SIC 3931

This category covers establishments primarily engaged in manufacturing musical instruments and parts and accessories for musical instruments. The primary products in this category are pianos, with or without player attachments, and organs. This industry also includes string, fretted, wind, percussion, and electronic instruments.

NAICS Code(s)

339992 (Musical Instrument Manufacturing)

Industry Snapshot

At one time, the ability to play a musical instrument was considered an essential part of a person's basic education. During the later half of the twentieth century, however, electronic advances like video games and music-playback machines combined with increasingly hectic lifestyles to make the effort of mastering a musical instrument somewhat less appealing. Nevertheless, in the late 1990s more than 60 million musicians resided in the United States. According to the U.S. Census Bureau, musical instrument manufacturers shipped $1.79 billion worth of product in 2000.

As part of the personal consumer durables category, musical instrument purchases depend greatly on consumer confidence. Such purchases are made with disposable personal income. In addition, in times of recession, discretionary spending for school bands and orchestras, personal music lessons, and high-end instruments become the first casualties of austere budgets. Reflecting a strong economy and low unemployment, production of acoustic pianos and school instruments increased in the late 1990s.

Organization and Structure

While dominated by a few large manufacturers, the musical instruments industry of the 1990s remained rather fragmented. In 1998 the top five companies commanded more than 50 percent of total industry sales, but there remained hundreds of small shops with annual revenues of less than $10 million. Traditionally, the musical instruments industry has been dominated by the production of pianos, player pianos, organs (including electronic), and parts for those products. In 1997 production of acoustic pianos climbed after years of decline; the segment claimed 11.7 percent of market share on sales of $713.8 million. Production of school instruments also improved due to a good economy. Sales of school music products were $628.3 million. Keyboard instruments, which accounted for an estimated one-third of the industry's sales in the mid-1990s, as well as home organs, had lackluster sales in the late 1990s. According to U.S. Industry & Trade Outlook '99 , consumers perceived portable keyboards as low quality and home organs as old-fashioned. In 1997, the industry sold $710.8 million of fretted instruments, $322.8 million of electronic music products, and $311.7 of percussion products.

While some automation had been introduced to the manufacture of musical instruments, the processes generally remained labor and materials intensive. The cost of building quality pianos soared during the later half of the twentieth century. A good piano used more than 8,000 moving parts, many of which required rare super-quality materials like ten-grain-per-inch spruce and highest-grade wool. Foreign competitors pushed into the market with innovative man-made materials and mass-production techniques that dramatically lowered the cost and increased the flexibility of the instruments.

A convergence of demographic and competitive factors that had shrunk the musical instruments industry in the 1980s continued in the 1990s. Business failures and consolidations were expected to reduce the number of industry firms from the 1987 level of 400. Similarly, across-the-board employment levels were forecast to continue their multi-decade decline.

Background and Development

The Victorian era (1830 to 1880) saw the enthroning of music, especially piano music, as an essential stabilizing element of society and, particularly, the family. In 1881, the Chambers' Journal reported: "In every house there is an altar devoted to Saint Cecilia, and all are taught to serve her to the best of their ability. The altar is the pianoforte."

The expected devotees of music were mainly women. In 1922, the Music Teachers National Conference noted that 75 percent of all concert audiences were women and 85 percent of music students were female. In 1978, 57 percent of all music students were female and 79 percent of all piano students were as well. As early as 1840, the American "piano girl" was a recognizable stereotype; at the time, musical ability was thought to enhance a woman's social prestige.

The piano brought families together to play and listen, becoming the centerpiece of the Victorian family and an avidly sought after item in the growing industrialization of hectic post-World War I America. The musical instruments industry sought to capitalize on that interest and place a piano in every parlor in the nation.

Before 1800, all pianos were grand pianos that required a lot of space, but that year saw the development of the John Hawkins' Portable Grand Piano, the precursor of the now-familiar upright piano. That innovation allowed the piano into the parlors of the middle class, a development paralleled by the refinement of the music box, particularly after 1815. This device provided good quality music without the needed effort of the piano or other instruments. These two trends in musical instruments continued throughout the century, with the appeal of passive listening becoming more important in twentieth century America. The first electromechanical piano, the Telharmonium by Thaddeus Cahill, appeared around 1896.

