Chinese Speaker Maker Edifier Purchases Famous Electrostatic Headphone Maker Stax Page 3

Tyll Hertsens's picture

Stax: Thriving or Surviving?
I've run a company about the size of Stax. Bootstrapping your way through product development is scary as hell. I don't think I can count the number of times I bet the company on both hands. And that's not the worst of it. The big problem are the things that go undone.

Having the backing of Edifier will allow product development to move forward without the financial risk and associated stress, but more importantly, it will allow Stax to do things that previously have not been addressed sufficiently. Edifier ownership might make the difference between thriving and just surviving. Here are my thoughts on what could be done to help Stax thrive.

Aging Product Line
While I think the newer products from Stax have been quite good, I find some of the older products a bit long in the tooth. Edifier has expressed the desire to improve the look of the product, and that's fine, but I think the electronic products probably need quite a bit of work to become competitive with current offerings from other manufacturers. (HeadAmp Blue Hawaii, for example.) Personally, I think it might be wise to move the manufacture of electronic products to China, and let Stax Japan focus on the tricky bit of driver development and manufacture.

One of my sources told me that because CRTs are going extinct, the need for certain high voltage transistors has disappeared, and many of these parts are becoming unavailable. These transistors are used in the high voltage sections of electrostatic headphone amplifiers. My guess is that Edifier will find a way to manufacture these parts itself, and this will create a strong market barrier to others who might otherwise compete in the electrostatic headphone market.

If Edifier will be assisting with industrial design, manufacture of parts, and building its own lower cost amps, there just doesn't seem any reason that Edifier shouldn't make the Stax amps. The economies of scale should allow a significant reduction in price to the consumer.

International Distribution and Price Harmonization
Stax has had a BIG problem with gray market distribution of its product. Stax states that 70% of its sales are in Japan and 30% are international. I'll bet a six-pack that more than half of Stax's domestic sales gets shipped overseas. I did a little ditch digging to show what Stax prices are like around the world.

121214_news_edifierbuysstax_photo_pricingspreadsheet

There's simply no way I'd buy a Stax product at European prices. The Stax international distribution network needs fixing in the worst way. This would have been a mammoth task previously, but now with Edifier's existing global network, this can be accomplished with little or no energy being exerted by the Stax team in Japan, which can now blissfully carry on the important work of product development and manufacture.

U.S. Distribution and Dealers
I was surprised by the number of negative comments about Yama's Enterprises, the current distributor for Stax product in the U.S. In telephone conversations with previous and current dealers of Stax headphones, it's apparent that over the last five years or so, margins for Stax products have eroded to the point where dealers simply don't want to carry the product because there's no profit in it for them. Our prices in the U.S. are good, but the dealers are taking a beating to get it there.

I called Tats Yamanashi, President of Yama's Enterprises, who claimed the low margins were a result of trying to lower the U.S. prices to reduce the incentive for U.S. customers to go around official distribution and purchase their Stax product on the gray market.

I looked at Stax product pricing from 2006 using archive.org to view HeadRoom's web site at the time. As you can see in the chart above, U.S. retail prices have changed very little over the last five years. There could be a number of causes for the ever decreasing dealer margin. Some sources fear Yama's is taking a larger cut, but the exchange rates may have been a strong contributor.

2011 $1=¥79
2010 $1=¥87
2009 $1=¥93
2008 $1=¥102
2007 $1=¥117
2006 $1=¥115

Regardless, Stax dealers have been dropping like flies over the last five years and today only a handfull of retail outlets remain. You're not going to buy something if you don't know it's there. If Stax wants to sell product through qualified retailers that can promote its product properly, then Stax will have to have to find a way to get product to those retailers with way more than 20 points margin.

The Viability of Electrostatic Headphones
The biggest concern to me is Edifier's idea of low cost electrostatic headphones. This is a technology that does not lend itself easily to the price reduction needed for mass market appeal. My guess is that you'd need to get the price down to around $300 for that to occur. Given the circuitry needed for the high voltage drive signals and the difficulty of electrostatic driver construction, not to mention the need to be very aware of consumer safety when you put hundreds of volts on their head, I think this will be very difficult to achieve.

Electrostatic drivers do have some significant advantages for high-end applications. The planar wave front they generate lends itself to superior imaging, as does the speedy transient response of these drivers. But the technology also has the drawback of typically having a hard time delivering deep bass notes --- something the popular culture desires greatly. Reducing the price of electrostatic headphones while retaining the inherent advantage of e-stat drivers and improving bass response will be a tall order for Edifier.

