KMC Music Headquarters
Mark Terry: CEO, JAM U.S. Music Group; President, KMC Music
Although “Five Minutes With” always seeks to host a prominent, well-respected, long-tenured veteran of the music products business, it’s quite rare that we score an interview with someone whose career is as illustrious as that of Mark Terry, CEO of JAM U.S. Music Group and President of KMC Music. The organizations with which Terry has been affiliated comprise a “who’s who” list that spans the music products, pro audio and recording technology industries. Here, Terry not only reflects on his multi-decade career, but also expounds a strong case for why KMC Music’s future is brighter now than it’s ever been. From a discussion about “centers of excellence” to an analysis of how retailers can succeed in an online-dominated world in which customers are accustomed to choosing from thousands of product options, this interview touches on critical issues…ones that retailers have no choice but to confront. This discussion is one you can’t miss.
The Music & Sound Retailer: To start, let’s take a look, from a 10,000-foot point of view, at your career in the music, audio and technology industries. Recount some of the highlights of your career from the past couple of decades. Then, tie those career highlights into how those experiences qualify you for your new task. Mark Terry: When I was a child, all of my friends were musicians—and I wasn’t a very good one at all! So, I decided to join the AV squad to make up for that. People get into music in one of two ways: either through a band or through the school AV squad. Needless to say, I was on the AV squad! So, I had a PA when I was 16 years old, and I did the PA for all my friends who had bands and performed in clubs. That pretty much sums up how I got my start in this business. I went to school in New York City to study audio engineering, and I ended up at National Recording Studios, which, at the time, was the oldest and largest recording studio in New York. I was a recording engineer, mostly doing jingle work. I was recording commercials for Budweiser and Michelob and Pepsi…you name it. I also recorded some of the “I Love New York” spots. I really was indoctrinated at the highest level of the New York studio scene in the late ’70s and early ’80s, when the scene was really jumping. I was working with the top studio guys, and it was just a blast. However, one day, it was late…2am…and I looked around the room and realized that everybody in the room was making more money than me. The studio musicians were making rate. The ad producers were making a ton of money. And I said, “There has to be something else.” I looked at all this equipment and said to myself, “I’ll bet whoever sells this stuff makes a lot of money.”
(L-R): James Tsaptsinos, Vice President of Sales; Mark Terry, President; and Roger Hart, Vice President of Merchandising.
So, that realization led me to selling recording studio equipment. I was selling mixing consoles, 24-track tape recorders…everything a studio would need. I sold equipment to Electric Lady Studios, the Record Plant, the Hit Factory…all the biggest studios. In fact, the Hit Factory is where I met John Lennon. I was selling them equipment for his last album, actually—the one he was working on just a month or two before he was tragically killed. When I met him, I was putting in a synchronizer so two Studer 24-track tape machines could work together. My experience selling studio equipment led me to New England Digital Corp., the pioneering audio company that developed the Synclavier. I was Vice President, and we were selling half-million-dollar synthesizers and hard-disk recorders to the likes of Pete Townshend, Sting, Stevie Wonder and Michael Jackson. As you might imagine, this was a pretty heady time, because we sold the very first commercially available hard-disk audio recorder. The Synclavier and the direct-to-disk system pioneered all the sampling that’s going on today. This was where it all began. We were selling memory for $5,000 a megabyte! And a full Synclavier direct-to-disk system would be two 19-inch racks, each of which were about five-and-a-half or six feet tall. And that whole system would go for about half a million dollars. And, in addition to artists, we were selling to Lucasfilm, the BBC and Universal Recording, among many others. It was in the process of doing this that I first became involved with Harman, which was our distributor in Europe. I moved to England and I was basically on loan to Harman, where I ran the distribution for their Synclavier business. And that was where I started getting involved with dealer distribution, because we had Harman UK, Harman Deutschland and Harman France. These were distributors. And we had independent distributors, like Arbiter, which was the Fender distributor, selling our products in Europe. Harman liked the work I did there and, eventually, they offered me a job that, quickly, turned into being responsible for the sales and marketing of JBL Consumer and JBL Professional products outside the United States. That’s where we were using distributors—most of them musical instrument/pro audio distributors—all around the world. I was at Harman for 17 years and, while there, as President of the Pro Group, I managed a large portfolio of brands: AKG, JBL, Crown, Soundcraft, Studer, Lexicon, dbx, BSS, Allen & Heath, Turbosound…as well as DigiTech and DOD electronic musical instrument products, which we sold through distribution around the world and directly to U.S.-based musical instrument stores like Guitar Center and Sam Ash. I lived through the MARS era. We were selling major retailers across the world. I’ve had decades of selling products into the music industry, including MI retail. This entire background has really positioned me very well to come into my new role at JAM Industries U.S. and KMC Music. The Retailer: There’s been some tumultuousness over the past several years with KMC Music, having been acquired by Fender in early 2008, having sold a number of brands last year to DW, and having KMC itself bought by JAM Industries. Describe the transition process, zeroing in specifically on the shift from Fender to JAM. 
