No matter what your opinion is on the issue, if you’re a DJ you can’t help but follow the various discussions about the resurgence of vinyl and the return of the turntable. As an old-timer myself (my first 12” was Pretty Tony – Fix It In The Mix), I can’t help but harbor romantic feelings about the turntable. After over 25 years DJing, it’s still the interface I’m most comfortable using.
But I am also a realist. And having worked as a Product Manager, I understand a little about what goes into developing and manufacturing a product. It’s in that spirit that Mark asked me to write a little bit about the reality of this phenomenon. So with that said, let’s dig in…
PROFIT JUSTIFIES EXISTENCE
Any business exists to make a profit. The bigger the company, the more important that cardinal rule is. In the context of our discussion, the companies involved make a profit by manufacturing and selling hard goods (DJ equipment). Building a product is expensive, so quite a bit of research goes into justifying that product’s existence before it’s given a thumbs-up to proceed. This research is one of the primary functions of a Product Manager. It’s not enough to have a good idea. You need to have a good idea that also has the potential to recover its development costs and turn a profit for the company. No one can predict with 100% accuracy how a product will do, but the more research done the better. So let’s look at the market and do some of that research here and see what a company like Panasonic would be getting into to put the 1200 back on the market.
WHY KILL THE 1200 TO BEGIN WITH?
When a company decides to stop offering a product for sale, it’s called SKU rationalization. The company takes a look at each product it offers and considers things like how it is selling, how much profit it is generating, what it cost to develop in the first place, what it is costing the company to support, etc. Another factor to consider, especially with a complex product like a turntable, is the cost of tooling and the condition of the tools. For those of you who are unfamiliar, think of tooling as the specialized parts created to manufacture a given product. So for instance, let’s say a product has an injection molded case. That case is made by squirting melted plastic into a metal form. That form has to be made specifically for that piece, cut out of a block of solid metal. A lot of engineering goes into the design of that form to ensure that plastic flows properly through it. It’s crafted with care (sometimes by hand), and eventually it wears out and must be replaced.
Knowing this, one of the first things we can assume about the decision to stop making the Technics 1200 turntables is that the tooling was likely at the end of its life. A company wouldn’t decide to kill off a product that they had just invested hundreds of thousands of dollars into. And if a company decides to kill off a product forever, they wouldn’t normally decide to keep the tools required to build that product in storage somewhere just in case. So it’s a safe bet that the tools required to build the 1200 are mostly gone.
THE BUSINESS CASE
Next we need to look at the condition of the market at the time the decision was made to stop production. Hopefully this will give us more insight into their reasoning. I’ve put together a few charts that will help illustrate the data. Please note that all data provided here is based on US sales only.
First let’s look at unit sales. I’ve gone back to 2007 and plotted the bigger DJ product categories against time.
I’ve colored the turntable (in green) and controller (in red) categories so they’re easier to see. This chart makes it pretty clear that the market was moving away from “traditional” equipment and towards controllers beginning at the end of 2009.
Now let’s look at dollar sales.
We can see the same jump in controller sales here that we did in the unit sales chart. Looking at this data, it’s easy to take away 2 things. The most obvious one is that sales were shifting away from “traditional” DJ gear and towards controllers. The other was that controllers were becoming the primary category for holiday sales (that little “heartbeat” tick in both charts represents the sales bump from Xmas).
These 2 charts do a pretty good job of explaining at least some of the reasoning behind the decision to stop production of the Technics 1200. The next chart shows average sales price in each product category. I like this chart because it gives you a visual representation of where each category exists in the pricing spectrum – sometimes this can be very different than your “gut feeling”.
You can see here that the average price of a turntable has gone down almost $100 from a high of around $250. And surprisingly, the controller category has a higher average selling price of around $400 and stays pretty flat (even with the explosion of lower priced products like the Mixtrack).
Finally, let’s take a look at the sales of Technics turntables specifically – without the noise of the other products.
This paints a pretty clear picture. You have declining sales, an obvious shift in the marketplace, and limited potential to justify the higher selling price. With over 3 million turntables sold and a typical lifespan of over 10 years, the used market is also working against new Technics 1200 sales.
While we’re crunching numbers here, let me touch on a smaller but still important part of the equation – media. A lot has been said lately about the resurgence of vinyl, and on the surface it’s not wrong. According to Nielsen SoundScan, vinyl sales are up over 30% representing over 6 million vinyl units sold. Vinyl hasn’t had this volume of sales since the 80’s, and that sounds like a lot until you look at the bigger picture. There were 1.26 billion digital track sales in 2013. Billion. And that’s down from 1.34 billion units sold in 2012, most likely because of the introduction of new compelling subscription services like Spotify and Beats Music. Since we’re looking at this through the eyes of a DJ, you must also keep in mind that the majority of new vinyl releases are not “DJ friendly”. They’re mostly limited vinyl re-releases meant for collectors. So unless Pink Floyd and Pearl Jam are in your regular rotation, this revival is largely irrelevant to you. (Some additional reading on this right here – Ed)
BUT WHAT IF?
So now that we understand some of the factors that contributed to the decision to stop production of the Technics turntable, let’s look at what it would take to start production back up.
Given the information we’ve already covered, I think it’s highly unlikely that Panasonic would retool for the 1200 and go back into full production. It wouldn’t make much sense, as they would likely never recoup their investment. Even if they took the opportunity to do a redesign and cost the 1200 down, it’s still a difficult proposition when you look at the market overall.
It’s easy to imagine Panasonic spending upwards of $1M dollars getting everything in place to begin making the 1200 again. Let’s also imagine that they were able to build in $200 profit into each unit. Panasonic would need to sell 5000 units just to pay for the venture. That might not sound like a lot, but it’s massive in today’s controller-rich environment. And they would expect to amortize the tooling over its lifetime – let’s call that 5 to 7 years. What will the DJ market look like 7 years from now?
Still, there are other options Panasonic might choose…
A limited edition run of 1200s might be worthwhile if Panasonic could keep production costs down. Instead of going into full production, they might choose to create a run of product out of existing spare parts. I imagine Panasonic has a decent stockpile of parts for the 1200, and final assembly could either be taken on by Panasonic themselves, or done in emerging markets where labor costs are lower. The upside of this option is that the end user will be getting a 100% genuine Technics 1200. The downside is that it relies on a limited pool of spare parts, not only resulting in a small run of product but also depleting available parts for existing owners.
HIRE A FACTORY
Another option might be for Panasonic to contract an existing factory to build the 1200. There are several factories out there that are already making DJ centric turntables, so they are familiar with any challenges associated with their manufacture. There’s little threat of intellectual property theft, since the 1200s have seen years of scrutiny already. Panasonic would simply contract an existing OEM/ODM and stamp their name on the finished product. The upside of this option is that it would be able to satisfy any demand for any length of time. The downside would be that it might not be built to the same quality users expect.
WHAT DO YOU THINK?
So you’ve heard me blather on about stats and figures. I want to hear your side. Not all companies do everything based solely on how much profit they’ll generate, and it’s possible that Panasonic is one of those companies. The Technics 1200 has been a critical element of dance culture. It’s responsible for defining the process of DJing, and setting a standard by which all other DJ products are judged. Doesn’t a product that venerable deserve a new lease on life if the market will allow it?
Or is it a fool’s errand to try to revive a product that is tied to a dead medium? Go into most modern clubs, and you’re likely to see 1200s being used as a table for someone’s controller and laptop – or stacked in a corner in various states of disarray. A new generation of DJs already exists that have never touched a vinyl record. Having slipped from its apex predator status, should we let the turntable go the way of the dinosaur?