While I'd love to see something like a reliable Koss ESP950 on the market at $500, I'm just not sure it's possible. I'm wondering if there's a different reason for this purchase.

Caution: Wild Speculation Alert!
Think about this: Edifier is big into computer and desktop speakers. Magnepan's new planar-magnetic desktop speakers sound wicked good. Stax used to make speakers. Put that in a pot and stir it, and you come up with the possibility that Edifier is looking into making electrostatic desktop speakers.

Near-field listening with planar drivers is a very good idea. Because of the large diaphragm surface, e-stat speakers are very directional, which means you can put them on a desk and tilt them up toward your head and have less first reflection off the desk surface than with traditional dynamic speakers. In my experience, reducing first reflections on near-field speakers significantly improves imaging. These systems commonly have sub-woofers, so the poor performance of electrostatic driver in the bass can be overcome.

A low-cost electrostatic desktop speaker is something I'd really like to get my ears on. How about you?

Summary
If Edifier is true to its word, I think we're in for great listening in the future with Stax product. It seems to me that this arrangement will allow the engineers in Japan to focus on what they do better than anyone else: make world class headphones. It also appears that Edifier is in a great position to clean up distribution and pricing, and develop a solid dealer network.

Whether or not Edifier can reduce the price of electrostatic headphones to the point that they can become broadly popular remains to be seen. But, certainly, having the best, and maybe only, small electrostatic driver development team on the planet could provide excellent differentiation and a competitive advantage in the commodity market of small speaker systems.

I wish both Stax and Edifier a long and prosperous future.

Resources
Edifier Notice of Acquisition of Assets Document
Edifier love letter to Stax enthusiasts.
Stax letter to suppliers informing them of the purchase.
Google translation of the best news article I found about the purchase.
TMCNet news post on the sale.
Edifier headphone product main page through Google Translate.
Edifier Global Site (in English)
Head-Fi thread on Edifier purchase of Stax.
Wikiphonia page on Stax.
Stax Wikipedia page.

Article Contents
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Comments
dalethorn's picture
Stax and electrostatics

My thought is that there is tremendous market pressure toward making even high end headphones viable for portable use. Whether it means making small portable amps that can drive power-hungry headphones, or somehow making the higher end headphones less power hungry, the pressure is there.

I don't doubt that the absolute numbers are still there for desktop-only electrostatics and high end dynamics, but the numbers are going down as a percentage of the market, and the bean counters are very anal about that sort of thing. Not that they want to eliminate the niche product, or close the gap by reducing the quality and performance of the top end item. I think it's probably they're afraid of that huge gap between the $2k 'phones and that $8k or more 'phone and they want to fill in that gap some if they can, to lessen their risk if nothing else.

So exactly what Edifier will be able to accomplish I can't guess, but if they can make the high end electrostatic more relevant in the big picture, that will be a good thing. Relevant could mean a lot of things, but for me as an enthusiast who's willing to shell out even a few thousand dollars if the return is good enough, it boils down to "Can I ignore it and feel like I'm getting 99 percent of the best sound, or do I need to make the sacrifice and buy it because otherwise I'm a second-class headphone citizen?" (OK, so I may never be first class anyway, but you know, it's that nagging sensation that becomes more bothersome the more relevant those top end products become. So looking on the bright side, it'll be cheaper if they don't become relevant.)

khaos's picture
Love letter?

I didn't really bother to read the entire "love letter" in Chinese but the a more accurate translation of the title would be "Stax-loving friends", it's a lot more logical and less ridiculous than the bad Google translation.

Tyll Hertsens's picture
ThaNks so much for that. I
ThaNks so much for that. I really wasn't sure what the heck was going on there.
Number 9's picture
Love, brains and money...

Continue manufacturing in high-cost Japan? Are you kidding me?

Edifier should:

1) Keep engineering in Japan but move manufacturing to China.

2) Get rid of those pitiful distributors they have today. Form strategic partnerships with strong regional companies who have skin in the game (the headphone marketplace). Embrace them, because the old middle-man distribution model is killing the audio industry (case in point: Yama's)

3) Develop a global pricing model that ices the gray market. Make pricing more competitive through lower manufacturing and distribution costs.

Edifier then stands a chance of increasing not only revenues but margins over the long term with this acquisition. Maintain the status quo - its going to be more of the same (a long slow death) for Stax.

