The Interrelationship of The Global Musical Instrument Market, the Scarcity of Tonewoods, Climate Change and NFC’s.

TONIC

Joensuu, Finland14-16 September 2011

The Global Musical Instrument Market

• “Recession proof” at one time.– No longer – video games, etc.– From 2008 to 2009 world economy down 2.4%– World “M.I.” down from 13.8%; $17.5 billion

(€12.1; £10.6) to $15.1 billion (€10.4; £9.15)– School Music

MUSICAL INSTRUMENTS• Electronic & Acoustic Guitars• Violin Family Stringed Instruments• Strings for the Above• Woodwinds• Brass winds• Keyboards• Percussion• Sound Reinforcement• Studio Audio• Software• Computer Peripherals• Printed Music• Accessories

GLOBAL MUSIC PRODUCT SALES

• 2009 $15.1, €104, £9.43 Billion• 2008 17.5, 12.1, 10.9• 2007 18.2, 12.6, 11.4• 2006 18.2, 12.6, 11.4• 2005 17.8, 12.3, 11.1• 2004 17.0, 11.7, 10.6• 2003 16.6, 11.4, 10.4

THE WORLD ECONOMY

In 2009, world economy shrunk by 2.4%Worldwide MI sales down 13.7%Largest decline EVER!(2010 world number available in 2011.)

MARKET SIZES

• US – 40.5% of the World Market• 2010 - $6.392, €4.4, £3.99 Billion• 2009 – 5.91, 3.17, 3.7• Guitar Center (WWBW, MF)• Most of US Volume is fretted– 2010 $1.43, €.98, £.89 Billion 2.4 million units– 2009 991, 683, 619 million 2.3– 2008 1.216, .838, .760 2.8

THE TOP 7 MARKETS IN THE WORLD

US 2009 - $5.9, €4.1, £3.7 Billion2008 - 7.13, 4.91, 4.5 -17.5%

JAPAN 2009 – 2.1; 2008 2.55 -16.8GERMANY 2009 – 989 million

2008 – 1.089 billion -8.8CHINA 2009 - 933 million

2008 - 931 -.2FRANCE 2009 - 718 million

2008 – 775 -7.4CANADA 2009 – 660

2008 – 776 -14.9UK 2009 – 628

2008 – 805 -22

SALES BY AREA - 2009

North America $6.6 billion -17%Central America 154 million -11South America 331

-.1Europe 4.04 billion

-12Asia 3.73

-11Australia 329 million

-6

FINLAND’S M I SALES

• 2009 $68.8 million, €47.4 million,£43 million• Down 8.1% from 2008• $13.10 (€9.00, £8.20) per capita• .5% of Global Market• Median age: 42.3• Market Rank: 25 (114th “largest” country)• World Economic Rank: 15 (2009)

CHINA- 2009

• $933, €643, £583 million• $.79, €.54, £.49 per capita• Large, wealthy middle class, BUT…

SOURCES

• World Trade Organization• Public Company Filings• The Global Report doe not include the Middle

East, large parts of Central Asia, and Africa; there are no clearly defined distribution networks in these areas. Volumes are small.

THE BEST PERFORMING MARKETS IN 2009

• India +4.4% $66, €45.5, £41.25 million

• Brazil +1.1 209, 144, 131• China +.2 933, 643.4,

583• Argentina -.07 84, 58, 52.5• Poland -3 47.1, 32.5,

29.4

WORST PERFORMERS - 2009

• Greece -27.6% $25, €17.2, £15.6 million

• Ireland -24.4 27.2, 18.8, 17• *UK -22 627.5, 432.8, 392.2• *Russia -17.8 197.7, 136.3, 123.6• *US -17.2 5.9, 4.06, 3.68 billion

WORLD’S LARGEST M I, AUDIO COMPANIES & DISTRIBUTORS -2009

• Yamaha $4.322, €2.981, £2.701 billion• Roland 921, 635, 576 million• Kawai 688, 474, 430• Fender 601, 414, 430• Harman 493, 340, 308• Sennheiser 452, 312, 283• Shure 395, 272, 247• Steinway 306, 211, 191• Gibson 287, 198, 179• KHS/Music 279, 192, 174

CHINA’S FACTORIES…

• Many closed in 2009• Inefficient, rising labor & operating costs• May cause shortages in future• So far (I) haven’t noticed any• Delivery times longer, depending on segment• Prices increasing at an alarming rate (20-60%)

INTERESTING STATISTICS

• Not everyone can live like an American/W European!

• M I prices have dropped in past several years• US & Canada spent $19 (€13,10, £11.90) per

capita; India spent $.06, €.04, £.03 !!• Obviously, the higher the GNP, the more spent

on M I• Median Age in US, eg, is 36.8 vs 37.2 Worldwide

– Older = Smaller Market!