Playing a piano well required effort and practice. Few could develop the talent to any great degree, a fact that prompted piano manufacturers to look seriously at self-playing pianos. These devices held the promise of combining the social values associated with piano ownership with the pleasures of passive listening. The French led the way in 1863 with a patent on music rolls but, like the German versions, they never worked well. The American Angelus player piano of 1897 achieved the first commercial success, followed by the Pianola in 1898 and the Apollo in 1900. By 1918 it was estimated that more than 800,000 player pianos were in operation in America east of the Mississippi alone, and 75,000 piano rolls were sold every month in Philadelphia. Most played popular ragtime pieces, but many delivered concert-quality renditions of classics "recorded" on cylinder by famous concert pianists from America and Europe. More than 100,000 coin-operated electric pianos produced by Wurlitzer and the J.P Seeburg Piano Company were distributed throughout the country, and automatic selfplaying pianos became common in many movie houses.

Despite manufacturer claims that anyone could play a player piano, even a child, proper operation required careful and consistent operation of the foot pedals. By 1923, player-piano sales peaked at 56 percent of all pianos sold. The automated devices could not compete with the growing popularity of radios and phonographs, however, which provided simple, reliable listening and took up far less room in the family parlor.

Faced with the evaporation of its market, the industry reversed itself, promoting active piano playing with National Music Week, which encouraged awareness of music in general and music lessons in public schools. In 1928, 358 schools provided piano lessons; that figure jumped to 2,004 by 1930. The National Piano Manufacturers Association, founded in 1901, stressed the joys of active piano playing and encouraged group instruction.

The industry also had to fight an image problem, as mass production techniques led to marketing abuses. The American industrial system of mass production and standardized parts, coupled with the expansion of the railroad transportation system near the end of the nineteenth century, sparked a realignment of the traditional piano craft shop. The corporation became the common business structure, and manufacturers often bought components to assemble a finished product without the need of a manufacturing facility at all. This was a similar development to what was happening in the automotive industry, with small firms becoming adept at supplying specific component elements to an assembly and marketing firm. The result, according to Frank L. Wing of Wing & Sons Piano Company, was the manufacture of the world's best pianos as well as the world's worst. Wing & Sons produced three distinct grades of pianos: professional instruments bought by wealthy middle class clients for about $600 in 1916, commercial pianos that provided reasonable sound quality and durability for $400, and the low-grade "assembled" piano that sold for about $200. Many of the latter category were "stencil" pianos that did not carry the name of the manufacturer or assembler anywhere on the instrument. Dealers usually stenciled their own names onto the casings after delivery and often used names similar to those found on top quality instruments, such as "Baldin" for "Baldwin."

A major innovation in the production of the American piano was the introduction of the console piano in 1935. This smaller, more streamlined instrument fit better with modern American architecture, blending with the living room decor instead of dominating it. The console piano and the new electronic organ formed a major part of the rising postwar demand of the mid-1940s.

In 1969 Baldwin Piano executive Morley Thompson predicted piano sales would double by 1980, but instead they dropped by 30 percent, reflecting a nearly one-third decline in the birth rate from 1965 to 1975. The resulting decline in school-age children decimated the industry's core market. At the same time, high interest rates and rising raw materials costs accelerated the decline of the market. Competition, both from other leisure and entertainment categories and from foreign manufacturers, whittled away at the domestic producers' share of the market. By 1986, imports had captured 43 percent of the U.S. acoustic piano market. In the late 1990s, things began to turn around for the segment, and Baldwin's sales increased 23 percent in 1997.

The electronic revolution had a great effect on the musical instrument industry. Between 1981 and 1986, the price of an acoustic piano doubled because of increasing labor and material costs, while unit sales dropped from 282,172 in 1978 to 166,555 in 1986. Compare that with a 40 percent increase in the sales of electronic keyboard instruments between 1985 and 1986. In fact, Americans bought twice as many keyboards in 1986 (206 million) than in 1985 and more than four times as many as in 1984. Sales of synthesizers jumped from 220,000 in 1985 to 350,000 in 1986. All that was driven by the increased power and flexibility of computer-assisted music production and a drop in the price of such electronic equipment. However, by the late 1990s, the segment had softened because consumers perceived that portable keyboards were of low quality. In 1999, Yamaha attempted to change that perception by introducing a moderately priced keyboard with such professional features as automatic accompaniment and sampled sounds.

Robert Moog introduced the synthesizer concept in 1964, but his company folded in 1977 and Moog moved to Kurzweil Music Systems Incorporated. The company's Kurzweil 250 used computer memory to reproduce the sounds of any musical instrument. The real breakthrough, however, came in 1983 with the musical instrument digital interface (MIDI), which allowed musicians and composers to connect synthesizers, instruments, and even computers together and have electronic signals successfully pass between them. Computer hardware and accompanying MIDI software sales jumped to $500 million in 1987. The computerized equipment allows composers and musicians to master new instruments quickly and to develop new music faster and more efficiently. They can also incorporate other, non-musical sounds into their compositions and performances. The system breaks down the barriers between composer, performer, music printer, and instrument builder, allowing the musician full control of the creative process.

