Tag Archives: market segments

2019 market data (NAMM)

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The National Association of Music Merchants publishes the annual NAMM Global Report, a summary of market data from the USA and 28 countries and regions around the world. NAMM makes its best effort to collect market data, but there isn’t a single authoritative reporting mechanism or source.

I’m browsing through the 2020 NAMM Global Report which is a 306 page behemoth. Here are a few random observations. Even though the report says “2020,” the latest market data is from 2019.

The USA music market is estimated at $8 billion (USD) or 45.8% of the total global market. The US is roughly 5% of the world’s population. Yet, it purchases 40% of the world’s instruments and audio gear.

We keyboard players like to think we are a major segment. Wrong. Fretted instruments — AKA “guitars” of all kinds — are king:

    Fretted Products           $1,891M 
    Pro Audio                     853M 
    Wind Instruments              611M 
    Percussion                    374M 
    Acoustic Pianos               307M 
    DJ Gear                       264M 
    Digital Pianos                182M 
    Keyboard Synthesizer          159M 
    Portable Keyboards            127M 
    Stringed Instruments          125M 
    Electronic Player Pianos      100M

NAMM tracks many other product categories (e.g., accessories, cables, etc.), so I’ve been selective in what I have shown here. It’s enough to see, however, that our beloved synthesizer and arranger keyboards are minor players! No wonder brick and mortar stores have so few keyboards on the floor while the guitar section is stuffed.

Keyboard synthesizers had modest growth, 5.6% versus 9% growth in Fretted Instruments. (The Fretted Instrument category includes amps and effects, too.) Portable keyboards were off 18%. Yikes! Further proof that arranger keyboards in the US don’t get much love.

NAMM classifies Keyboard Synthesizers uder the Electronic Music market segment. This segment breaks down in the following way (by retail value):

    Keyboard Synthesizers        56.3% 
    Electronic Drums             24.3% 
    Controller Keyboards          9.8% 
    Electronic Piano/Organ        5.6% 
    Rhythm Machines/Production    3.7%

Oddly, NAMM does not include Portable Keyboards under Electronic Music. NAMM divides Portable Keyboards into two subsegments (by retail value):

    Keyboards under $199         41.3% 
    Keyboards over $199          58.7%

One could argue that portable keyboards under $199 are entry-level, beginner, educational instruments. Some of those portable keyboards over $199 are comparable to synthesizers. Without further data, one cannot make a stronger comparison. However, synths do out-sell mid- to high-end arrangers by retail value in the USA. Unit sales flip relative numbers the other way: 135,000 synthesizers versus 767,000 portable keyboards (total).

Higher tariffs are affecting the price of imported musical instruments, especially imports from China. By import value, 57% of imports are from China. No wonder manufacturers are shifting production to Indonesia, India and Malaysia. So much for using tariffs to move musical instrument manufacturing to the domestic US. Tariffs alone are a blunt instrument and the law of unintended consequences applies.

As mentioned earlier, the US has a 45.8% share of the global market. Here’s a table to fill out the world picture:

    United States      45.8% 
    China              10.8% 
    Germany             5.9% 
    Japan               5.4% 
    Canada              4.5% 
    France              3.5% 
    U.K.                3.3% 
    Australia           3.1% 
    Spain               2.0% 
    Italy               1.9% 
    S. Korea            1.9% 
    Mexico              1.3% 
    India               1.0% 
    Netherlands         1.0% 
    Belgium             0.9% 
    Hong Kong           0.8%

I’ve read other international music market studies wherein they decry abysmal reporting from certain world regions. Thus, one shouldn’t draw too many conclusions here. Data from South America, Africa and broader Asia are notably lacking. Systematic, consistent and complete? No.

Due to the lack of uniform reporting, it’s impossible to make any detailed comparisons against the US market. For example, I wanted to validate the conjecture that “arranger keyboards are more popular in region XYZ than the USA.” Only a few countries had data by market segment (Germany, the UK). Report subsegments just didn’t match up, preventing comparison.

As to the UK, guitars and effects dominate, but not to the extent as the US:

    Guitar and Effects   150M
    Pro Audio            112M 
    Keyboards             87M 
    Band and Orchestral   50M 
    Recording             50M 
    Accessories           45M 
    Percussion            42M

Retail value is expressed in British Pounds and is only an estimate (from a bar chart, argh). UK keyboard sales break down in the following way:

    Digital Pianos          31M 
    Grand Piano             14M 
    Keyboard Synthesizers   13M 
    Portable under $199     10M 
    Vertical Pianos          8M 
    Portable over $199       7M 
    Player Pianos            4M 
    Keyboard Controllers     3M

Again, these retail sales numbers are only approximate (British Pounds).

Well, have at it. If you have any quibbles about product categories, missing data, etc., please write to NAMM, not me. 🙂

Copyright © 2022 Paul J. Drongowski

Yamaha: The business

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We musicians like to dream about new electronic musical instruments or even just simple improvements to the instruments that we already own. Everyone likes to think that their specific needs are indicative of the general market, and gosh, “Why doesn’t Yamaha (or whoever) realize that this is important?”

Well, like any other business, Yamaha or any other musical instrument manufacturer needs to make a business decision before committing money to a new product or product improvements. This rather obvious notion led me to find out more about Yamaha as a business.

