D&M Sees Receiver As Home Net Hub

By Steve Smith -- TWICE, 3/12/2007

MAHWAH, N.J. — D&M Holdings sees next-generation audio receivers as the hub of entertainment networking and connectivity around the home.

And with its wide variety of upscale audio-related brands, D&M sees itself right in the middle of the changing market as it prepares to take advantage of the upsurge of interest in audio and A/V networking with a variety of new feature sets to debut this summer. (See p. 44.)

Kevin Zarow, marketing VP for Marantz, Escient and Snell, commented, "It's more important than ever to have a centralized box that can handle all of this information and get it distributed all over the home and do it seamlessly and easily. We see the receiver as the hub."

Not that D&H, whose brands include Denon, Marantz, McIntosh, Boston Acoustics (which it bought in 2005), Snell, Escient, Replay TV and D&M Pro, hasn't been taking advantage of the changing market already. In its recently released financial for the first nine-months of its fiscal year, ended Dec. 31, 2006, the company reported a 103 percent gain in operating profit of $36.5 million, a record for that period, plus a 6.5 percent increase in consolidated revenue, to $589.3 million. (See TWICE, Feb. 12, p. 69.)

During a recent visit to its headquarters, here, Bob Weissburg, D&M sales and marketing president for North America, outlined for TWICE the changing face of the hi-fi market and how its brands are positioned to take advantage of that change. "The audio category is evolving into something far different and so is our product line." Part of that evolution is that as consumers get more comfortable with the performance of their iPods and HDTVs, they realize that they want better quality audio from those devices.

While D&M has premium brands cash on these changes, and has an efficient operational infrastructure and common technical research that is shared across the portfolio, Weissburg stressed, "We don't want to be like [General Motors] in the 1970s where the Buick was the same as a Chevy or a Cadillac. We have each brand maintain its individuality, market position and distribution. We don't take a generic approach. We don't want to homogenize the brands."

And he added, "While we provide all the 'back room' efficiencies the uniqueness of the brands and product quality remains the same. We are still focused on the premium segment of the market."

To outline his point Weissburg outlined each brand's distribution. Denon has "is the most diversified brand in our portfolio" selling to chains like Circuit City, Magnolia Hi Fi, A/V specialists and custom installers. But Denon "is focused on higher end technologies and have multiple lines within the brand."

Marantz is distributed through custom integrators and installers, and may expand to more A/V specialists. Escient is "99 percent focused on custom installers" with its home theater applications, Weissburg noted, while Boston Acoustics is "expanding with Circuit City" and McIntosh goes with custom integrators and A/V specialists.

"We address every segment of [retail] distribution in CE, with the exception of the mass market such as Wal-Mart," he noted. Much of D&M's distribution changes in recent years have been with custom integrators as some A/V specialists have fallen on hard times. "We are encouraged by this channel because here the issue is not about price. It is about reliable, premium products that can be connected efficiently," Weissburg said.

He volunteered that the increased demand for HDTV in the past several years and the iPod, which has revolutionized how consumers listen to and use music, has increased demand for better quality audio. "Loudspeaker sales are up and the receiver business has recovered. We see steady growth from 2007 until 2009 and beyond" as the average selling price of flat panel and other HDTVs decline "12 to 18 months faster than anyone predicted," Weissburg said.

Jeff Talmadge, Denon's product development and systems integration director, observed, "Lower flat-panel pricing has helped us because consumers now have more money to upgrade their audio systems. With all retailers, including mass merchants, upgrading their in-store demos [of HDTV and audio systems] it has helped."

And he added, "Or as we like to say, people are not standing for 'good enough' anymore."

Concerning iPod's effect on audio, Zarow noted. "Some in the industry were fearful of the iPod. We love it because it supercharged the business and got people to listen to music again. They realize that [music] can sound better. Consumers are reinvesting in hi-fi."