The technology, however, brought a new set of problems. It allowed a musician to "sample" sounds from anywhere and anyone and then modify the sound to fit the need. Entire orchestras can be synthesized by one person, and other performers can be used to computer-produce totally new performances. This has led to copyright battles and fears of lack of work for live-performance musicians. In addition, the old fear that plagued the piano industry during the heyday of player pianos—that the technology will displace the art—has returned.

Introduced in the United States in 1989, acoustic/digital pianos offered the best of both worlds—for a price. The equivalent of a digital age "player piano," these instruments combined the traditional, full sound of a grand or upright piano with computer-driven options like automatic playback of famous performances, self-recording, and headphones for silent practice.

Another advancement in musical technology was the use of virtual reality. Peter Williams of Virtual S of London experimented with a virtual-reality keyboard in the shape of a checkerboard and bouncing ball. Each square could be a specific instrument or effect controlled by filters and other electronic controllers. The effect is a random music piece accompanied by the visual representation of the bouncing ball on the checkerboard. "This is one class of music programming that you couldn't do in the real world," said Williams in New Scientist. "We're not trying to replace violins and other instruments; this is a different way of doing it."

Other developments in the industry included a new process for making a plastic clarinet, which was developed by an English clarinetist and teacher along with an industrial designer. By fusing two molded halves instead of injection-molding a single piece, they eliminated the traditional tone problems of earlier plastic clarinets. Traditionally, clarinets are made from African hardwoods usually found in endangered rainforests. Consequently, the price of such wooden instruments was skyrocketing. The inventors hoped to begin using the same molding technique in the production of saxophones.

Current Conditions

Demographics and a strong economy held out some promise for the musical instruments industry of the late 1990s and early 2000s, with growth projected at 2 percent annually. Many of the school students in the "echo boom" were being given the opportunity to learn to play a musical instrument and were potential buyers of instruments. The baby-boomer generation entered the 35-to-54 age group during the 1990s, bringing with it considerable purchasing power and an interest in improved products. The instruments of choice for this generation were the acoustic guitar and similar instruments.

Industry shipments increased from $1.32 billion in 1998 to $1.79 billion in 2000. Manufacturers spent a total of $704 million on materials in 2000, compared to $498 million in 1998. The total number of industry employees increased from 13,587 in 1998 to 15,279 in 2000. Production workers, who numbered 12,217 in 2000, worked a total of 23.7 million hours and earned wages of $310 million.

Industry Leaders

At the beginning of the twentieth century, the American musical instruments industry was dominated by a few big names like Baldwin, Steinway, Aeolian, American, Kimball, Wurlitzer, Steger, and Kohler. By the mid-1990s, after a century of reorganization, merger, takeover, and bankruptcies, many of these once-famous names had disappeared.

Baldwin Piano and Organ Co. of Loveland, Ohio, survived dropping sales and rising interest rates by getting into the finance business: it bought and sold loan agreements on its pianos and organs. Dwight Hamilton Baldwin, a retail dealer of pianos and organs in Cincinnati, established the company in 1862. Its later success resulted from the takeover of many small piano manufacturers and the development of a consignment-based dealership contract arrangement. The system, actually begun by the W.W. Kimball Co. of Chicago, put pianos in showrooms across the country without major investments from the dealer and made pianos available to consumers on monthly payment terms. By the late 1930s, innovative marketing and quality products had established Baldwin as the industry leader. Hoping to capitalize on its decades of experience in consumer financing, the company diversified into financial services in the 1970s. By the early 1980s, the piano business was a mere 3 percent of the holding company's $3 billion operation. When parent company Baldwin-United went bankrupt in 1983, it spun off its piano interests in a management-led leveraged buyout. Faced with intense foreign competition, heavy debt, and a shrinking customer base, the company struggled to achieve consistent profitability in the 1990s. Sales rose from $110.1 million in 1992 to $122.6 million in 1995. Net income slid from a high of $5.9 million in 1992 to just $345,000 in 1994, rebounding to just under $4 million in 1995. Sales increased to $154 million in 1997. Baldwin has the largest market share of grand pianos in the United States. Since 1988, it has manufactured Wurlitzer pianos, and since 1995, Chickering grand pianos.

