Voice Is Key to Sound United Strategy, but Approach Differs Per Category, Says CEO

Digital technologies are “more complicated and expensive to implement,” said Duffy, singling out voice assistants as an area the company needs to be in but one that requires more engineering resources. Sound United has implemented the top voice platforms in products over the past 12 months, “and we iterate pretty fast,” he said. “If you’re not big enough, I think it’s hard to keep pace with that quickness of iteration and you’ll end up generations behind in your platform.”

Duffy called voice control the most interesting segment of the market for custom electronics dealers and an area that will make integrators even more important to customers. The idea that voice control could simplify the AV setup process to the point of cutting the dealer out of the customer experience is “ridiculous,” Duffy said: “A person needs to go to a custom integrator more now because integration is awesome,” he said. The audio industry will experience a shift from voice control from a single device to becoming in-home control for many different devices, he said: “I don’t think that disintermediates custom.”

Sound United has spent “the last 24 months putting voice throughout our portfolio,” said Duffy, citing integration with Amazon Alexa, Apple Siri and Google Assistant. On whether the company envisions working with a smart speaker for control or integrating a voice assistant directly into a product such as the Polk Audio Command Bar, Duffy said that will depend on the product. “There are products mics should be in and not in, but all the products should be controllable via voice,” he said.

Building a mic array for voice control into an AV receiver located in a central equipment stack in a basement “doesn’t make a lot of sense,” he said. A Command Bar-type product that serves as the central entertainment hub in a living room -- to control access to video and music content -- “is a pretty cool place” to have one, he said. Sound United has configured mics to “suppress the sound of the bar itself so it can hear you better than an independent mic,” he said. In Sound United’s broad product portfolio, “I think you’ll see different implementations of the way we use microphones and voice.”

Duffy declined to elaborate on plans for the Onkyo and Pioneer audio brands following the pending purchase of Onkyo Pioneer Corp.’s audio business, expected to close in July. The executive described the deal as “carve-out” of the audio-video business from that company, which sells through distributors in the U.S. and Europe.

Onkyo USA is an independent company not owned by Onkyo-Pioneer Japan, “but owned by an individual.” Duffy said, saying Sound United is assuming those distributor contracts as part of the acquisition. An Onkyo Global announcement May 21 said: “Other subsidiaries and current distribution by Onkyo USA in the Americas and Aqipa in Europe will be unaffected by this transaction.” Jason Sausto, CEO of Onkyo USA, didn’t respond Friday.

On what Sound United looks for in potential acquisition targets, Duffy said in addition to engineering, it looks for supply chain, manufacturing, production and customer relationships a company has in place. “We have warehouses all over the world so we have the warehouses where they need to be to get the product to customers quickly,” he said.

Sound United products are produced mostly in Japan, Vietnam and China, and so far the company has seen “minimal exposure” to List 3 Section 301 tariffs imposed by the Trump administration on goods produced in China, Duffy said. “We have a pretty diverse manufacturing base,” he said: “Obviously, the tariffs today are largely related to China and, and the vast majority of our production does not occur in China.” The company is “fortunate to have -- at the current time -- minimal exposure” to tariffs, he said.

Duffy wouldn’t discuss plans for its brands once the purchase is complete when it would have five AV receiver brands in its stable. Responding to our question on whether some brands might move into audio categories other than AV receivers, Duffy said, “I can’t really talk about product road map.” Sidestepping a question on whether the decision to buy the Onkyo and Pioneer brands was a “checkmate” on competitor Yamaha, Duffy said, “We did it for scale.”

Commenting on the apparent overlap of five AVR brands targeting the same price range and whether the company would push one of the brands toward the audiophile segment where it doesn’t have an AVR offering, Duffy took exception to the “overlapping” suggestion. He said there’s more difference between the Denon and Marantz brands on the engineering side “than we take credit for marketing-wise.” While there’s not a lot of differentiation on the digital side -- “a Wi-Fi chip is a Wi-Fi chip” -- differences exist on the analog side that are “far greater than you would imagine.”

Michael Greco, Denon senior director-global brand management, said while there are similarities in HDMI chipsets and digital signal processing chips that the two brands use, “there’s different programming on the DSP.” At retail, signage focuses on a feature set that compares specifications, he said, but “that doesn’t tell a whole story.” Customers buy a Marantz, Denon, Polk or Definitive Technology product because of “how it sounds,” he said, “and that isn’t representative on a spec sheet.” That’s a challenge at retail where product tags indicate wattage per channel and the number of HDMI inputs: “The story gets lost.”

On how Sound United generally finances purchases, Duffy said it's a combination of debt and equity, while it tries to keep a conservative debt capitalization on the overall company. Its majority shareholder is Charlesbank Capital Partners. Sound United is in the process of securing financing for the Onkyo-Pioneer acquisition, he said.

As for other brands that Sound United is eyeing to enhance its product portfolio, Duffy said it's much stronger in loudspeakers in the U.S. than it is in other markets. “There are ways to get that,” he said, through growing “organically” in other geographic regions or through acquisition. “That’s one reason we bought Denon and Marantz,” he said of the 2017 purchase that brought the two brands plus Boston Acoustics under the Sound United umbrella: “We got access to channel partners in other regions.”