Chinese ownership is irrelevant IMO. Its a global business and Stax was being run as if this was still 1980.

attilahun37's picture
Thanks

Extremely helpful, thorough and thoughtful.
Thanks, Tyll.
I'm an investment banker and the purchase price really is shockingly low.
I'll bet the Stax mafia could have raised more money to cut a deal.
But, the sellers probably wanted to find a value added partner.
Personally, I wouldn't have sold 100% but rather entered into a joint venture to be able to participate in some of the coming upside.
Can't wait to watch this one unfold.

deckeda's picture
Thank you

... For letting me know in the hed that Edifier was famous for making speakers. Not that I have a pulse on the market, but who again are they? Are they an OEM, or do they manufacture for others, or design as well but don't sell under their nam in North America?

None of that actually matters to me, although seeing the name of a famous Japanese (did I at least get that part right? It's been many years since I was into this, sorry ...) headphone maker go to the Chinese does give me pause.

Thanks again for reporting this, Tyll --- company ownership and design pedigree/history are two of the most frequently left-out topics concerning consumer electronics, and IMO important ones.

sgrossklass's picture
On Edifier...

Their reputation stems from making active PC / multimedia speaker systems of the better kind and selling them under their own name (not sure about OEMing). That seems to have earned them good money. (If overseas companies can have stuff manufactured in China, native ones also can...)

I guess buying a company like Stax at a bargain price was too tempting to pass it up.

Currawong's picture
Number 9

People buy Stax *because* they are made in Japan -- because they are Stax and not some "global brand" with offices in one place and manufacturing in Asia. Move that to China and people will desert them.

Japanese people, in general, don't like the Chinese. The Chinese don't like the Japanese either. It's a hangover from the past. Regardless, Japanese people feel the same about manufacturing in China as many of us do.

Ideally the result will be that this will give Stax a buffer with which to develop new products without the "sleepless nights".

The 009s though - they don't wow you on first listen, they just simply, without drama, make every other kind of headphone on the planet seem incompetent IMO. The quality of their build is that far above everything else as well. Even the packaging is absolutely perfect, down to the plastic bag around the box, which is folded and taped *perfectly*.

A few companies in Japan, such as Stax, still hold the attitude that, even if, by our standards, they have reached perfection, there is still further to go. I think that, other than a few small manufacturers, only Apple have ever come close in maintaining such an attitude and producing a global company. I don't believe anyone else could pull it off, because it requires such an un-compromising dedication and focus that most people will give into diversions from it sooner or later.

Number 9's picture
To Currawong

People love Apple products even though they are designed in California and manufactured in China. No one seems to care that their iPhone or iPad was mostly made in China. Why should headphones be different?

Outstanding design, great support, competitive pricing, top-notch-engineering ... these types of things have no national boundaries.

What the Chinese lack is primarily marketing skill to build strong brands in Western markets. They bought a strong brand in Stax. All I am suggesting is they drop the backwards thinking which led to their bleak financial situation. They need to become more price competitive and lower manufacturing costs and develop a stronger distribution network. The market for $5K headphones is really small.

I've driven Saab's most my life and you probably heard this week about Saab's bankruptcy. An interesting commentary by one analyst: Great brand, bad business model. I stll love my Saab, but I would say the same of Stax if it continues to manufacture in Japan and attempts to sell over-priced gear through a shitty dealer network. Not sustainable.

MarcoGV's picture
Stax, Saab, electrets

I am driving a Saab also---I share Number 9's predicament there.

I have recently retired my 1979 Stax SR-44. This was an electret model, which I was given new as a gift in 1979. It does not work correctly any more; I suspect a problem with the electret losing its charge after 30-odd years. In my opinion, that headphone was superior to the Audio Technica ATH-700AD, the Fostex T50RP, and the Grado SR-60, all of which I own, particularly in the midrange (human voice and chamber music). Stax did not always sell only very expensive, top-of-the line electrostatics. Maybe Stax could sell again headphones of that quality to compete against the lower-cost audiophile headphones.

dalethorn's picture
Bias?

Now Currawong wouldn't be just a wee bit biased toward Japan or Stax, because he has a long time residence there? Just clarifying - that was a very dramatic endorsement of the SR-009, not that they don't live up to the hype.

Jazz Casual's picture
Do you think?

"The 009s though - they don't wow you on first listen, they just simply, without drama, make every other kind of headphone on the planet seem incompetent IMO." If not biased, then hyperbolical.