A good place to start is the Yamaha annual report. Here are links to the 2012 and
2013 annual reports. There is way to much to summarize here, so here are a few brief observations and information from the 2013 report.

Yamaha has a new president: Takuya Nakata. One of the four key strategies is to expand sales in the electronics business domain (digital keyboard instruments, PA equipment and ICT devices). The priority in digital keyboard instruments is to 1. expand market share through product differentiation and 2. Respond to various market demand. The annual report doesn’t give any details as I’m sure that Yamaha’s competitors would be interested in that information, too! However, as an example, I will say that Yamaha is strong in the regionalization of its arranger keyboards, providing many region-specific expansion packs with ethnic styles and sounds.

Yamaha is clearly a global company and manufactures instruments in Japan and other locations. Labor costs are rising in Chinese and Indonesian factories. Yamaha has significant exposure to exchange rate volatility. These factors put considerable pressure on corporate finances.

The 2013 report has a long Q&A with the president. Here is an interesting quote from Mr. Nakata-san:

Q: What are Yamaha’s key strategies for the future?
A: Our priority business strategy is, naturally, to accelerate growth in China and other emerging markets. Our target is to achieve growth of 30% or more over the next three years. China is a market where acoustic piano sales accounts for more than half of musical instrument sales, but, with lifestyles changing due to urbanization, we expect major growth, particularly in digital musical instruments. With the goal of increasing the music-playing population and expanding the market, Yamaha is constantly increasing the number of Yamaha Music Schools and providing music instruction at schools in both markets. We will continue to increase the size of our marketing staff, including staff in other emerging markets, and develop and fortify our sales network.

Turning to products, we will continue to pursue our strategy of expansion in the electronics business domain. Our plan is to achieve sales growth of about 30% over the next three years in digital keyboard instruments, professional audio equipment, and information and communications technology (ICT) devices. Digital keyboard instruments are a promising field of growth in the previously mentioned markets of China and other emerging countries. However, the challenge we face is this: can we assess customer needs, focus on what the customer wants, and provide it at a suitable price? More than ever, Yamaha will develop products that are finely tailored to market needs with sound that is genuine, with style and tone data that take into account local preferences, and offer original and appealing products that excite customers.

The report has a map showing market priorities. Yamaha is definitely looking for growth in China, India, Russia, Africa and South America (notably, Brazil). We should expect to see more instruments that are specifically targeted for these regions.

What is an annual report without the numbers?

Overall sales/income
  2013 net sales: 366.9 billion yen
  Operating income: 9.2 billion yen
  Net income: 4.1 billion yen
  ROE: 1.9%

That’s 3.58 billion US dollars. Investors cannot be happy with such a low return on equity (ROE). Intel and Apple, for example, have an ROE of 18% and 31%, respectively. That’s probably why there is a new president.

Musical instruments provide the majority of sales:

Sales by business segment
  Musical instruments   74.3%
  AV/IT                 15.1%
  Electronic devices     4.1%
  Others                 6.5%

Sales by region
  Japan                 45.2%
  Asia, Oceania, other  23.2%
  Europe                16.5%
  North America         15.0%

Yep, Yamaha does make other stuff (e.g., golf equipment!) The 4-cylinder engine in my ten year old Pontiac Vibe was made by Yamaha. Regionally, Japan is still a very important market for Yamaha.

Musical instrument sales were 2.66 billion US dollars in 2013.

Musical instruments
  Sales:                272.7 billion yen
  Operating income:     8.1 billion yen

Now we get to the good stuff about musical instruments. Here are two breakdowns:

Musical instruments sales by product category
  Pianos                15.0%
  Digital musical instr 22.9%
  Wind instruments      11.1%
  String and percussion  7.3%
  Professional audio    11.7%
  Music schools, etc.   32.0%

Musical instruments sales by region
  Japan                 42.8%
  Asia, Oceania, other  16.9%
  Europe                16.7%
  North America         15.2%
  China                  8.4%

Most of the sales from “Music schools, etc.” is in Japan. It’s interesting that a large part of Yamaha’s revenue comes from educational services and not products! Further, this source of revenue is mainly in Japan. In North America, roughly one third of sales are guitar and drum sales.

The digital music instrument (DMI) category includes digital pianos, Electone organs, portable keyboards and synthesizers. Thus, when we complain about this workstation feature or that synthesizer sound, or whatever, our workstation or synth is really just a small part of bigger, global picture. Because Yamaha is foremost a manufacturing company, executives must carefully allocate development funds and capital. I do wonder, though, how much Yamaha regards itself as a software company and how much attention software is given.

The report notes that more than half of sales in China are acoustic piano sales. There probably is real sales opportunity for DMI in China.

I wish there was a further breakdown within product category. I’m sure the breakdown is in a 200 slide PowerPoint deck somewhere inside Yamaha. 🙂 This level of info is not usually available in an annual report.

Yamaha have clearly been hit by the global collapse/slowdown of recent years. The chronically stagnant Japanese economy cannot be a positive factor as well. The annual report also cites business disruption and effects due to the Great East Japan Earthquake.

Well, there it is — a quick marketing picture of Yamaha as a business. I wonder how they will differentiate their products? Hmmm…