Harman High-Performance Group Imposing Changes, Pre-CEDIA

For strategic reasons, Harman High-Performance Audio Video also now shares headquarters in Elkhart, Ind., with Harman-owned Crown professional audio, said Marc Kellom, the Harman International vice president who heads Harman High- Performance Audio Video. The Harman Specialty Group, once based in Bedford, Mass., later moved to Woodbury, N.Y., which also housed parts of Harman’s consumer operations but has since been closed.

Having Harman’s Mark Levinson, JBL, Revel, Synthesis and Lexicon high-performance brands as part of the consumer group didn’t serve them well, Kellom said. “It’s been a challenge for these brands over the years because our consumer division is much higher volume and more of a Best Buy kind of product,” he said. “That doesn’t fit these products well because they're high-performance in the way they're sold, installed and supported.” The pro division is a better fit because none of the brands relies on a retail sale, he said. “There’s a consultant and an installer and a series of experts that put these pieces together,” he said.

Harman High-Performance Audio Video, which was formed in January, is taking a “blocking and tackling” approach to distribution, nudging dealers to take on all the brands in its portfolio in exchange for incentives, Kellom said. Until now, many dealers have been cherry-picking brands, some, for example, selling Lexicon and Levinson, others offering Revel, he said. “If you're selling one of our brands you have to sell all of them,” he said. “We've put a bunch of pretty strong incentives in place. If you want to be on the team, you need to get on board.” Kellom admits the strategy could pit specialty AV dealers against one another in some markets, “but practically, that doesn’t happen very often,” he said.

Ultimately, Kellom said, the group’s goal is to help dealers sell more products, a win-win. “The questions for us are, how do we get them the products they need and how do we make sure they make good money when they sell our products -- more than when they sell our competitors’ products -- and how do we support them from a marketing and sales perspective.” The full-line approach works for dealers as well, Kellom said. “We have a really compelling solution in JBL Synthesis as an amazing turnkey solution for home theater, but if you have an audiophile customer who wants a great two-channel system, the best products in the world are sitting in the Levinson and Revel speaker lines.”

Harman wants dealers “who get it” and understand the one-stop-solutions approach, Kellom said. Not all dealers are happy with the program, he conceded. “Yeah, we have lost some dealers and I'm sure there are some hurt feelings out there, but we are in business to make money,” Kellom said. “That’s not all we're here for -- we love audio -- but you gotta make money doing it or you can’t pay people or stay in business. Sometimes you have to make difficult decisions.”

Kellom said it isn’t the first time dealers are seeing this kind of aggressive distribution strategy. He cited the example of D&M, which he claims pressures dealers to carry Denon, Marantz, McIntosh and Boston Acoustics. “No one is surprised by it,” he said. “It’s the way business is done now.” D&M executives couldn’t be reached for comment by our Wednesday deadline.

Incentives in Harman’s arsenal include sales quotas encompassing all brands, though the quotas themselves have increased as part of the new policy, he said. Harman is supporting the new push with marketing and ad initiatives to “pour some gas on this thing and make it more successful than it has been,” he said. The ad campaign, which will include placements in Architectural Digest and Cigar Aficionado, is designed to bring in customers that may be new to the brands and will focus on performance rather than style, he said. The company is also sponsoring a 53-foot truck that will travel the country and promote the brands.

“We see a huge opportunity,” Kellom said. “There’s a lot of places where people don’t know how great the products are or may not even know of the products. Someone who’s in the market for an ultra-premium loudspeaker may not even have known about the K2S9900,” referring to the new $30,000-a-pair JBL speaker due out in September. “We have great product, an amazing story to tell and truly a differentiated product,” he said. “It’s not marketing hype. There are patents involved.”

At the CEDIA Expo, the company will show 15 new products and some upgrades to existing amplifiers and loudspeakers. Lexicon will launch its first Blu-ray player, with a preliminary list price of $3,499. Described as “future- proof,” the BD-30 packs HDMI 1.4 outputs, plays all available audio formats including DVD Audio and Super Audio CD, and will be upgradable via Ethernet and USB. According to Kellom, the BD-30, by the time it ships in November, will be certified by THX, the first Blu-ray hardware to achieve that status. In a nod to the times, Mark Levinson will show a $12,000 five-channel amplifier at CEDIA. That compares with the company’s $35,000 monoblock amps.