rate until today - 30 years later – where we would expect to see the industry selling 800,000 guitars a year. 

That’s still 200,000 per year below where we are now. Greed created the unmanageable heights of 1.5 million guitars a year in 2007, which has now fallen to 1 million a year in 2017.

The guitar is not dead - Greed's role in this industry is dead. Passion has been there all along.

Guitars - like most musical instruments - are about one simple thing. Passion. The passion for creating. The passion for learning. The passion for inspiring others. It's not about price, which is what big-box retailing brings us. It’s never been about price. It’s always been about passion. 

Black Lips live

Pic: The Black Lips - one of the bands proving that guitar is alive and well - at Rock'n'Roll gigs across the globe...

As the old adage goes, “you’ve made your bed, now lie in it.” Nobody here is weeping except the debt-burdened behemoths. Meanwhile, the rest of the industry is busy doing what it’s always done best - inspiring millions of people every day to passionately create. 

As the President of an electric guitar manufacturer founded in 2002, we’ve continued to grow year over year without the need or desire to be involved with big-box retailers like Guitar Center and Musicians Friend. We work directly with customers and specialty retailers that share our passion for electric guitars. We’ve developed innovative new production models and streamlined our distribution chain putting all our staff directly in contact with the customers, where we can simply and efficiently listen to their needs. They like it that way and as a result, we continue to grow. 

So from where I sit, the electric guitar is certainly not dead, it’s passionately thriving. 

Mike Robinson

Get Rocking

 


38 comments

  • Carolyn Donovan

    First my apologies to Michael who has been a friend to a customer and helped me to get three of their fine Inst. when I’m disabled temporarily hopefully. I some how saw my comments posted twice and being a hot headed ol hippie gal, who’s being a pro musician since 1972 and loved it so much also became a certified string Inst. tech which was the primary reason for me unprofessionally attacking a write named Mike who has the right to say exactly what he wants. What I should have said was that Michael should be applauded for doing what he’s doing with his co. Quality Inst. at reasonable prices …who else does that. And here is a comment about Guitar Center. I was offered a job at four different ones around the country…I refused because even tho I was a certified tech and had many yrs.musical Inst. sales experience, I was invited to a meeting in which the owners of GC said their intention was to run every Mom and Pop store out of biz, as well as the big stores stores like themselves and wouldn’t stop until they owned every music store in the United States. Then if you think that was greed, they sold out and the greed practically quadrupled because of the Internet….ok so they overstepped and started having problems selling to unsuspecting parents who had heard the names Gibson and Fender and thought if they bought those brands even thomthey knew nothing about the junk they were getting for $119 until someone was nice to fill them in and say these aren’t the American brands you’ve heard about all your life, but overseas junkers that people get paid a few cents a day to build. Not saying there aren’t some great overseas Inst. I even own some and I’m very picky …my instruments are my income after all. I helped to save four stores from bankruptcy but whenever I would move on because house gigs were up and my mgr. sent me elsewhere all four of those stores went out of biz, why because a couple of cos. Insisted that the music stores I worked at buy their yearly supply of Inst. and instead of buying what we knew we could sell in the size town or city we were in made us purchase the same amount as Guitar Center. We didn’t want to spend half of what we were getting on beginner junk from overseas and the other half on ridiculously high price Inst. that people in the towns we were in couldn’t afford. We knew our market and the cos. we bought from did not. So many Mom And Pop size stores gone for that very reason. Much more I could say going into a lot of detail continuing on Michaels article but I won’t bore you with that. Suffice it to say Eastwood will be around for a very long time and these other cos. should take note or they will be following in Gibson’s footsteps. Again my apologies to the gentleman who would never own an Eastwood. Your loss.

  • ted

    You nailed it, Mr. Robinson. My first guitar was a ‘67 SG that I bought with $175 of paper route money when I was 13 or 14 years old in the mid 1970s; hands down the best Gibson I ever played; but I’ve watched their quality fade over the years. The last Gibson I bought online about 10 years ago -a J-185 that looked so good on screen- arrived with a bridge saddle so low that it was gonna need a neck reset before I’d even broken it in! That’s inexcusable in a $200 guitar, much less a $2000+ guitar. Gibson years ago took its cue from Harley Davidson and other great American brands taken over by greedy CEOs who sought to “expand the brand” into a ‘lifestyle products company’ with logo branded furniture, theme parks, ‘special edition’ trucks and other BS favored by wanna-be’s with more money than chops (or fashion taste). For years now, the best acoustic Gibson guitars have been made by Collings, Santa Cruz, Huss & Dalton and other small builders. A Les Paul Standard that sold for $375 in 1958 would sell for $3255 today, adjusted for inflation. You could get a great handmade electric guitar for that today —one build custom to your specifications, built with ‘passion’, as you say.

  • Carolyn Donovan

    I totally disagree with Mike who doesn’t deserve an Eastwood anyway and agree with Michael Robinson. As Fenders first female certified guitar tech and did my research because I was also a traveling pro musician who worked and actually saved four stores from Bankruptcy I would advise you to do your research before mouthing off . I never attack other people who write in but his comments are ridiculous. I said Gibson wouldn’t make it another 3 yrs. 3 yrs ago because I got customers bringing me brand new gold top Les Pauls that were crap . Gibson has not been making quality guitars for several yrs. and the reason is not having the money because they way overcharged to make people who heard the names Fender and Gibson buy their Inst., then be disappointed because the quality wasn’t there. They sho7ld have stuck to making quality Inst. and not invest in other failing cos., and Fender look out it will happen to you if you don’t do the same. Fender bought out several cos. And quality took a nose dive. I loved Gibby and anything Fender until both cos. did the same thing and was a disappointed warranty tech for Gibson and Fender…Fenders quality stayed high longer even tho they got greedy as well but it no longer is helping to be stuck with these cos. I’m sick about Gibson but you couldn’t give me a new Les Paul, quality non existent and I’ll have any Eastwood any day …own three as I write this.

  • Mark Gardiner

    I have 11 guitars and a wish-list for at least half a dozen more. Some Fenders some Gibson and an Eastwood or two.

    What is actually frightening me more is the ridiculous CITES as the rules of actual proof of ownership and the ability to move your instruments around globally without fear of confiscation (I already have had an import seized and destroyed for a NON Brand model)…

  • Denis Moreau

    Mike Robinson,

    Thanks for the good analysis on “The Death of the Electric Guitar”! Good to read a factual and enlightening article that speaks to the opposite, i.e., passion for music, guitars and unique guitar models. I have a sibling who keeps talking about “the death of Gibson, the death of the guitar and the death of Baby boomers”, that great rock & roll guitar generation. Such negative bafflegab from a non-believer sibling is quite disheartening and depressing!

    I have 3 Easwood guitars and plan on buying more. I say this:

    “Rock on” Eastwood Guitars and thanks for your unique and also quality guitars at a competitive price point! It’s good to hear a positive opinion for once in this new world of negativity and divisiveness!

    Thanks,
    Denis Moreau


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