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

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.

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