In the 1980s, Yamaha Corporation of America executives went to Japan to learn things from parent company Yamaha Corp.
Rarely was it the other way around, said Terry Lewis, senior vice president for the Buena Park musical instruments company.
That’s changed.
“We’ve learned a lot from them, and they’ve learned a lot from us,” said Lewis, No. 2 at the U.S. unit after Chief Executive Yoshihiro Doi.
“What we’ve seen is a much greater willingness to acknowledge each other’s strengths,” Lewis said.
The Japanese are strong in innovation, design and engineering, according to Lewis.
“They are great at making things,” he said.
U.S. executives know marketing and branding, Lewis said.
“When you put those two together, we think those are powerful things,” he said. “We’re kind of like the Toyota of the industry.”
It’s a fair characterization. Yamaha is the dominant maker of guitars, pianos, violins and other instruments and audio gear.
The Buena Park unit does about $800 million in annual sales. Parent Yamaya does nearly $5 billion in global sales.
No. 1 in Industry
Yamaha ranks as the top U.S. music and sound company, according to Music Trades magazyine.
Next are Harman Professional Group, a unit of Washington, D.C.-based Harman International Industries Inc. with nearly $500 million in yearly sales, and Fender Musical Instruments Corp. of Scottsdale with $430 million in sales.
Yamaha has about 375 workers in Buena Park. Many are musicians, including Lewis, a fan of jazz and classical music. He plays guitar and other instruments. There’s even a Yamaha band he jams with from time to time.
Elsewhere, Yamaha has workers at its factories in Georgia, where it makes small pianos, and in Michigan, where flutes, saxophones and other wind instruments are made.
Other instruments are made in China, Taiwan and Indonesia.
Yamaha’s instruments and sound products are sold in music stores and, more recently, at Target and Costco, which sell starter guitars and other gear.
Selling to folks who shop at mass retailers is a small but fast-growing business, according to Lewis.
The company’s units in Buena Park: piano; band and orchestral products; consumer products; and professional audio equipment.
The professional audio division is the largest and most profitable unit, selling guitars, drums, sound equipment and other products.
Among instruments, grand pianos and fancy wind instruments are the most profitable.
California makes up 20% of U.S. sales.
“California has a strong tradition for being the pacesetter for popular music,” Lewis said.
Targeting Amateurs
The bulk of the company’s products are sold through 8,000 independent music stores and chains, such as Sam Ash and Guitar Center.
To go after more people who might just want to play instruments for fun, Yamaha offers incentives to music stores and encourages them to offer music classes, Lewis said.
It’s a challenge. Amateurs don’t usually go to music stores, and the stores themselves aren’t used to selling to them, he said.
That’s where Target and Costco come in.
Yamaha and others in the industry continue to tout the benefits of music making, citing and even sponsoring studies.
In the past 10 years, studies have played up the benefits of music, everything from stress reduction to boosting intelligence, Lewis said.
“Most people know it intuitively,” he said.
To attract those who aren’t musically inclined but are interested in playing, learning needs to be made easier, according to Lewis.
Yamaha, for one, tries to do that with learning software for keyboards. It also makes a line of EZ Learning instruments such as a guitar that lights up the fingering for chords.
It would seem natural for Yamaha and others to do what the sneaker companies do,hire a Michael Jordan-type to hawk the brand.
The industry doesn’t have big endorsement contracts, Lewis said.
“There isn’t enough profit in our industry,” he said.
Musician Ties
Yamaha does offer instruments to artists for tours and recording. And musicians tend to be loyal, indirectly promoting brands by playing them. Alicia Keys usually performs on a Yamaha grand piano.
Yamaha supports musicians in other ways. Many pass through Yamaha Artist Services Inc. in New York (see story, this page). There, musicians can try out pianos, practice, have instruments repaired and attend workshops. The unit doesn’t really generate revenue and is designed to reinforce the company’s ties to musicians.
Lewis oversees that division, which focuses on classical music, as well as its Nashville artist affairs office, which works with rock and jazz artists.
The musical instrument industry is linked to the economy, according to Lewis. Musical instruments aren’t a latte-kind of luxury. They are a big investment in both time and money. The industry is fueled by discretionary income, he said.
“When there’s a pinch in income, musical products have to wait,” he said.
