STEINWAY HEGEMONY

Saturday, December 11, 1999

"As of Nov. 1, the Boston Piano Company, a subsidiary of Steinway Musical Instuments, Inc. and Young Chang Co., Ltd of Inchon, Korea jointly announced the signing of an Agreement under which Young Chang will manufacture a new line of grand and upright pianos designed by Steinway. This new piano line will join Steinway Musical Instruments other two brands: Steinway & Sons, and the mid-priced Boston line designed by Steinway and manufactured in Japan. The first model of the new line will be unveiled formally in early 2001 at the NAMM show in the U.S. and at the Frankfurt Musik Messe in Germany. This third line will be reprsented exclusively through Steinway Halls, Steinway Piano galleries, and selected Steinway/Boston dealerships. This third line of pianos will be priced below the Boston. In my opinon this is a great marketing idea for Steinway. Instead of a Steinway dealer having to carry Yamaha and/or Young Chang, their competitors, a Steinway dealer will have a great 'Pitch'. Steinway, the best from America, Boston, the best from Japan, and ????, the best from Korea, all under their own umbrella. This information, outside of my own opinion (sic), was taken from the December issue of 'The Music Trades' magazine. JK."

The impact of this ripple on the piano market should be tremendous. It would represent for Steinway an attempt to complete vertical market integration. As suggested this would offer Steinway dealers a more consolidated offering. It would also tend to simplify everything Steinway does especially from a marketing standpoint.

This isn't by any means the first time this has been done. Baldwin did a deal with Kawai about 30 years ago that tried to accomplish something similar. The results of this deal probably affected Baldwin's own piano line as more research was done which led to the redesigned SD and SF series and even the L was revamped a bit.

If Steinway sticks with its marketing plan; "buy a Boston now, and a Steinway later" and then adds another line below that making it, "buy a Whatever now, a Boston later and a Steinway after that," maybe Steinway will get the turnover in pianos to increase, something that's been the dream of every large piano manufacturer ever, and Steinway retailers could really clean up as well. It's actually "dog eat dog" in the piano business, especially whenever there's any kind of economic collapse. It's not that Steinway doesn't make a great product, they do. But Steinway would not be in the enviable position it is without shrewd marketing along the way, the Stein-way.

All of us interested in pianos will have to watch this one as it develops. Will Steinway do anything very innovative here? How will they associate elements of touch and especially of tone in a series of pianos that will carry their estimable reputation probably around the globe? One thing it's guaranteed to do is to put pressure on the main Steinway plant in New York and ultimately to drive up the prices of anything new bearing the Steinway & Sons label on their fallboards. This plan is intended to promote the hegemony of Steinway and give them a way to generate a wider potential market for their limited scale high end product. Eventually even Boston pianos will probably fetch more money.

One has to wonder what the dynamics of this plan may do to Steinway's competitors. Right now competition is stiff, there seems to be a good deal of flexibility in pricing and up to a few price points, this seems to be a "buyer's market" which is to say that it's not so easy to sell pianos of certain characteristics above certain amounts of money. It's called "price inelasticity" by the way. All the makers are getting more efficient and concentrating on quality. For example, Baldwin has consolidated their line and raised quality standards everywhere so that now, no new piano carrying the Baldwin name would be inferior in any way to its competition on price or quality. Many long time Baldwin watchers, such as myself, have been waiting for this to happen for a long time and view it as a great move for Baldwin, Steinway's chief domestic competition.

In the worldwide market, pianos are being sold in parts of the world that have never had so many; China, Brazil, Indonesia, South Africa. If Steinway can get their dealers in these places to sell their latest Korean made entry at the lowest level with the pitch that they can later on trade up for a Boston or Steinway, well, it may work very well in some places. By the way, some British made pianos are advertised as weatherized for the locales they are destined for, such as Brazil, Africa or south Asia. So you see everyone has their pitch.

As soon as we know more, it will be posted here....