The new KMC Music distribution center spans 300,000 square feet and is part of the Fed Ex complex in Southaven MS.
In addition, JAM has invested millions of dollars in this new warehouse, which is now optimized for picking and packing product in a state-of-the-art fashion. It’s all computer-controlled conveyor belts, whereas a lot of businesses used to walk around with a cart and hand pick product for fulfillment. This is all laser-scanned and computer-controlled. It’s the kind of operation you would expect to see at an Amazon warehouse. We’ve put millions of dollars into this 300,000-square-foot facility to really bring it up to being a state-of-the-art distribution center. We’re now able to offer same-day shipping to our customers, which we used to strive for before, but which we didn’t have the infrastructure to support. And, now, with this new infrastructure, we’re going to be dramatically better off. We’ll be better able to pick, pack and ship products—same day—to customers. And whether that’s a set of strings or four guitars and a set of drums, the system is optimized to get all that product out the door very quickly, right into the hands of FedEx next door, and then off to the dealer. The Retailer: I’d like to touch on “centers of excellence.” How can the JAM companies in the U.S. operate better as a team built around “centers of excellence”? Terry: I think that ties into my earlier comments. What I’m doing now with JAM U.S. Music operations is to focus the businesses on centers of excellence. US Music has done an outstanding job of developing and managing our own proprietary brands, such as Washburn, Randall, Oscar Schmidt, Jay Turser and others. They will continue that focus, in addition to taking on the management of brands that we still own in KMC, such as Barcus Berry, Jasmine, Hilo and others. They will be our center of excellence in brand management and marketing. We will be investing heavily in this area. Additionally, they will handle international sales for those products and continue focused distribution of a limited number of premier brands, including Marshall, Eden, Natal and DigiTech. KMC Music and Davitt & Hanser will be the centers of excellence for U.S. distribution and dealer support. Each company has a different product mix and customer base. They have operated independently and successfully in the industry for years, and they will continue to do so. KMC Music will now sell many of US Music’s brands, such as Washburn, Randall and others, alongside Hagstrom, Warwick and the more than 250 other brands they currently carry. That sounds like a lot of product, but they have a huge sales force of over 40 outside and inside salespeople who bring these products to over 6,000 dealers in the U.S. The Retailer: You believe the Internet is actually creating new sales opportunities for retailers. Explain your view of the Internet relative to brick-and-mortar retailers. Terry: The Internet is changing the buyer’s methodology. Retailers, to be competitive in the world today, have to be able to support that new methodology. Buyers used to walk into the music store—I know I used to do it when I was younger—and they’d go, “Hey, what’s the cool new microphone that’s out today? What’s the new amplifier out today?” And what I would learn about product was either in that store, from that salesman, or maybe in a magazine. And, so, I would very often buy what that store sold and the products that they had in stock, because I was loyal to that dealer. Today, people research and find out about products on the Internet, where they see hundreds of times the amount of products they would ever see in a retail store. So, say they’re looking for a guitar strap. It used to be they’d walk into a store and, whatever guitar straps the store had, that would be their choice. Now, they literally can see tens of thousands of guitar straps online from all different vendors. And, when they walk in the store, they’re going to say, “Hey, I saw this really cool guitar strap. Can I buy it from you?” And the dealer, if he doesn’t have it in stock—and he can’t have tens of thousands of guitar straps in stock—will need a strong distribution partner. That dealer must be able to say, “I can get it for you. I can have it for you tomorrow.” Meeting that very real, critical need is where the role of distribution takes on new, added importance. In the MI business, we’ve always added value by holding inventory for the dealer, so the dealer didn’t have to be so deep in his inventory. He might have one or two of something, rather than 20. But the big change now, I think, is the need for that dealer to have this broad assortment and to have immediate access to that broad assortment. So, the dealer in the store can go to his computer terminal, type in the name of that guitar strap at KMC Music Online, show it to the customer, who will say, “Yup! That’s the one,” and the dealer can click and say, “It’ll be here tomorrow when you come back.” That is a new methodology. And it’s similar to what the big-box retailers are doing…this hybridized brick-and-click methodology, where they’re doing a very similar thing. At Walmart and Kmart, you can order product online and take delivery in the store. It’s that breadth of inventory capability that customers expect today from the average retailer in America. With KMC Music Online, dealers are just one click away from offering their customers over 20,000 SKUs from hundreds of brands. The Retailer: Much has been said over the last several years about how the broader economy affects our market. Drawing on your experience—as well as your current role with KMC—what’s your view of the broad market? Is there