Here’s what you need to know about Gibson
Phil Smith | Feb 01, 2018 | Comments 0
We can hear and read a lot of things about Gibson but the whole “Gibson is lost”, “Gibson is doomed” or “Gibson is finished” seem to be quite popular. We can often read it on The Tone King comment section or in the chat room during TTK Live streams. This is nothing new and it has already been the case for many years now; maybe even a recurrent theme for decade(s) now.
I’m personally not an unconditional fan of Gibson myself (this author likes Strat and PRS guitars more). However I have a great respect and appreciation for the brand, its history and products, even if I don’t always share some of their decisions. Also, if you already read my very first article for The Tone King (Happy New Year, Happy New Gear), you know I have a very long gear wish list; it does include some Gibson guitars. So I’m not a Gibson hater, not at all.
However, it looks like the hate toward Gibson reached a complete new level lately, mainly since the announcement that this year they were NOT at the Winter NAMM music trade show.
Regardless what we personally think about Gibson, I do believe all this hate is not necessary; mainly when it comes from people that actually don’t seem to really understand Gibson, as a company. So here’s a little insight of what you need to know about Gibson (in our humble opinion & based on our research – of course!) :
1- Gibson is in debt, therefore they’re lost!
This is true that Gibson has around 520 Million dollars in debt [1]; and for many people, or even many other businesses, it would be the end. But not all companies are the same; some can still run perfectly, including with debts that large. It all depend on the company. Gibson is more than just a company. It is a group that owns many other brands such Epiphone, Kramer, KRK, Drobo, Steinberger, Teac, Tascam, Cakewalk, Baldwin Pianos, Slingerland Drums, the Onkyo group, the Stanton group, Phillips Home Entertainment, Pioneer Home Entertainment and probably many others.
So, even if Gibson Guitars is what made the name worldwide known and famous, it’s only a small percentage in the overall Gibson Brands revenue (estimated at 2.1 Billion dollars in 2014). Yes, you read that right, it’s Billion, with a B. That’s probably one of the reasons they can afford to have 520 Million dollars in debt. To put in perspective, it’s just like if you would earn $21k a year and you’d be $5k in debt (let’s say for a new guitar & amp); or if you’d earn $200k a year and would have a $50k debt (let’s say for a new car). Is that completely negligible? Of course not… but it wouldn’t be crazy and some people could perfectly live with that kind of debt.
So far, Gibson proved they can… for one particular reason: the Gibson name alone is worth million dollars and the brand won’t go anywhere; too bad for the haters that would love to see Gibson disappear, but it’s very unlikely it would ever happen.
They might file for bankruptcy, fire the CEO or even being sold to another company or group, but the Gibson guitar is an icon in Music History, used by some of the most famous artists of all time; so there would always be someone to buy them back. It doesn’t mean that Gibson is too big to fail, because nothing is too big to fail. It means that even if they would fail, the company would always find a new owner that would rebuild and preserve the brand.
2- Gibson closed a factory; therefore Gibson is doomed!
Only couple months ago, we learned that Gibson was closing its Memphis factory [2]. We probably all talked about it, including during TTK live streams and videos. One of the conclusion was to not read too much into it. I still fully support this conclusion to this day. The Memphis factory was sold for 17 Million dollars. Even if it’s not pocket change, this is still not a major revenue for Gibson Brands — nor even for Gibson Guitars.
However, it could be a way to have a better financial annual report; because in the end of the day, even if Gibson is a large group, they still have to cut cost everywhere they can. Since it has been reported that half of the factory wasn’t even in use, it could be a perfect opportunity to close a large facility to move to a more appropriate one (and maybe even a modern one); and to temporarily have a greater financial report for banks, investors, shareholders, rating agencies, etc…
Also, keep in mind that Gibson doesn’t have only one factory. The Memphis factory was dedicated for the semi-hollow and custom instruments — while the Nashville factory is dedicated for solid body instruments. I’m no expert, but to me, it would seem like a good idea to use this opportunity to move to a new location with more modern machineries or a more automatised production line (like we saw in TTK videos during the Warwick / Framus and Kiesel factory tours) [3] [4] and [5].
