By If you ask Bose or Harman, the future of the audiophile hobby is clearly accelerating quickly on four wheels. Historically, audiophiles and car audio enthusiasts were as different as oil and water but installed, premium audio inside of all sorts of cars today has merged the two hobbies and their collective interests. Recent tectonic changes in the landscape of who owns what brands in the audiophile business have rocked the often change-resistant industry. Legendary audiophile companies are now fetching nine-figure prices not because there is a bright future selling to the traditional demographic of audiophiles but because of what automotive manufacturers are willing to spend to license said audiophile brands as part of their premium option packages.
Most AV industry pundits believe the main motivation for why South Korean consumer electronics conglomerate, Samsung, bought American audio powerhouse, Harman (parent company of JBL, AKG, Revel, ARCAM, Mark Levinson, Lexicon and others) specifically because they can be used in future, lucrative licensing deals that involve the automotive world. There is no debating that the Lexus/Mark Levinson branding deal has been the most successful business relationship in audiophile history. Nine figures of money per year, change hands just for the right to have that legendary audiophile sound inside the comfortable interiors of Toyota’s finest luxury/performance cars.
Bose is not known as an audiophile company but McIntosh certainly is. So when Bose recently purchased McIntosh and audiophile speaker company, Sonus faber – many industry watchers questioned their motives. McIntosh is an equally as iconic brand that appeals to older, more well-heeled consumers. That’s why you will find McIntosh branded car audio inside of $85,000-plus Jeep Grand Wagoneer SUVs. Will that be the only car company that dons the McIntosh branding from Bose (a company who’s been the brand associated with ranging from Mercedes Benz, Porsche and Ferrari albeit years ago). Audiophiles should expect to see McIntosh branded audio in more and more premium and iconic cars going forward as Bose is pulling McIntosh gear out of almost 200 Magnolia stores across the United States. They need to make their money back somewhere and giving up the most important retail distribution chain in the United States puts Bose’s eggs more in the car audio basket than before.
Haman/Samsung has been very tight-lipped over their recent $350,000,000 acquisition of Masimo’s audiophile and AV brands – formerly known as Sound United. These brands include a next level of excellent brands to go under the Harman umbrella including Bowers & Wilkins, Polk Audio, Definitive Technology, Marantz, Denon, Classe’ Audio and even Boston Acoustics (an oldie but goodie). Masimo is an Irvine, California-based medical services company with now-former CEO who was way into audio. He was smart enough to use Denon and Marantz’s HEOS networking on Masimo’s medical devices such as their watch. Courts have since found that Apple swiped said technology in possibly the biggest David vs. Goliath tech lawsuit in global history with Masimo the victor (as expected, Apple is taking matters up on appeal). The shareholders didn’t like the distraction that consumer electronics brought to a successful medical services company and they decided to, through the power of the Board of Directors, to oust the CEO and sell off the Sound United brands at any price and no matter what. To call Masimo’s sale of these legendary and all-powerful brands an ultra-shit-show would be to grossly underestimate the level of sheet and total incompetence involved. With more than a year on the market, the Sound United brands were left out to die by leadership and Masimo’s poorly equipped and some not very industry experienced executives. At this stage, the two parties are doing their due diligence in utter silence which has led some to believe that the deal could fall apart months after the announcement.
Why Are Audiophile Brands Worth So Much To Car Manufacturers?
We asked a former executive at Harman who was involved in the Mark Levinson deal more than a decade ago. Back then, Toyota supposedly paid $100,000,000 per year to Harman for the use of the Mark Levinson brand. They then paid roughly another $60,000,000 to $80,000,000 per year in speaker and amplifier manufacturing, as even Harman can’t make all of the elements of today’s sophisticated, integrated premium entertainment systems but at 6x to 8x margins on that part of the business you can see how insanely profitable the deal was for Harman. At its best and in a long-ago era, Mark Levinson might have been able to put up 20 percent of this money from the sale of audiophile preamps, high performance SACD players and dual mono power amplifiers. Even with a successful and profitable foray into audiophile headphones in the modern era, the Mark Levinson brand exists to serve its master and that master is Toyota.
Why does Toyota/Lexus care to spend this level (or anywhere near it today) on branded audiophile sound in their cars? That is because of the profitability found in premium option packages in luxury cars. Our sources tell us that over 40 percent of the cars that Lexus makes come with a premium package. This package of not just audio goodies is absolutely loaded with profit. Let’s face facts, Dr. So-and-So isn’t walking in to the dealer to buy a fully loaded Lexus Sedan or SUV because he or she is looking for audiophile cred in their next lease. They might appreciate better or upgraded sound but they also want those air conditioned seats with rich Corinthian Leather too.
