This is the following personal viewpoint

["V70NL::ROSSI" <rossi%v70nl.decnet@NUSC.ARPA>]

Subject: The NAMM Busters !!!

After reading the posting by Frank Fousek, yesterday, a new (i.e., non
MIDI card IBM etc) and more important thing came to mind.  Watching
the postings which have come over rec.music.synth, it has occurred to
me that there are a lot of musicians who have not done a hell of a lot
of music equipment purchasing, at least not in the modern era.  Many
of you appear to be quite dismayed, and maybe rightfully so, about the
best places to go for good buys, while maintaining the security of
having some user support after you have made the deal.  The following
(rather long) essay, may lay to waste many of your fears, and allow
you to be more competitive shoppers when buying music equipment.
Also, you might be forced to inquire about free trade in the music
industry, price fixing and exactly what NAMM means to you.  I will
start from the outset by saying that everything I am about to impart
is true to the best of my knowledge.  Much comes from direct
experience, much from contact with many industry insiders who have
coroborated many of my suspicions.  There is, however, the possibility
that some things are not totally true.  I am, after all, not a Federal
Grand Jury and may have misinterpreted a lot of circumstantial (i.e.,
correlational) evidence incorrectly.  I will elaborate starting with
Mr. Fousek's comments.

First, I would like to pose a question ... Has anyone actually had a
bad experience in dealing with Akron Music Centers ( or any of its
presumed alias named stores), or is this another example of network
blackballing due solely to the fact that the store is obviously not
NAMM controled, and dares to break some of the rules of the game for
the benefit of the consumer?  I personally have no experience with the
store(s) and for all I know they could be an example of the many
sleazbag dealerships which lurk in odd places, such as northeast Ohio.
On the other hand, if AMC is guilty only of selling products for which
it is not an authorized dealer, this probably a thing to their credit,
as opposed to being something 'BAD'.  Accordingly, there are a number
of legitimate 'PIRATE' stores out there who exist in-spite of the
tight controls of the NAMM/Music Manufacturer monopolies and
suppression of free trade.  Many of these stores are brash enough to
actually flaunt their non-NAMM control by taking on colorfull names
(e.g., ROGUE Music, NYC).  I have had experiences dealing with several
of these free-market stores (Rogue Music, among others) and have had
very pleasant experiences with their services, including PRICE,
SUPPORT and (guess what?) real, honest to God, manufacturer's
warranties, which have been accepted by the equipment registration
programs of the manufacturers, and which have had some minor factory
authorized work (upgrades in software, mostly).  Let me continue ...

A little history about prior attempts to control or defeat free trade
practices in the US marketplace.  We all know about anti-trust
violations in many areas, monopolies and monolopy breaking in the
60s-70s, but the closest thing to what is currently taking place, was
legislated against around 1972.  It was at that time that the
'Fair-Trade' laws came into being.  What this meant was that the
fair-trade pricing schemes set up by many Japaneese audio manufactur-
ers was deemed to be illegal and in violation of our competition based
free trade economic orginization.  Companies, most notably Sony, had
arranged for what ammounted to price fixing through their dealers
(i.e., the fare-trade price), where dealers were were bound to NOT
discount products below a set fair trade minimum by contract with the
manufacturer or its distribution representative.  If the dealer tried
to discount below the fair trade price they would loose access to the
product through the distributors.  Federal courts said this practice
amounted to price fixing and around 1972 the practice was made
illegal.  Not coincidentally, it was about this time that free market
competition set into the Japaneese audio markets and prices began to
decline rapidly.  Wholesalers, who were previously suppressed from
conducting VOLUME based trade could then sacrifice higher prices to
the retailers and make up the difference in larger volumes.  This
proved to be a benefit to everybody in the consummer end of the chain.
Although the legislation was primarily directed at imported consumer
items, it also had an impact on smaller 'HIGH-END' american audio
markets (i.e., most notably in speakers [JBL and Altec] and amplifiers
[Scott and Macintosh].  As in all economic situations rulled by greed,
a new variant of the fair-trade system was created which bypassed the
fair-trade legeslation.  Hence was borne the concept of AUTHORIZED
DEALERSHIP.