So by doing it on a smaller scale, let’s say for semi-hollows and custom instruments, it could be a first step in the right direction and it could be done since it would be on higher value and lower volume instruments. If it does work well, then they could do something similar for higher volume and lower value instruments in the Nashville factory.
3- Gibson has been downgraded by Moody, therefore Gibson is finished
While being in debt, a company can continue to do business by borrowing money. But like for any loan, it’s mainly based on the trust by the bankers and investors in the company’s capacity to reimburse in due time. Of course, to evaluate a large multi-national company such Gibson, they don’t use any personal “credit score” but an overall financial evaluation done by 3rd party rating agencies such Moody, S&P or Fitch
They generally use notations such AAA (Prime), Aa1 to Aa3 (High Grade), A1 to A3 (Upper Medium Grade), Baa1 to Baa3 (Lower Medium Grade), Ba1 to Ba3 (Non Investment Grade), B1 to B3 (Highly Speculative), Ca1 to Ca3 (Default Imminent with little prospect of recovery)… and finally D the lowest score.
If those rating agency names and those notation codes sound familiar to you, it’s probably because you might remember that during last summer, Moody did downgrade Gibson from a B to a Ca3 notation [6]. Again, we don’t have to read too much into it, but still it doesn’t look good.
However, one of the main reason for downgrading Gibson was said to be the reduction Gibson did in their number of SKU (Stock Keeping Unit, which is the unique number for each distinct type of item for sale).
From the rating agency point of view, the less items a company has to sale, the less likely they will generate revenue and therefore will be in capacity to reimburse its debt. However, if you’re like me and you’ve been checking the Gibson product line for the last decade, reducing the number of product (and therefore the number of version of products), it’s probably one of the best decision Gibson could have done so far.
With all different model out there (Faded, Tribute, Studio, Deluxe, Classic, Traditional, Standard… available in Regular/Traditional or HP… righty, lefty… you name it), it’s almost a full time job just to figure out all models that were/are (or even could be) listed in the product line. Way too many models with too many variants and too many options; in the end, it’s just confusing for the consumer (even more with some bad name choices such the “Traditional” variants and the Traditional models).
This is even more confusing since customers are mainly divided in two basic groups of people: The ones that just want an accurate reissue of the ’56, ’58 and ’59 Les Pauls. And the others that just want a “modern” version of it to include newer features; and they would only have to decline them at pretty much 3 price points: from Most affordable model ($990-$1,190), to Best bang for the buck model ($1,490-$1,690) and Top of the line model ($2,290-2,490). Anything lower would be carried by Epiphone; Anything above would be carried by the Custom Shop line.
So reducing the number of models and variants is maybe not a bad thing, regardless what Moody can think about it.
4- Gibson didn’t go to NAMM because they have no news for 2018;
This is not true. Gibson actually already revealed their 2018 product line. They didn’t even wait on NAMM, nor even wait 2018 for that matter since they already did reveal their news last September [7].
One of the main reasons they did not reveal them during a trade show is because they knew that all magazines, websites and YouTubers would report their news anyway. Therefore they don’t even need now to go to NAMM to meet the press or their distributors. With internet, all the business side of the NAMM could be done any day of the year — during a slow-news period to get all media coverage and maximum attention and not just get “buried” under an avalanche of news, like during a music trade show.
But also, keep in mind that 75% of Gibson revenue come from consumer electronics. So it make perfect sense for them to focus where the money is and therefore particularly to the CES (Consumer Electronics Show) in Las Vegas, NV instead of the NAMM show in Anaheim, CA.
Also keep in mind that a Trade Show is VERY expensive. You can easily reach a $50k budget for a small 10×20′ booth — so if you have a large booth like Gibson generally get, it might be an overall cost of $250k or more. So skipping it could also be a wise decision, mainly if it doesn’t provide anything for the company.
