|Posted on May 3, 2010 at 4:43 PM|
The landscape of the custom installation industry is changing, and fast. Companies that are too slow, too late, too entrenched or just too frickin’ lame to change and adapt to the new landscape are going to get left behind. And by “left behind,” I mean that the quick and nimble will sail away into the sunset on a luxury cruise liner, sipping Mojitos with little fake umbrellas, smoking cigars rolled on the thighs of virgins and playing high stakes baccarat, while these old timers bob around in an angry, broiling ocean crammed into an poorly patched rubber lift raft that smells like old potatoes and kerosene with just a few old cans of peaches, being forced to decide just how many times you can drink your own urine after that second sea water enema.
I feared for Escient. And they went out of business. I feared for Kaleidescape. They assure me they have big news ahead. *(Actually I have an embargoed call this Wednesday with "announcable news" on Tuesday the 11th.) Now I fear a bit for Niles. I think they make some great products—particularly outdoor speakers with lifetime warranty – and they are a CEDIA founder. And I’m not saying that they’ve secured a seat on the raft-to-goodbye, but they have weathered a swamping tsunami of bad tidings lately.
1) They spent a ton of money on a high-end speaker line that just did nothing. I always thought this seemed like a spot right out of the SNL “Bad Idea Jeans” skit (“Normally I wear protection, but then I thought, ‘When am I gonna make it back to Haiti?’”). When I first heard about this I thought, “Really? Are people seriously gonna want a $3000 Niles speaker. There are SO many other, better known players in the high-end market.” Turns out I was right. Inventory blow out sale!
2) Parent company Nortek filed for Chapter 11 protection in September last year. Right around the CEDIA show. (The CEDIA show is like *the* event of the year for the custom installation industry. If we had a gala, black tie ball where we get together to pat each other on the back…wait, that IS exactly what we do. And it’s at CEDIA.) Which gave the custom install industry roughly the same vote of confidence as a football team’s owner announcing they are ditching the star quarterback as he’s suited up and getting ready to run onto the field for the Super Bowl coin toss. Now, I don’t really totally understand the new economy. I’m old school, and when I hear “bankruptcy” I’m thinking, “Hmmm. Sounds bad.” It doesn’t really matter how you gussy it up and try and spin it as a good thing with terms like “restructuring” or “strengthening core positions.” Of course, just as being flat in this economy is the new up, and bankruptcy is kind of turning into the new relaunch.
3) Their latest audio distribution system, the ZR6, seemed like a great idea – hey, I reviewed it and really liked it. It interfaced well with iPod, had FM radio metadata, had cool keypads that were reasonably ($299) priced. But it has just been *plagued* with problems. Three have died at my house and I have a customer that went through four. Then they just issued a recall because the thing *might* catch on fire, something generally frowned on with things that you’re installing in people’s homes.
4) They just got glommed together with Elan (who just got glommed together with ATON, Sunfire and HomeLogic) and Xantech. They say they are going to be running as separate companies but, really, how many 6-zone/6-source audio systems does the industry really need? Also…
5) Within days of the above, Niles president, Frank Sterns, just decided to
abandon ship retire step down. This doesn’t really cover me with a super warm and cozy and tingly feeling security blanket. And it isn’t like Niles has a history of lots of presidents. In their 32 year history they’ve had, uh let me see, let me see, you carry the one... Oh, yeah, that’s right, two. They’ve had TWO presidents in their history and the other guy was the founder. Sterns has been with the company since 1992. Just, you know, figured it was time that he leave and do something else. Totally unrelated. In fact the reason he gave for leaving? Something pressing like he found out he only had 18 months to live? No. He wanted to take a full European summer vacation. I used to want to take a full summer vacation. I called it BEING IN SCHOOL! This sounds like, “Gee, we’ve got to think of SOME reason why he’s quitting. Anybody got an idea?”
“How about a vacation?”
“Seriously? That’s the best you’ve got? Dude, that’s lame. Can I fire you?”
“No. We’re in the same department.”
“Wait! I’ve got it! Not just a vacation, but a European summer vacation!”
“Bingo! But won't people think he's leaving because of, you know, the whole combined company thing?"
"Didn't you hear me? I said EU-RO-PE-AN vacation. Hell, I'm thinking about quitting just
making it up talking about it."
6) There is such a new dynamic in the audio world that traditional big racks of black box audio gear are going away. There doesn’t seem to be a real need for them anymore. The new gen of listeners doesn’t have racks of CDs, doesn’t listen to terrestrial radio or physical media and pulls all their music out of the Cloud. For this, you really can’t beat a Sonos-type system where you can add rooms one by one wirelessly, stream your content and don’t even buy a controller because you already have a damn iPad/iPhone/iTouch. (I’m only kidding; you know I *love* you, iStuff. Like, let’s move to Massachusetts where we can celebrate and legalize our love in holy matrimony and live together as man and wife.) The only reason to have a full blown stack of gear is if you are incorporating additional automation (lighting, HVAC, security, pool, remote access, etc.) which is an area that Niles doesn’t even play in. Going forward, there seems to be a clear-cut distinction in the audio distribution world; small, Sonos-type systems and giant Control4/Crestron-type systems. The middle is being squeezed out.
Now maybe this combined company will be just the change that both Niles AND Elan (and Xantech) need. Get these engineering teams together, put a heavy-dose of Guarana herb into the water cooler, throw in an iPad, a Sonos system and some high-speed Internet, lock the door and don’t let them out until they produce some exciting NEW stuff. Maybe toss in some raw meat and occasionally poke them with a sharpened broom handle to really keep those creative juices running. So, Niles, here’s to you righting the ship and to some (hopefully) exciting products coming just around the corner…whatever name they happen to have on silkscreened on them.