Australia Markets open in 8 hrs 50 mins

The American guitar industry is making a serious comeback

Aarthi Swaminathan
Finance Writer

The electric guitar — an icon of American culture — is standing the test of time.

Despite a lot of bad PR in recent years, manufacturers and sellers say demand is strong for American-made guitars 10 years after the 2008 financial crisis hammered the industry.

“There are some underlying trends that are really helping to fuel the industry,” Fender CEO Andy Mooney told Yahoo Finance’s Final Round. “There are 125 million people we estimate paid for streaming music services last year. So interest in recorded music is an all-time high.”

Mooney added that the record 86 million people who attended Live Nation concerts last year corroborate the notion that “there are more people interested in music than ever before, and millennials are a large part of that audience.”

That interest has translated into an impressive retail guitar market.

‘There’s opportunity out there’

Earlier this year, famed Nashville-based guitar maker Gibson Brands filed for Chapter 11 bankruptcy. But that doesn’t mean that the entire industry is in dire straits.

“The notion that the electric guitar is dead is not what we’re experiencing,” Jack Higginbotham, COO at PRS Guitars, told Yahoo Finance. “We’re experiencing the opposite. If the manufacturers are listening to the consumer and delivering the product the consumer wants, there’s opportunity out there for manufacturers.”

A worker on the Paul Reed Smith factory floor works on a guitar. (Picture: Paul Reed Smith)

According to the National Association of Music Merchants, a trade organization in the music industry, the demand for American-made guitars rose year-over-year with unit sales increasing by 7.03%. And overall, the total retail value of guitars sold — $1.3 billion in 2017 — indicates a rebounding industry.

“Generally speaking, even people from … other countries want to buy American guitars,” Nate Westgor, who runs Willie’s American Guitars, a vintage guitar shop in St. Paul, Minnesota, told Yahoo Finance. “There are so many things about an American guitar that’s so different — the metals, the fret material, the magnets, the type of wood, how the wood has aged.”

At bankrupt Gibson, sales of electric guitars grew 10.5% to $122 million in the 12 months through January from a year earlier. Even Guitar Center, the nation’s largest chain retailer and a holder of more than $1 billion in debt, recently said that “guitar sales over the past year have been the strongest we’ve seen in our history.”

Illustrations by David Foster for Yahoo Finance.

Over at Fender, one of the biggest manufacturers of guitars, the trends are strong.

“Sales of fretted instruments — electric and acoustic, plus ukuleles — have been growing in the mid to high single digits for five years,” Mooney told Yahoo Finance.

Mooney added that while growth was strong in the acoustic guitar space, electric guitar figures were outpacing acoustics for the past 18 months.

‘It’s very much an American thing’

Why is business booming? One of the main reasons for its vitality is its place in American culture.

“As an American industry, we invented folk and rock, blues and jazz. The instruments that make them. It’s very much an American thing,” explained Westgor, the manager of Willie’s American Guitars. “We invented all these genres, and invented the instruments that make them — and it’s still a multi-billion [dollar] industry.”

The industry boomed in the ’60s as The Beatles and other rock bands burst onto the music scene, inspiring teenagers to buy electric guitars and bases. Gibson was one of the companies that rode along this wave, and companies including PRS Guitars joined the fray as interest remained high through the ’70s and ’80s.

Higginbotham, for instance, joined master luthier Paul Reed Smith in 1985. He said that consumers have evolved along with guitar manufacturers.

“The consumer has a higher expectation today than they did 30 years ago,” said Higginbotham. “Maybe the internet has been the tool that’s helped that happen. Guitar players in general are aware there are high-quality things that are out there, and they want them within their grasp.”

Jack Higginbotham, COO at PRS, in the workshop. (Picture: Paul Reed Smith)

‘Our audience is getting younger’

Some argue that changing tastes in music is causing guitar sales to decline.

“The electric guitar was new and fascinatingly exciting in a period before Jimi [Hendrix] and immediately after,” former Beatles band member Paul McCartney said in an interview with the Washington Post last year. “Now, it’s more electronic music and kids listen differently.”

However, another reason for the industry’s vitality is steady interest from millennials.

“For us, our audience is getting younger. I think of that as incredibly powerful and good,” Higginbotham said. “As our industry, if you were to look at our industry as a whole, it’s an aging demographic. But if you took a snapshot of us, you would see that compared to 15 years ago, our average age of our buyer has come down quite a bit.”

Howie Statland, who sells vintage guitars made by such companies as Gibson, Fender, and Martin, at Rivington Guitars in downtown New York, agreed: “We have a lot of millennials buying from us.”

Ty Dolla $ign, born in 1985, players a Fender American Professional Precision Bass. (Picture: Fender)

The key reason for capturing that age group, Higginbotham said, was to price it more competitively.

He explained that by introducing cheaper, more affordable ranges such as the SE line in 2001 and the S2 line in 2013, the company offered a price range between $499 to $1,499 to bring people into the family of Paul Reed Smith.

“That opened up an age group, and the sensibility of the designs of the guitars spoke to the indie musicians,” Higginbotham said. “That line brought our age group down considerably.”

‘Purest and most direct forms of self-expression’

With the music streaming industry booming, manufacturers are also using social media and working with prominent artists to increase brand awareness.

Mooney said that Fender is “spending twice as much on consumer-focused marketing than it was three years ago.” And the company is using social platforms like Instagram and YouTube to connect with its millennial audience by creating content that appeals to them.

Paul Reed Smith collaborated with Grammy Award-winning musician John Mayer, to create the PRS Silver Sky based off Mayer’s and Smith’s favorite elements from 1963 and 1964 vintage instruments.

John Mayer with the PRS Silver Sky. (Picture: Daniel Prakopcyk via Paul Reed Smith)

Looking to the future, confidence abounds about the American guitar’s staying power.

“I believe the guitar itself is so deeply ingrained in American culture it’s not gonna go away,” said Statland, the vintage guitar seller in New York. “It will be around as long as Mama’s Apple Pie or Coca-Cola. … It’s one of America’s purest and most direct forms of self-expression.”

Follow Aarthi on Twitter.