The main goal for a company to go at a trade show is to get orders from dealers, meet the press to get coverage on their new products, meet other professionals, etc… with internet, now each company can have their own keynote online, they can have their own live stream and reach even more people and more dealers in the same time. They can get order by emails and skype. So NAMM doesn’t bring anything anymore… not to a very large company that already has its own distribution network and audience.
5- Gibson is out of touch; they don’t even innovate anymore;
As a matter of fact, Gibson DOES innovate. Very little company want to do over and over the same product without any new R&D or any new exciting improvements, etc… Unfortunately people don’t always like it when they do innovate. Over the course of the years, Gibson tried many times to come with some innovations. For instance, just based on the last years we can think about the robot tuners, the digital outputs, the onboard effects, the PCB board for rewiring pickups, the HP models, the new Double Cut model, etc…
Sometimes it was good and eventually got accepted by everyone; it became so common that people even forget that it was ever something new and controversial at the time. Sometimes it was either just too controversial or too different from what people wanted or liked at the time; so it didn’t work and just appears like “another Gibson’s failure”.
But failures are part of the innovation process, as mentioned in the famous Thomas Edition quote: “I have not failed. I found 10,000 ways that won’t work”. Unfortunately, it seems like all people wants from Gibson is the same late ’50s models over and over, with no change or innovations — as long as it’s the most accurate reissue model from this era. Unfortunately, even when Gibson do it, people blame them for not innovating anymore.
6- Gibson can’t compete with new and cheaper brands;
They actually can. They currently have guitars at any given price points now, including a $99 model. But the question is: should they?
Before you jump on your keyboard to type “of course they should!”, just bare with me, because the answer isn’t as simple as we think. Why? Because there’s actually three implications and approaches when it comes to this “Should they build cheaper models?” question.
The first one is from a social and economical approach:
The cheaper we want products to be, the more likely they will be produced overseas with cheaper labor So when looking at it from this prospective, it’s not an easy question anymore. I’m not even going to pretend that I know the answer, because I don’t. However, stay tuned on TheToneKing.com because I will still try to develop more about this topic later on.
The second approach would be from a business point of view:
When a company wants to grow bigger than what the current market and network would allow it to be, it needs to expand and reach either new markets or new networks. To do so, it could mean to try to sell the products in more countries or through more dealers; and/or developing new products specifically designed to reach those markets.
However, we can’t expect any product to have the same quality, specifications and musical purpose when it will be sold in mass (most likely to beginners) in grocery stores such Walmart than when it would be sold to musicians in music store (even if it would be Guitar Center). The customers aren’t the same and won’t have the same level of exigences from the instrument. If we look at keyboards, this is what happened to brands such Casio in the ’90s.
The third approach is from a musical point of view:
Why so many people around the world are playing a musical instrument as a hobby? For professionals, we can understand it’s a way to earn money, it’s work. But why people would do it, generally for free, as a hobby? My theory is: because it’s the real universal language and an emotional art that requires perfection.
If you’re just slightly out of tone or out of time in comparison to what you want to do, the result won’t be just as pleasant. That’s why we learn by watching others, taking lessons, practicing over and over… just for one day be able to express ourself and play with perfection what we wanted “to say”… even if what we want to say is imperfect. We will just say perfectly those imperfections. That’s the whole beauty of it. When we succeed it, there’s a immense pleasure and gratification that is worth the effort.
Now, even if gear is just one part of it, just one tiny component amongst many others, it still is one that could be our best friend, as well as our worst enemy. That’s also why we’re all chasing gear trying to find THE one setup that will resonate with us and will allow us to express ourself the best we know and the best we can.
So considering all that, why would we want an instrument that wouldn’t be tailored the best way possible to reach this goal? As said above, an instrument that would be designed and produced to be sold on a mass market to beginners wouldn’t have the same requirements that an instrument designed and produced for musicians.