Despite the generally good economy of the past few years, sales have been slow since 2001.
Lewis said he sees pent-up demand from generation Y and its love of pop music culture, and from the all-consuming baby boomers, who bought instruments for their children and now have time and money to buy that drumset they’ve always wanted.
School music programs are contingent on government funding, which has been cut for the most part. California schools recently got a boost when Gov. Arnold Schwarzenegger signed legislation funding $250 million for school music and arts programs, “which is tremendous news to us,” Lewis said.
Yamaha is nowhere near the size it could be, Lewis contends.
“I think we’ve only scratched the surface,” he said.
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Disaster Ready
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Buena Park campus: alternative “hot spots” available in case of disaster |
Yamaha Corporation of America’s Buena Park campus has something akin to the government’s continuity plan to keep things running in the event of a disaster.
In the past few years, Yamaha has taken steps to guard against interruptions to its business in the event of a natural or man-made disaster. Initiated by U.S. management, Yamaha’s business continuity planning program involves finding alternate work sites, recovering data and having staff trained to administer first aid.
Each facility and each division has its own continuity plan, said Terry Lewis, senior vice president.
Brian Jemelian, corporate vice president of finance and administration secretary, oversees the programs. Yamaha is publicly traded in Japan with American depositary receipts here. But the U.S. operation doesn’t have to deal with Sarbanes-Oxley regulations.
“That frees up my time to oversee administration,” Jemelian said.
About 18% of the U.S. work force has been trained for emergency response. They are trained during the workday, learning CPR and other first aid. Yamaha has onsite defibrillators if needed to get someone’s heart beating again.
Yamaha also keeps emergency food, water and first aid supplies onsite.
The company has “hot site” agreements so it can carry on its business at other locations in the event it has to move from its Buena Park headquarters.
The continuity planning wasn’t in response to the terrorist attacks in 2001. Yamaha signed an alternate work site agreement the month before the Sept. 11 attacks.
Yamaha worked with a consultant on its planning. Earlier, it worked with big-name consultants but wasn’t pleased with the experience.
“We didn’t get the A-team,” Lewis said. “We saw those people during the presentation.”
Instead, Yamaha turned to a smaller consultant, Denver-based WisdomNet Inc., whose chief executive regularly visits the Buena Park campus, Lewis said.
The planning has proven to be a morale booster, according to Lewis.
“It sends a strong message that we care about them,” he said. “It’s just good business as well as good business relations.”
Yamaha also cleaned up its databases. It had more than 40 different ones, Jemelian said.
“They’ve been compiled into one,” he said.
Another program dubbed PEP for process excellence project, helps the company improve quality, cut errors and speed up operations. In management circles, it’s known as business process engineering. Jemelian came up with the PEP acronym.
Employees are integral to the program. About 25 people work to find improvements within their divisions that can be used companywide. A leader might come up with a dealer promotion that could be used by every division.
“These are high potential folks,” Lewis said. “They do this in addition to their regular jobs.”
Yamaha sends workers for training through its Yamaha University. It contracts with California State University, Fullerton’s business school for training on campus and at Yamaha.
“It’s been a fantastic partnership,” Lewis said.
,Sherri Cruz
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Artist Outreach
Yamaha Corporation of America is expanding its partnerships with the artists who use its musical gear.
Last month, the company opened an expanded artist relations, research and development facility in the North Hollywood arts district called Yamaha Artist Services Hollywood.
The operation, which joins existing Yamaha Artist Services facilities in New York and Nashville, focuses on guitars and drums.
The Nashville operation handles worldwide relationships with Yamaha artists such as Elton John, Alicia Keys and Paul McCartney.
The New York outpost is geared toward classical performers.
All in all, the company represents some 3,500 artists worldwide.
Yamaha has had an artist relations group in its North Hollywood complex since 2005, when it moved the operation from Buena Park.
Yamaha has expanded in North Hollywood by taking an additional 6,000 square feet in an adjacent building and spent five months renovating to give the operation a total of 11,000 square feet of space.
The complex provides space for a research and development center for guitars and drums; drum and guitar showrooms; photo and recording studios; a live performance room; a repair workshop; offices; and warehouse space.
,Anne Riley-Katz,
Los Angeles Business Journal