reason for overall optimism? Terry: Yes, I think there is reason for optimism—but it’s a tempered optimism. If you look at the history of the musical instrument business, you can see that it ebbs and flows. It’s never just rocketed up. There are periods when we have had good growth year after year, but nothing astronomical on the scale of the Internet business or the computer business. It was never that kind of industry. But, what it has always been is a business in flux. In flux in terms of the product—remember the harpsichord used to be the biggest-selling musical instrument in the world, and then the accordion was the largest seller in the world, and then it was guitars. This kind of flux is going to continue. And, so, we see this dynamic in terms of the mix of what people buy. For example, how acoustic guitars are stronger now than electric guitars…those kinds of things. But then, we also see flux in how the product gets to the customer. Everybody remembers when the catalog business came out, and everybody was convinced that catalogs were going to put all retailers out of business. But that didn’t happen. Then it was big-box retailers. Then it was the Internet that was going to put all the retailers out of business. But that is not going to happen. Yes, it is impacting a lot of retailers, but smart retailers are making the necessary adjustments to make the Internet work for them—not against them. So, I think the long term is great for the business. I think our human nature is to make and enjoy music. I think that will always happen, and it’s a great business for that reason. What we have to do in this business is stay nimble and adapt to the changing of music methodology and instruments, as well as the changing of channels and the way that customers buy. If we can adapt to that—and keep adapting—I think the future’s great for the long term. People love music; they’re always going to love it. It’s just changing, and it’ll continue to change. The Retailer: Do you have any suggestions for the brick-and-mortar MI retail channel? Are there things you think a substantial percentage of retailers could be doing better? Are there ways dealers could interact with KMC Music more effectively? What would you offer, in the way of constructive criticism? Terry: We learn a lot from our retailers, and we really value the input they give us for our business. By the same token, we deal with 6,500 retailers across America: every type and every size. And, you know, what we see today is that the retailer who expects just to have a storefront, sit at the counter, wait for the customer to come in and sell him what he has on the shelf…that’s the guy who’s challenged today. The retailer who is out there working all the dynamics—working an instruction program, doing outreach to the schools, getting involved in concerts in the community, having an Internet presence, doing social media—these very active dealers are doing well. We see their year-over-year sales increasing. The key to future success in this business is for retailers everywhere around the world to execute strategically and consistently in a number of different initiatives around the music space in their community. The retail MI business is no longer—if it ever even really was—a business where retailers could simply hang product on the wall and wait for customers to come into the store to make a purchase. The Retailer: Having had such an incredible career in music…in audio…in technology, I’m curious what keeps you motivated in 2015. What gets you excited to get out of bed in the morning and get to work? Do things still surprise you? Do you still feel excited about the industry? What drives your vigor and enthusiasm? Terry: It’s the people. I love the products…. I’ve sold musical instruments; I’ve sold audio equipment. But I love the people in this industry even more. I’m a lifer. I have many good friends in this business who are also lifers. And that, I think, is what helps to make this business so interesting and vital. And that’s what keeps me going: the fact that I can walk into a trade show and see all my friends who I’ve known for decades. I think it’s what separates our business from many others, you know? Everybody likes to think their industry is different, but, you know, there aren’t a lot of people who come in and out of our industry. I’ve had some experience in the consumer electronics industry, and somebody who’s selling stereos today might be selling copy machines next week. But, in the musical instrument business, you’re not going to sell guitars unless you’re selling guitars your whole life, and you know the industry, live the industry and are of the industry. I think that’s what I enjoy most about it. There are some crazy, quirky people in this business, and I love them. The Retailer: Is there anything I’ve forgotten to ask that you’d like to discuss? Terry: KMC Music has now greatly expanded its portfolio of product offerings, bringing it back to the range of offerings we had before. The addition of major guitar lines, major guitar amplifier lines, major cymbal lines, major percussion lines…we’re far more than just the accessory side of the business that we had been for the past six months. And that brings us back to a new beginning for the company. We have a very large field sales force and a very large inside force; they’ll sell you the instruments, the accessories and everything in between. We’re also expanding our pro audio initiatives. So, our product line today—and in the future—is going to better mirror everything that is sold in a music store. We intend to continue to be KMC Music: the one-stop source for everything you need in your store.