The cheaper you would want an instrument to be, the more likely it will be on the mass market side of the spectrum — and not on the musical side of it.
7- Gibson lose more and more market share every day;
Gibson can’t win. When one or two companies come with a new product and create a complete new market, they’re definitely dominate the market since they’re the first ones — it’s only shared amongst them. That’s pretty much what happen to Fender and Gibson. I’m aware there was other brands and builders but I think we can all agree that Fender and Gibson were the two pioneers for electric guitars.
However the more manufacturers come to play, the more there’s competition — therefore the more market share they will eventually lose since every newcomers can eventually fill every possible single spots and niches of this market. The more choices customers get, the more likely they can pick an alternative as their first choice. Regardless all their efforts, Fender and Gibson can do nothing about that. They both know they will eventually lose some market to all other brands out there.
However, let’s keep in mind that Fender and Gibson are still the two biggest guitar manufacturers in the world. So even if they lose some market shares, they’re still pretty dominant and relevant. To put things in perspective, while Kiesel produce 4,000 guitars a year, PRS produce 15,000 guitars a year — Gibson produce 100,000 guitars a year — and Fender produce 250,000 guitars a year.
8- Gibson is only driven by profits; their guitars used to be cheaper;
I know it might not be a big revelation for everyone, but absolutely all companies on earth are generally motivated by profits. If they don’t, they eventually just go bankrupt. Of course, there’s always room to be driven by both passion and profits. This is very often what happens to new and small companies. But the bigger a company becomes, the less room there is for any major or even radical changes. Once a company starts to have a consequent customer base, they have to keep it to avoid the risk to lose some consequent revenues by losing customers. Therefore, they have to be driven by the results, which is often the reflect of what customers like or not… and therefore, they are driven by profits.
This is absolutely not a bad thing in a Free Market. That’s why it’s important to remember that the best voice a consumer could have is his/her wallet. If you like a company and you want to support it: do buy its products. If you don’t like it or don’t like its current products: just don’t buy its products. If you believe it’s a company that is only driven by profits, then it will send a strong signal they will have to consider if you don’t give them your money.
Also, this is not really true that Gibson used to be “cheaper”. This has nothing to do with greed. We often hear the whole “but my ’59 Les Paul did only cost me $300 back in the day”… but you might want to count for inflation. It is true that Fender is a little bit more close than Gibson to the adjusted price (they’re even a little cheaper than from the ’50s/’60s). But a Gibson Les Paul Standard in ’59 sold around $300 would cost today $2,223 in adjusted dollars… which is not too far from the 2018 Les Paul “Traditional” (that many would argue is the closest model to the original standard model, specs for specs).
9- Gibson lost interest of new/young guitarists; they don’t even Djent!
This point is actually quite tricky to know. I mean, are they really losing interest or is it just a music genre issue? Would they have more attention from young guitarists if they would release a 8 or 9 strings baritone Les Paul with fan frets? I might be wrong on that, but I’m personally not sure… not even if they would release a 18 strings Les Paul.
It’s unfortunately because of the image we get from some instruments and brands. I already heard some millenials saying that the “Les Paul” guitar was just for the “old farts that play old music”. As an old fart myself, I know what you may think: “ouch!”.
That’s generally the reaction when we hear this kind of thoughts. But let’s be honest, we all do associate some gear to some music. When I see a Tele, I think country/twang; when I see a Strat, I think blues/rock; when I see a Les Pau, I think hard rock… and yes, this is “old music” rock for most of kids out there.
Of course, this kind of preconceived ideas that an instrument can only be used for a specific music genre is absolutely wrong! Luckily, some artists out there prove it wrong regularly. I don’t deny it, but it would be lying to say otherwise and pretend we don’t have this kind of thoughts from time to time regarding an instrument or even a brand; this is also very often the downside of a rich history and past.
10- Gibson quality is now really bad; we can see it all over the Internet!