Shike's picture
meh

"People buy Stax *because* they are made in Japan"

No, they buy them because they like the sound.

If the only place to get the Stax sound is Stax, regardless of where they're made - many will STILL buy them. Besides, I've seen past retailers furious with serious QA problems from Stax even when they were made in Japan. Enough problems they stopped carrying them entirely in fact. I've stopped paying attention to where it's made considering that and instead focusing on "is it reliable - period".

Then again I'm not a fan of ESL technology on headphones where it's least useful IMO. Planar magnetic and dynamic still seems best for headphones, leave stats to speakers where they can really shine tech wise.

shstrang98's picture
What bothers me about this

What bothers me about this more than anything else is the idea that made china is so acceptable.
Yes for some stuff that is true. Iphones, ipods, ITurds whatever are nice products but they shouldn't even mentioned in the same sentence as Stax headphones. If Chinese ownership allows them to bring high quality headphones to a lower price point then fine. But by all means keep the expensive models manufacture origin in Japan. No one wants to pay high-end prices ($10k) for Stax headphones only to find they're made in China.

It probably won't be long before Audio Research, Levinson, krell, McIntosh, etc move to china as well. Classes Audio of Canada has moved all or their production to china.

And don't even start with calling my attitude "Racist." If it was racist then that person wouldn't even want Stax headphones because they are Japanese.

Lunatique's picture
Technical risk translation

I'm a native speaker.

Your interpretation of the google translation is pretty good.

The original per my translation:

(1) Technical Risk

Due to fierce competition in the headphones industry, even though Stax has greater technical advantage in electrostatic headphones, electrostatic technology might be replaced by more advanced technology. If the company cannot further invest and progress in the products' various technological developments, it could become obsolete in the market place.

The Monkey's picture
Purchase Price
I'm still confused by the purchase price. I mean, jesus, that's the average cost of a Manhattan apartment. The real estate alone must be worth that, right? Either I'm just completely naive, or we are missing major details with respect to this transaction (e.g., how much of Stax's debt Edifier assumed, which is usually included in the purchase price). If I'd known it was on the market at that price....
John Grandberg's picture
Me too...
We MUST be missing something because the number is just so low. You can't even buy a local hardware store or franchise a Burger King for that price.
Number 9's picture
What does $1.5M buy these days?

For $1.5M you can buy a McDonald's franchise in an urban location.

The sale price is indicative of the sad situation in high-end audio, which is, that it has become predominantly a cottage industry; many small, little firms lacking economies of scale, whereby the only way they can survive is selling expensive, cost-no-object niche products to fanatics with money to burn.

Notwithstanding, Sennheiser, AKG and Beyerynamic which have put R&D into uber headphones and sell them for more reasonable sums --is it truly innovation when you start selling $5K headphones, that are at best 10% better than other options which sell for orders of magnitudes less? Will they even sell more than 100 009s in a year? You call that a business?

I have not heard the 009, but if they are fantastic as Currawong says, then imagine if Stax did have ability to sell these for perhaps $1500? That would be disruptive enough to put Sennheiser, AKG or Beyerdynamic on edge. Ah, some real competition. That would be nice. Hopefully, one day, if Edifier makes the right moves, Stax will be able to do that and grow to gain the efficiencies of a larger business and be more competitive. As consumers, we stand to benefit.

Jazz Casual's picture
Stax is dead long live Stax.

Thanks Tyll for going the extra yard beyond mere speculation that's both rife and understandable. Whatever the future holds for Stax and the products that it makes, I can't help feeling a tad melancholic about this development.

ClieOS's picture
Not surprising.

I actually own the first headphone amp Edifier made back in late '90s. It is probably the worst headphone amp I have. Regardless, I have seen Edifier trying very hard to break into the headphone market since then without much success. Edifier probably see Stax as the one real chance they have to finally get into the higher end of the headphone market.

BTW, in the love letter Edifier CEO doesn't say they will 'produce diaphragm material for Stax'. Instead, he says the new brand will use 100% Stax produced electrostatic speaker unit while Edifier will produce the rest of the parts - in order to create more affordable, easier-to-use electrostatic headphone.

dalethorn's picture
100 percent of what?

I dunno about Stax making the speaker unit 100 percent and Edifier "all the other parts to reduce costs". If I were thinking about buying a $9000 headphone/amp combo like the SR-009 and a matching amp, then I think the less I knew about Edifier the better. If Stax wants to be successful, they sure don't need anyone's PR campaign (deliberate or incidental) promoting the notion of reducing costs by using parts from a manufacturer who doesn't have a reputation for excellence. In reality that may be OK and it's what most manufacturers do I'm sure, but it sounds bad here for Stax.