MORE INTERESTING STATISTICS

• US has high GNP/Capita, this & age = good market

• Europe’s low birth rate = graying population, less MI bought

• English speakers represent only 10% of world population, but…

• In every country polled, the guitar is the most popular instrument; same top 5 brands same in most countries

EVEN MORE INTERESTING STATISTICS

• Global M I sales represent a potent argument for the benefits of free trade…

• Top 225 M I Firms (MI,Audio,Distributors) account for $18,308,836,565, €16,626,783,837, £11,443,022,855)

• Employ 121,405 worldwide• Top 225: 157 (69%) are manufacturers; 50 (22%)

distributors, 10 (4%) distributor/retailers, and 6 (2%) are publishers.

• Countries with more than 10 of the 225: US (79), Japan (27), China (25), Germany (16), Taiwan (10)

ARE WE THERE YET?(MORE STATS)

• Every 225 company does business with at least one other 225 company

• Many of the 225 do business outside of the MI industry: Yamaha makes bathtubs!!

• A lot of the volume is counted twice: e.g., Remo heads appear on other company’s products, Gold Peak Electronics, D’Addario…

• A GLOBAL MARKET ALLOWS FOR GREATER PRODUCTION VOLUMES; BETTER VALUE FOR THE END USER.

CHINA’S STRINGED INSTRUMENT OUTPUT - 2010

• STRINGED INSTRUMENTS (VIOLIN FAMILY):– Violin/Viola 808,808 (92%)– Cello 48,477 (5.5)– Double bass 24,638 (2.8)– Other (?) 52,771– Total 934,694 770,784 (82.5%)

Exported– Above numbers are from 9 factories

CHINA’S 2010 GUITAR PRODUCTION

• Acoustic 3,977,243 (83%)• Electric 669,436 (14%)• Other (?) 89,365 (1%)• Exported 4,001,940 or 84.5% of total• (Electric numbers seem low to me.

Indonesia?)• Source: China Music Instrument(s) Association

DEFORESTATION

• What is deforestation?• At one time, almost 1/2 of the US, ¾ of Canada, ½ of Europe,

the Plains of the Levant (Mideast) were forested!• Every year an area the size of Panama (29,340 square miles,

75,991 square kilometers disappear!• Some experts believe, at this rate, there may be no trees in

20, 30 or 100 years!• Perfect example is Easter Island.• The World Resources Institute estimates that only about 22%

of the world’s old growth forest remains intact.• Today forests cover more than ¼ of the world’s total land area

Deforestation

• For millennia humankind has influenced the forests, impact was minor

• Today, the impact is enormous!• Regrown forests differ in structure &

composition from their predecessors. • Spruce

THE IMPORTANCE OF FORESTS

• Provide wood for cooking• Building materials• Furniture, paper, cartons• Non-Wood: bark, dyes, fibers, gums, incense,

latexes, oils, resins, shellac, tanning compounds & waxes

• Food: Fruit, nuts, berries, Maple syrup!• Influence the climate

FORESTS HARBOR TREMENDOUS BIOLOGICAL DIVERSITY

• New crop varieties & medicines• Less than 1% of tropical plants have been

screened for drug use!• Tropical deforestation contributes up to 90% of

the current net release of biotic CO2 into the atmosphere.

• Recent estimate says that tropical forests are disappearing at the rate of 38,600 square miles/year.

LOSS OF FORESTS

• Tropical forests once occupied 6,177,600 square miles; only about half remain

• It’s estimated that Latin America and Asia have already lost 40% of their original forests

• Africa has lost more than half (except the Congo)

• Some areas of the Amazon basin are largely intact.

FOREST MANAGEMENT & RECOVERY

• Deforestation has slowed over the last 10 years

• Still 19,730 square miles a year is destroyed. (These numbers vary, but situation is serious.)

• More forests are designated for conservation.• Ambitious tree planting in China, India, US and

Vietnam + natural expansion has added 7 million hectares (2.8 million acres)

CLIMATE CHANGE

• World’s forests play an important part in climate change mitigation.

• Forests store a vast amount of carbon; when cut, the carbon is released back into the atmosphere

MUSICAL INSTRUMENT WOODS

• Account for less than 5% of world consumption• Many tonewoods are impossible or very difficult to

find: Pernambuco (Brazil got its name from the tree!), Brazilian Rosewood, ebony

• With proper harvesting , a steady supply is possible.• With humankind being what it is, we must be ready

with sustainable substitutes!• There are alternate woods, but cell structure doesn’t

lend itself to good sound; low end instruments.

ALTERNATIVE WOODS

• Nyatoh: a non-threatened hardwood; necks• Paulownia: sub for mahogany, grows from

sustainable root stock; large leaves gobble up CO2

• Sonokeling: fingerboards; species of rosewood• All above can be sustainably farmed on

plantations. (Some already are.)• Bamboo?

THANK YOU VERY MUCH!

• Neil Lilien• RS Berkeley Musical Instruments/USA