Every time an automotive company can sell a car with all of the bells and whistles, they make a lot more per-car profit and that is good for the bottom line. Listening to music and/or enjoying premium media is a big part of the value added that comes from a premium package thus the race to offer a more hip, luxurious or even just a differentiated luxury offering is just good business.
Years ago, Mercedes Benz partnered with Cartier to have a branded, analog clock inside of cars such as the E-Class and S-Class sedans. The co-branding was a success in that not every Mercedes customer owned a Cartier watch but they did get a daily reminder of the brand in ways that other luxury brands don’t have access too. Ford did a co-branding project with outdoor company, Eddie Bauer, that nicely married the concept of luxury, outdoor living with an upgraded SUV that might never once venture off-road but if it ever did – it was going to do it in style thus it was worth more money to consumers in the big sport utility vehicle market.
Should Audiophiles Worry About the Influence of the Automotive Deals?
No, but they are. Audiophiles historically don’t deal with change very well. They stereotypically fight new technologies while clinging on the ways of the past. The reality is that companies who have an automotive deal will have more money to invest in new technologies, higher performance gear and more. There simply are not enough audiophiles to create enough demand to be able to drive growth the way that the influx of money from one of these car companies can do.
Brand awareness is another big advantage for audiophile marks in car audio. Does every Maserati customer know what Bowers & Wilkins speakers are? Likely, most don’t but if they learned about how speakers like the Bowers & Wilkins 802 D4s are used in Abbey Road Studios and even inspire special limited editions, super-high-performance speakers. Many a car enthusiasts loves upgraded performance and the audiophile world offers just that kind of retail buzz. Could doors be opened to new audiophiles through luxury and performance automotive brand partnerships? You bet they can.
How Can Audiophile Companies and Automakers Do a Better Job Making More of These Sexy Partnerships?
The concept that a guy buying a $75,000 Lexus would be a good match for a $75,000 Mark Levinson/Revel system is broken. An audiophile is likely to want to invest more of their money in audio components than in a luxury lease but that is not a hard-fast rule. Could that customer pop for $999 Mark Levinson No. 5909 headphones? They absolutely could? If Harman wanted to go next level, how about invest a pair of Mark Levinson branded headphones (parts cost is not $999 – it is a small fraction of that) for any new Lexus owner to visit a nearby Mark Levinson dealer. Could a small setup be installed in the waiting area of Lexus service? Yes it could and yes there should be one but that’s not enough to connect the dots. A pair of free $999 audiophile headphones is likely enough to “fill the pipeline” of Mark Levinson’s local dealers? Be it a Magnolia store or a custom installer or a hybrid audiophile/CI location – everybody needs new sales leads. If Mr. Custom Installer sells a few Sonos components or upgrades a few 4K UHD-TVs – they are well into making profit and have, more importantly, acquired a new client to their rosters. New clients are the lifeblood of any small business and Lexus/Harman could be gambling $100 or so on getting people with money who are spending it on premium packages in their cars involved in our hobby. How many of these people have ever experienced a true audiophile system? After a good 15 minute demo, how many will drive around town thinking of the experience? That would be all of them and powered by the goodwill that comes from a free pair of $999 headphones – we’ve got some momentum cooking here. New life and new enthusiasm from people with money to spend isn’t the worst idea for the future of the audiophile hobby is it?
Final Thoughts on the Premium Car Audio Movement in the Audiophile Hobby …
Establishment audiophiles will hate the idea of premium audio in a car mainly because they have everything that is new and represents change. They think that car audio is a distraction from the ways things always were in the audiophile hobby. Any departure from the past, which is just too scary for many of them but these small-thinkers are not representative of the future of the hobby. They also can’t stop the train that has left the station with big companies buying up audiophile brands for a reason different than making a more tweaky DAC or preamp.
There is nothing that the audiophile hobby needs more than new blood. We aspire to find kids who have grown up in a world with unlimited access to music and who love technology. They are great people to incubate for future audiophile purchases but they often aren’t packing the kind of cash that you need to buy audiophile gear. Somebody buying a Volvo, BMW, Maserati, a $85,000 Jeep, a Lexus, a Mercedes do have the money to buy an audiophile system. Thousands of cars are sold from these brands every day in the United States. Imagine if a fraction of them were incentivized to engage with the audiophile hobby at the retail level? If one out of 100 converted into a full audiophile sale, you would have one of the most successful marketing an outreach campaigns ever. And the 99 others who are rocking those free $999 Mark Levinson headphones will feel a pride of ownership when they are at the gym, working at the share-office space or flying in style while sitting in seat 2B. What is the price for that level of brand awareness? It seems to be nice figures and somehow well worth the price of entry.
Do you have any cars (or had any) with a premium car audio system installed? If so, what kind? How did you like it? Did it make you feel better/worse/indifferent about the brand? Does premium audio draw you to a specific car brand? Tell us about your experience and we will quickly post your comments in our moderated forum.