John Grandberg's picture
Similarities

This brings to mind the acquisition of Ultimate Ears by corporate giant Logitech a few years back (for $34 million if I recall correctly). Obviously a very different situation in many aspects.... but still - it's the closest example of a giant company buying small specialty headphone or earphone firm.

In some ways, UE has remained true to its roots. The UE Reference Monitor is widely accepted as a quality product, the UE18pro slightly less so. Still, UE generally remained the same as far as custom IEMs go. Their universal models are a different story though - it appears that the Logitech ownership has stopped them from competing at a high level in the universal arena. Maybe that's just not where they think the profit is right now.

I'd like to see the Edifier-owned Stax continue with their flagship products while running in a more efficient way (as many have said). I would also like to see an expansion in the low end of the market (think SR-001MKII and such), so that more folks can experience the Stax sound. Hook people with the entry level stuff and they will be more likely to want the higher models in the future.

JIGF's picture
Wow, what a polemic

Wow, what a polemic subject.

Thanks for the thorough report Tyll, very insightful.

jeffreyfranz's picture
Stax article

I want to add my voice to the many others who praised Tyll's work on this article. It is clear to me that this was a big and time-consuming job. Thanks, Tyll, you have our best interests at heart.

amateriat's picture
My thoughts turn to another hallowed brand...

...namely, Quad.

Near as I recall, after Quad was purchased by Verity Group, the entirety of its entire manufacturing facilities were moved to China. From a quality standpoint, it appears the transition went without a hitch. Don't know how (or if) Quad has dealt with any perceptual issues on this front.

I ultimately see a situation where Stax' manufacturing will be split between Japan (the ES headphones themselves) and China (electronics). This could also be a route to Stax re-entering the more moderately-priced (relatively speaking ES/electret 'phone market. The one thing for certain is that this won't be a boring ride.

Tyll, BIG thanks for your detective work on this!

nick n's picture
Lower end for the masses

Originally posted by Dalethorn:
"My thought is that there is tremendous market pressure toward making even high end headphones viable for portable use. Whether it means making small portable amps that can drive power-hungry headphones, or somehow making the higher end headphones less power hungry, the pressure is there."
Agreed, not that my measly opinion means anything..
I'd love to see few lower end models put out that are more easily affordable by more people. I don't mind forking over $ for higher end but not everyone has these priorities, or something like that. You know what I'm getting at anyhow. Maybe a larger diaphragm electret terminated in a commonplace TRS plug to tap the stat-curious bass oriented folks and avoid the whole speaker terminal adapter box thing which limits their application and probably puts a few folks off. With all the reasonably priced portable amps around these days no issues.
I've certainly taken a few full-sized electrets out for a walk. It's great.
Properly designed it could prove a serious contender. There have been a few examples of this in the past but only a few that hit up the bass decently. Just imagine what a TRS terminated closed back SR-50 would do to the market(anyone else own/tried one or am I alone there?) however they decided to deal with the transformers, but a larger driver with circumaural pads. No die-hard bass-heads need complain there! It's enough as it is. Bass machine.

Daydreaming again about classy chrome and matte black audio bits.

Too bad someone this side of the water didn't know about the sale previously.

Appreciate the article.
Made me sign up just to spill my dreams all over the page here in my first post...

Tyll Hertsens's picture
It would be very interesting
It would be very interesting if Stax could develop a really good electret. Thanks for the comments and welcome.
peterroumian's picture
don't worry guys if stax

don't worry guys

if stax ends we'll still have wachara from head fi Smile

Ryley 7's picture
Edifier is a multinational

Edifier is a multinational company, with offices in Beijing, Shenzhen, Hong Kong, Canada, Australia and Argentina, with manufacturing facilities in Beijing and Dong Guan, China.Quality Inspection India

Statix's picture
As a fan of Stax electrostatic cans, this is good news

As a fan of Stax electrostatic cans, this is good news to me. The Chinese, culturally as a whole, are serious about high-end audio. This is opposed to countries such as the US and Japan, where true audiophilia has become more and more a niche/boutique concept in the past few decades. Stax products have been developed at a snail's pace for a long time, and they cost an arm and a leg (by headphone price standards, at least). Hopefully this will accelerate new product development, and thus drive refinement, advancement, and exposure in the electrostatic headphone arena.