I wasn’t even born in ’58, so I won’t be 100% sure about that. However, the more I look into it, read interviews from artist that actually were using Les Pauls at that time, etc… the more it looks like Gibson quality actually didn’t change much over the years. It looks like the quality has always been a “hit or miss” kind of thing. So yes, there’s always some “lemon”, but the only reason why we know it today is because we have this great ways of communication with the internet and social networks to share our opinion.
We can now include pictures and videos to show it to the world. In the past, bad instruments would end up like any other lemon of today: we resell them, we break them, we mod them, etc… we just don’t really care about them.
Also, before the internet era, we were buying instruments from a store, often after trying them in the said store — bad guitars were just ignored. Today, we order more from online stores without ever trying them. So we might end with a guitar we don’t like; we can always return it but then we might have this bitter bad impression that all guitars from this manufacturer might be that bad. Because the instrument was already ours and in our house… while when we were just trying them and ignore them at the store, they were not ours yet, we weren’t at home with them. That’s one of the change in perception.
Of course, the quality on the entry price models is not as great as vintage models. But as mentioned above, $300 in 2018 is not the same as $300 in 1958. So to be able to get a $300 Les Paul on the market today, there’s no doubt Gibson is cutting all possible corners (way too much to my taste to be honest, but that might be the subject for another article or maybe for a TTK Live stream).
So cheap models might have components that aren’t as great as before with a labor that isn’t as detailed as before — surely not when producing high volume like Gibson does today (definitely more than in the ’50s). So they definitely have to cut corners to make it happen on that kind of lower price range.
However, if we look at instruments of the same adjusted value (the $2,200 price range), we can all agree that it would be hard to find really bad guitars in this price range. They might not all be exceptional, we might not even like some but it doesn’t mean they’re bad instruments. Of course, sometimes we might find some that will have something “magical” that we like “better” than the others. But it doesn’t mean others are “really bad” guitars — they’re just not exceptional for us and/or probably just made for someone else — pretty much like it was in the ’50s.
However, we can’t ignore it’s now also more difficult to justify to purchase a $2,000+ Les Paul that end up to not seem exceptional to us when we can already find many competitors that might have exceptional guitars with better quality in the same price range.
So the problem doesn’t come from the fact that Gibson quality changed over the years … the problem come from the fact that Gibson quality hasn’t changed over the years, while everybody else did improve and step up their game.
[1]: https://www.thestreet.com/story/14280618/1/gibson-guitar-may-default-if-company-can-t-refinance-its-debt.html
[2]: http://www.musicradar.com/news/gibson-is-selling-its-memphis-factory
[3]: https://thetoneking.com/framus-warwick-unofficial-factory-tour-guitcon/
[4]: https://thetoneking.com/off-the-grid-factory-tour-warwick-framus-responsible-guitar-building-guitcon/
[5]: https://thetoneking.com/kiesel-guitars-factory-tour-1-hour/
[6]: https://www.moodys.com/research/Moodys-downgrades-Gibsons-CFR-to-Caa3-outlook-negative--PR_371298
[7]: http://www.gibson.com/News-Lifestyle/Features/en-us/New-Gibson-2018-Models-Available-Now.aspx
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About the Author: French by birth but Texan by heart, I had different careers in multiple areas that don’t really make sense when they’re all laid down on my resume. Amongst them I’m a former military officer (mainly confidential stuff I can’t talk about) — I’m a former network architect (the stuff with switches, routers, optical fibers, satellites and wireless things that allow people to be connected) — I’m a former R&D engineer and product designer (mainly for electronics instruments in the Music Industry) — I’m also a former sound engineer that worked in professional recording studios (but nobody cares about that anymore) — and I even thought once in my life I was someone almost important doing things almost awesome... Now I’m just a professional amateur spreading my 2 cents online about anything and everything to anyone with too much time in their hands — and if you’re reading this bio, you might be one of them that just wasted 2mn of your life you will never get back. Sorry...