Steinway Musical Instruments, Inc. has two divisions: Selmer and Steinway. Founded before the turn of the twentieth century, for most of its history Selmer Co. concentrated primarily on wind instruments—clarinets, trumpets, and saxophones—as well as violins. Leveraged buyouts in 1988 and 1993 put the company in private hands. In 1994, the company acquired Steinway Musical Properties, Inc. for $101.5 million. Steinway had also built a reputation as a maker of quality instruments. Established in 1853 in New York, the firm eschewed price competition, instead cultivating a top-quality image via international endorsements by concert pianists, sponsorship of national concert tours, and with award-winning national advertising campaigns. According to a corporate profile, "More than 90 percent of all concert piano performances are on Steinway grand pianos." It also states that "Selmer is the leading domestic manufacturer of band and orchestral instruments" and that "over 60 percent of professional musicians and performing amateurs" use instruments with a Steinway Musical Instruments brand. Steinway Musical Instruments had sales of $277.8 million in 1997.

Leaders of the guitar segment of the industry included Fender Musical Instruments Corp. and Gibson Guitar Corp. Headquartered in Scottsdale, Arizona, privately-held Fender was acquired by CBS Inc. in 1981 and taken private in 1985. New management reinvigorated the company such that by 1995, the company boasted almost 50 percent of the guitar market. Fender had 1997 sales of $193 million, while Gibson had sales of $120.1 million. Nashville-based Gibson can be traced to the 1870s, when company namesake Orville Gibson opened a mandolin shop in Kalamazoo, Michigan. C.F. Martin & Co., founded in 1833, is a leader in the high-end guitar market. The company's earnings rose 10 percent a year for four years, generating revenues of $53 million in 1998. In 1999, Martin moved into the under-$800 segment.

The founding of United Musical Instruments U.S.A., Inc. (UMI) in 1985 allied the famous musical instrument names of Armstrong, Artley, Benge, Conn, and King. Brands encompass wind and brass instruments. Armstrong, Artley, and Benge began manufacturing in the 1930s. Conn, the oldest continuously produced brand name brass instrument in the United States, was founded in 1875, while King instruments have been manufactured since 1893. UMI also imports and distributes instruments from overseas. The company had 1998 sales of $20 million.

America and the World

The United States imports and exports musical instruments in all categories. The main imports are pianos, guitars, and electric instruments. Japan, Korea, Taiwan, and China are the main suppliers and account for some two-thirds of imports. Chief musical instrument exports are parts (about one-third of total), high-quality guitars, and electric instruments. Half of U.S. musical instrument exports in 1997 went to Japan, Canada, the United Kingdom, and Germany.

Research and Technology

An ongoing problem for novice musicians is how to learn to play an instrument without disturbing others or embarrassing themselves. Yamaha tackled this problem by introducing a whole of line of "silent" instruments for practice sessions. By 1999 the line included the violin, drum, cello, and a brass collection. For people who wanted to pretend to be playing, QRS Music, maker of a wide selection of self-playing instruments, introduced the world's first self-playing violin.

Developed by Virtual DSP Corp. in the late 1990s, the MidiAxe guitar contains a circuit board embedded in the back. Competitors' guitar MIDI systems, such as those from market leader Roland Corp., required a sensor to be attached to the guitar—something musicians balked at doing to their expensive instruments. Notes George Erb in Puget Sound Business Journal , "Because of that board, players can plug a MidiAxe directly into a computer and use the instrument to create a wide array of digital sounds."

Further Reading

Brown, Ed. "Sing Me a Song, Mr. Piano Man … Excuse Me, Orchestra." Fortune , 15 March 1999.

Cummings, James. "Yamaha's Affordable, Easy-to-Use Keyboard in High Demand." Knight-Ridder/Tribune Business News , 8 July 1999.

Darnay, Arsen J., ed. Market Share Reporter. Farmington Hills, MI: Gale Group, 1998.

——. Manufacturing USA. 6th ed. Farmington Hills, MI: Gale Group, 1998.

Erb, George. "Plenty of Pluck." Puget Sound Business Journal , 9 April 1999.

Feibelman, Adam. "The Good Wizard: He Saved Gibson Guitars From Being a Firm That Sold Seconds." Memphis Business Journal , 14 October 1996.

Fitch, Stephanie. "Stringing Them Along." Forbes , 26 July 1999.

Grument, Tobey. "Silence Is Golden." Popular Mechanics , April 1999.

Lim, Paul. "How You Can Get a High-Tech Piano That's Truly Grand." Money , February 1997.

Matzer, Marla. "Playing Solo." Forbes , 25 March 1996.

Smith, David. "Conway Plant Builds 2,200 Baldwin Pianos a Year." Arkansas Business , 6 April 1998.

U.S. Industry & Trade Outlook '99. McGraw-Hill and U.S. Department of Commerce, 1999.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from .

Watson, Bruce. "How to Take on an Ailing Company and Make It Hum." Smithsonian , July 1996.

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