Osaka, Japan-based Onkyo Corporation says it has set a new global growth strategy that will focus on launching portable music players and headphones, thanks largely to resources it received in its acquisition of Pioneer’s home AV division. In an interview appearing in Japanese media, Onkyo President Munenori Otsuki said the world is entering “the age of portable music players.”
See more on this surprising shift of direction from a significant audio industry player…
In an interview with a reporter for the Nikkei, Onkyo’s President explained this new shift in strategy, suggesting that resources it obtained as part of its acquisition of Pioneer’s AV division better position it to go after larger markets. And in an assessment of market opportunities – the company is thinking big.
Up to now, Onkyo has been focused on what he calls the “audiovisual amplifiers” market – a relatively small segment of the overall industry. Onkyo says the global audio industry is a ¥3.2 trillion ($26.5 billion) a year business. Onkyo’s focus on audiovisual amplifiers meant it was addressing only about 2% of the overall industry.
Market share in a small market…
“Until now, we have been concerned about market share in a small market,” Otsuki told the reporter. But now the world is entering “the age of portable audio players.”
By aggressively attacking the portables and headphones product segments, the company believes that it is addressing a much bigger market – so much so they anticipate driving their annual growth by about 40%. Although the company does not specifically identify precisely what Pioneer resources allow them to go after these bigger markets – they suggest it was not possible for them to address these markets prior to the integration of Pioneer into their company.
Onkyo’s President pointed out to the Nikkei that Sony is expanding its Walkman line of portable music players and Panasonic is reintroducing its Technics brand (that they call a “high-end” brand)…suggesting that these companies see portables as an expanding market. Part of the motivation appears to be the expectation that there will be high demand for high-resolution portable music players.
The ‘collapse of the Apple empire…’
But Otsuki suggests more directly that the motivation for this industry expansion by some Japanese manufacturers in portable music players is because of “the collapse of the Apple empire” in the audio industry. Onkyo’s perspective apparently is that thanks to the growth of branded streaming services (such as Spotify & Pandora) and the popularity of non-Apple wireless technologies (such as Bluetooth and PlayFi), Apple’s stranglehold on the music distribution business is about to be broken.
Onkyo is a little more qualified to have a perspective on this topic because, unlike many other equipment manufacturers, they also own a music distribution website in Japan called e-onkyo music that offers downloads of high-resolution audio files. The company also has a separate service in the U.S. at www.onkyomusic.com offering a selection of high-resolution and other lossless music files.
Providing the music & the player…
The company stated the obvious – by expanding into this new (for them) portables category, they will now be able to offer both high-quality music downloads…and the portable players on which to play them. If that market is, as the company projects, about to take off thanks to high-resolution audio, then it can expect to benefit from both sides of the business…much as Apple did early on with the iPod/iTunes launch.
As far at the headphone category, which Onkyo did not discuss in detail with the Japanese press, here too Onkyo is in a unique position to make a real mark. Why? What many here in the U.S. do not know is that for many years, Onkyo was a globally significant manufacturer of transducers. At its peak, the company had superlative engineering capabilities for loudspeaker design. Because most of these were sold on an OEM basis with products sold under other brand names, most here are unaware of the company’s prowess.
Woox, there it is…
The company said that it has partnered with Woox Innovations – a Singapore-based manufacturer of accessories once owned by Philips – now owned by Onkyo partner Gibson Brands. Woox retains the rights to develop and sell Philips-branded headphones. We have no information on whether Woox plans on marketing high quality, high-end models – or more price-sensitive mass market models. But we do know that based on the generally positive reviews of Onkyo’s first foray into headphones (under their own brand), that the company has the ability to engineer a quality offering.
Onkyo is certainly in need of a new growth driver as it has seen its fiscal revenues decline from $441.4 million in 2011 to $302.5 million in 2014. And net profits declined from $3.7 million in 2013 to a net loss of $3.9 million last year.
Making systems for others…
In addition to the specific categories already mentioned, the company told reporters that they are considering designing and manufacturing “compact audio equipment” for other…unnamed brands. Apparently, Onkyo has already started a project with Meridian Audio to develop products using its MQA technology.
There is one thing that Onkyo did not address in their Nikkei interview – while these new categories may offer them the ability to participate in a larger sized market, they also come with increased competition. Differentiation of their offerings is going to be critical for success. For that we’ll have to wait and see what their engineers come up with.