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For Koss, The ‘Personal Listening Experience’ Remains Paramount

MILWAUKEE — The headphones category is a sea of newcomers, shuffling and elbowing to capture the attention of consumers (and retailers). It is, without question, a challenge to all brands, young or old.

For many of the established, legacy brands that have spent some time in the space, however, this crowded market is yet just another challenge that can be overcome with dedication to its consumers.

Koss, founded in 1958 by John Koss and currently helmed by his son, president/CEO Michael J. Koss, is one example of a company that has weathered its share of storms and has no intentions of going anywhere.

TWICE spoke with Michael J. Koss and his son, marketing director Michael J. Koss, Jr., earlier this month about the company’s track record of intense brand loyalty, its recent flurry of new product introductions, and its plans for the future.

TWICE: What has it been like, running a massive global operation as a family business? How does your history and your legacy play a role in your current operations?

Michael J. Koss: The company is a public company. When you look at what we’ve done over the years, when my father started the business, it was very innovative not only in product design but in approach to markets. It was one of the first CE brands from America to get a foothold in Europe.

The first operation he had in Europe was in ’67 or ’68; it expanded pretty significantly there. He even had one in Tokyo at one time — that really helped establish the brand throughout Europe and the Middle East and Africa, and also throughout Asia.

What we’ve done over the years is dedicate ourselves, really, to the stereophone, and to listening to music through stereophones for the personal listening experience — bringing people closer to music they love.

We’ve had times when we diversified into other parts of the audio industry: the purchase of a turntable company back in the ’60s, an amplifier company back in the ’70s, a car amplifier company in the late ’70s, personal electronics in the ’80s.

But we’ve always come back to stereo headphones and the personal listening experience. I think what you’ve seen in the products we’ve introduced this autumn, we began a dedication to that personal listening experience.

TWICE: Returning to your roots in a sense.

Koss: We don’t like to think we’ve gotten away from the roots recently. The diversification that we’ve had pretty well stopped in the ’80s. We got out of most of those things and have been honing our skills in stereo headphones.

TWICE: Still, you recently introduced your first portable Bluetooth speaker. What has been reaction thus far from retailers and consumers?

Michael J. Koss, Jr.: So far the response has been great. People, particularly Koss fans who have been using Koss headphones for a while, are finally excited to share the sound of Koss, and the reviews so far have been great. We’ve been really excited about feedback from consumers, about the ease of use, the ease of portability and their satisfaction with the sound.

TWICE: Does your current emphasis on Bluetooth mean that you’re pulling away from the Striva Wi-Fi ecosystem?

Koss: We’ve suspended Striva temporarily. We’re going to back to that when resources are more plentiful. The last years have been pretty tough because of Europe. We’re very prudent with our spending. Long term, we think the Wi-Fi space will be very important to us.

We started Bluetooth in 2007. Back then it was really a plug-and-pray market; it was enormously frustrating. There wasn’t enough installed base with transmitters and we had to sell our own transmitter, in two different versions: one was a dongle that plugged into your computer and the other plugged into the headphone jack of any portable device you wanted to use. … It’s really amazing when you think what has happened in the last seven years.

Our experience with Bluetooth really taught us that we had to make the setup and user experience extremely simple. We’re very happy with the two new models, which are both very easy to set up; very easy to use; ergonomically designed so it’s simple and intuitive to answer a phone call; and intuitive to turn up the volume on the headphones. They’re very, very simple.

TWICE: Koss has recently been experiencing somewhat of a setback according to your financials, but you appear to be readying for a marked turnaround. Can you detail these plans? Are you in a turnaround mode?

Koss: I think it’s very possible that we’re going to see some improvements in Europe. It’s very dependent on what happens in Germany. Because we have independent distributors throughout Europe, we of course have to go through some of the positive and negative aspects of the general economy and general market conditions with them too.

Our biggest distributor went through an internal restructure and got its warehouse in order. We’re hoping we’re going to see more improvements from them.

The other problem we have is we got caught in the battle between the Ukraine and Russia, which are our second- and third-largest distributors over there, and starting in February they pretty much stopped ordering. Once that conflict is resolved, and once the economy stabilizes more in Europe, I think we’ll return in our volumes.

The other problem is there has been a lot of competition. And with that competition … the more confused the space gets. There may be a general sorting out of the whole process.

TWICE: This wouldn’t be the first storm you’ve weathered. The market keeps changing, yet Koss keep changing with the times. How?

Koss: In a way, because we’re focused on bringing people closer to the music they love and dedicated to that personal listening experience, the authenticity of the brand remains very strong. Once people have owned headphones by Koss that they’re happy with, we tend to keep that customer for a long period of time.

The best example of that is the Koss PortaPro. It was developed in 1984 and is still in the market, and it’s one of our biggest sellers. The repeat customer for that phone is just incredible. We think we’ve got a couple winners in these new products as well. They’re legacy products for a legacy brand, for a brand that has been around since the creation of the market in 1958.

TWICE: Has your relationships with retailers and distributors changed over the years as the technology has changed? Have you been consistent in the way you form and keep relationships?

Koss: We’ve stayed as close as we possibly can, but let’s take a look at what that’s all about. Go back to the late ’70s and start adding up the number of retailers in the space that represented great storefronts, and count up the number of people that are gone. Pacific Stereo had over 100 outlets and they’re gone. Team Electronics, with over 100 outlets, is gone. The list goes on and on and on.

From the period of 1980 to the mid-’90s we lost over 3,000 buying locations. It hasn’t stopped. As recently as people like Circuit City and Crazy Eddie’s. The landscape has totally changed. But we’ve tried to stay as close to our retail partners as possible. A lot of them aren’t around anymore.

TWICE: What about e-tailers?

Koss: It’s a different space. But the nice thing about it is it gives consumers an opportunity to purchase products that a traditional retailer may not stock. We have so many different models, and they might not be stocked in every single store. It does give someone in a [remote] location the chance to find a product they can’t buy locally. That’s been a benefit to us.

TWICE: Looking outside of just the Koss Corporation, what are some of the biggest challenges facing all headphone manufacturers today?

Koss: I think what’s happened in last five to six years is there is a general misconception that just about anyone can make a headphone and sell it, and it will be successful. Just find some sort of celebrity to endorse it and it will go over well. That created a lot of confusion, and I think it was very disappointing.

If you take a look at the landscape today, there have been a number of celebrities endorsing headphones who have already fallen out of favor from the standpoint of being celebrities. … In most cases, those headphones never got any traction.

The market is going through a little bit of a shakeout. We’re fortunate in the respect that we didn’t chase that. The only celebrity endorsement we’ve really done is a development deal with Olympian Dana Torres to come up with a headphone designed specifically for women. We saw a niche there that had more to do with women, and we found someone who was authentic enough, who had worn headphones and used them in training since she was 15 years old. …. We didn’t pick a celebrity on a reality TV show.

TWICE: What is your long-term outlook for the category? Is this kind of market growth sustainable?

Koss: Unit-wise I think it is. You’re probably going to see a shift in dollars again. We’ve seen this before. There has been a lot of activity in the really higher-priced products recently. We’re already seeing some of that coming back down to normal. That’s why the products we’ve introduced recently aren’t up in the stratosphere. They’re in a class that’s affordable for most people.