Interestingly enough, there were heroes born back in the early days of
authorized distribution.  The most notable story is that of Crazy
Eddie in New York.  Eddie was/is a clever businessman who beat the
corporate pressures with a little help from his friends.  The first
ploy of the manufacturers to quell Eddie's INSANE discounting policies
was to send him defective goods in hope that the INSANE discounts
would become synonymous with inferior products.  Eddie, immediately
set up his own repair/testing facility and tested representative
samples of incoming product.  When defects were encountered, Eddie
shipped entire case lots of murchandise back to the distribution
centers, at great cost to the manufacturers.  This action of course,
irked the corporate establishment so that Eddie was then backordered
on many of his products and, his authorized dealership rights to some
products were taken away by the distributors.  Eddie sidestepped the
whole normal distribution process, by creating his own path to
product.  He found that, because of his long friendships, he was able
to buy from other dealers who were part of the corrupt system.  Many
high end Ney York stores looked at Eddie as a way of achieving quick
cashflow and quick turnaround of product.  You see, the high priced,
high end stores could achieve larger discountds from the distributors
for more product moved THROUGH Eddie's operation.  Eddie helped fill
marketing quotas all over New York, for his friend's high end
businesses, and was still able to offer his INSANE discounts to the
price conscious consumer.  Everybody won.  It pissed off a lot of the
distribution companies, but it did work.  Eddie is largely responsible
for the large price discounting competition continuing in the eastern
US.

Well, you might say, that's an interesting story, but what does it
have to do with Akron Music Center, Frank Fousek, and synthesizers.
Well for one thing, it illustrates an important concept concerning
manufacturers warranty.  When a Japaneese manufacturer puts his
product in a box intended for shipment to the US through all legal and
bureaucratic channels, he also includes, the OFFICIAL US WARANTY
REGISTRATION CARD for use in registering the purchase with the
manufacturer's direct US representative.  No matter who legally sells
this equipment first hand, the manufacturer is bound to the warranty
terms (modified state by state) as long as it can be demonstrated that
the product was purchased NEW, and was obtained in a legal retail sale
as long as a valid invoice, sales slip or credit card voucher can be
produced.  Now it is true, that the dealership named on the warranty
card does not have to be the one from which the device was purchased,
as long as the dealer obtained the product in a legetimate way (i.e.,
in accordance with local resale tax laws) through a resale/wholesaling
agreement with another dealer who has access to the product.  This is
apparently the only way around the stranglehold imposed by NAMM.  This
is not to be confused with the Gray Market goods, brought to
popularity by people with something to loose.  Gray market goods are
those which never were packaged with an American warranty card because
they were never intended to be shipped to the USA and arrived here in
a non conventional way.  There have been reports of gray market
musical products entering the US, these reports usually involve
Yamaha, Roland, or Ensoniq equipment, but according to people actually
in the industry, these are few and far between.  Actually, many
authorized Yamaha dealers do not include Warranty Cards (e.g., Caruso
Music), a somewhat suspect indication that in order to protect the
dealerships from non-authorized dealer sales, Yamaha, Japan does not
include a Warranty card with their products aimed at US markets
(making the term gray market Yamaha a little hard to conceptualize).
At any rate, there is no such thing as gray market items from
international companies which have their major primary distribution
centers in the USA anyway (e.g., Oberheim, Sequential, Kurzweil, and
even Casio).  All these products come with a legitimate USA warranty
upon first purchase, no matter whetre it is from.  So for these
products, anyway, authorized dealerships are bullshit and a fiction
developed by the NAMM.

How does this all happen, and how does it affect you, the consumer.
Unfortunately, the music market is relatively small when compared to
other high tech consumer markets such as computers, audio, video and
cameras, etc.  The pricing practices in the musical equipment
industry, therefore, get less attention than those in the larger
markets.  Thre attention it does get is by musicians, who are, to a
large extent, dependent on the NAMM for their existence.  What the
NAMM has apparently sanctioned reeks more of unfair marketing
practices than what was outlawed in the early 70s.  The greatest
offending companies appear to be Yamaha, Roland and Ensoniq (in that
order).  What appears to be going on is that those companies have
built up a network of NAMM dealerships which actually do what amounts
to PRICE FIXING.  Now, none of this can be condidered undeniably true,
and may be the result of paranoid conjecture by me and the others who
have been trying to understand our data concerning pricing competition
in the music industry.  Indeed, it is possible that the NAMM is
actually a nice, warm cozy group that has nothing but the good of
musicians in mind.  All the data may be coincidental, and only the
result of our poor sampling techniques and inappropriate insider
information, but for what its worth ere are the numbers..

It definately appears that price bottoming exists, well above those
predicted by discounting in other markets.  Because the video market
is easy to gain access to, and to ascertain actual dealer costs,
distribution expenses, and overhead, we compared the profit margins in
the video market with those in the electronic music product market.
This is legitimate in that the saturation ratios of dealers to
consumers is probably skewed to the benefit of the music indistries in
that there are slightlu more video discounters per video consumer than
music instrument dealers per consuming msicians.  For NAMM mail order
dealers the bottom margin is at about 15% minimum dealer profit/unit
and about 22% minimum profit/unit for off the shelve sales in walk in
dealerships.  On the other hand, in the less oragnized video market,
mail order dealers work with about 5% profit margins which can
actually reach negative percentages (e.g., -3%) over dealer invoice in
a blowout sale where the dealers are compensated by manufacturers
after high volume sales (i.e., this is the same thing as what happens
when car dealers sell things a couple of hundred $ below the factory
invoice, if you are unaware of these incentie marketing plans).
Similarly, 10-15% margins are common bottoms for over the counter
resalers including large discount store chains and the
appliance/audio/video stores which have sprung up in the past 15 years
(e.g., Highland Appliance, Tokyo-Shapiro, Leiser, Sound Warehouse,
etc).  The differences in the bottom profit margins, apx 18% and 10%,
for mail order and and over counter discount sales, respectively, are
statistically enormous.  We are talking an average of $15 per $100
more profit in the music retail industry than in video, start
multiplying by about 10,000 (based on $1,000,000 retail sales), your'e
looking at quite a difference.  One that the NAMM dealers are
intrested very much in keeping.  When compared to other markets (i.e.,
consumer audio, car audio, and computers) the differences are even
greater.  Another interesting factor is the uncanny ability for NAMM
dealers to know other dealer's botom prices on given pieces of
equipment, even while it is vaporware.  You may be unawware, but List
Price has absolutely nothing to do with sales price and often bears
absolutely no relatiuonship to anticipated dealer margin.  Conversly,
the dealer sets his price based on a % increase over his purchase
price.  If price bottom fixing did not occur, it would be hard to
explain how all the dealers know what the other dealers are
discounting at, such that after polling 29 mail order houses (all
NAMM) the absolute bottom variance never was more than .1% each
minimum quoted price reflecting a real 15% margin bottom.

This may all seem strange, unless you have banged heads with NAMM and
the distributors.  I went up against this thing once and found that
when I disclosed the fact that I had very low overhead and could
discount in the 2-5% profit range, I couldn't get distributor support
for Yamaha, Roland and Ensoniq equipment.  Several friends of mine
also tried to beat the NAMM stranglehold and were almost bankrupted
after their efforts.

Anyway, I realize that this has been a little long winded, but I feel
thit it is important to highlight the other side of the authorized
dealer story.  The truth to the matter is that you should not be
afraid to talk to a NON-AuthorIZED DEALER.  Like Eddie, he may
really be a Robin Hood of our time, all the while working inside the
constraints of the law (larceny here is metaphorical, of course).
More often than not, succesfull non-NAMM stores have tricks up their
sleves which preserve factory service warranties.  Quite often, many
of these stores have accomplished service departments of their own
which will honor the store's warranty (i.e., an actually better
scenario).  Finally, many stores have underground deals with
AUTHORIZED DEALERS, in which they act as a middleman (for a small
profit) in order to gain access to markets they are denied by the
factory agreements.  I'm not advocating running out to some sleazebag
extablishment and buying junk goods, but the fact that the dealer is
not authorized by a distributor to sell the brands he carries should
not be a purchasing criterion, either.  Think of it this way, in many
ways, these guys who operate outside the system may be able to offer
you more support than those with authorized fixed prices.  As
consummers, musicians should be a little mode frugal and explore legal
buying opportunities which exist in the real world, as opposed to
following the advertising and marketing ploys of a sheepherders as
skilled as NAMM.

If anybody encounters, fine service, and good prices from rebel stores, you
should make your dealings known.  I have already attested to the service
oI received from Rogue Music.  There are more stores like that out there.
Money talks.  If enough people stray from the NAMM dominated market, it will
have to change or cease to exist.

Long Windedly,
John
ROSSI@NUSC.ARPA

The above statement is purely the conjecture of the author and may,
indeed, be incorrect.  The statements presented as factual are true to
the best of my knowledge.  None of this reflects the opinion of the
U.S. Navy or the U. S.  Government.