AKG Acoustics GmbH

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AKG Acoustics GmbH

Lemboeckgasse 21-25
A-1230 Vienna
Austria
Telephone: (+43) 1-86654-1241
Fax: (+43) 1-86654-1205
Web site: http://www.akg.com

Wholly Owned Subsidiary of Harman International Industries Inc.
Founded: 1947
Employees: 576
Sales: EUR 90 million ($109.7 million) (2003)
NAIC: 334310 Audio and Video Equipment Manufacturing; 334419 Other Electronic Component Manufacturing

For more than five decades AKG Acoustics GmbH has enjoyed a reputation among professional recording engineers, sound men, and broadcasters for microphones and headsets of the highest quality. AKG manufactures more than 300 sound reinforcement products for both the professional and consumer markets, including dynamic and condenser microphones, wireless microphones, and cabled and wireless headphones. AKG also produces a large number of products for the original equipment manufacturer (OEM) market, in particular miniature transducers for mobile phones. More than 95 percent of AKG products are manufactured at its 17,000-square-meter state-of-the-art factory in Vienna Austria. The company has subsidiaries in Germany, the United States, and the United Kingdom, as well as joint ventures in Japan and India. AKG's stated philosophy is to be flexible regarding methods and techniques, while refusing to compromise on the quality of its products.

Entertaining War-torn Austria: 1945

AKG Acoustics was founded in Vienna soon after World War II. Dr. Rudolf Görike happened to meet an old prewar acquaintance, Ernst Pless, on the streets of Vienna. As they chatted, an idea for a business hatched: Viennese—indeed Europeans in general—were hungry for distraction from the hardships of postwar life. One of the most popular forms of popular entertainment was movies. Unfortunately, most of the movie theaters in Vienna had been destroyed or ransacked during the war, and it was almost impossible to find replacements for stolen or damaged projectors and sound systems. The two men set up a company that purchased old equipment from the stock of a closed factory in Hungary and sold it to the movie houses of Vienna. Görike and Pless were a perfect team. Görike's experience as an electrical engineer provided him with the technical expertise needed to repair and modify the machinery. Pless was a businessman who found customers and made deliveries. For smaller shipments, he used a backpack and bicycle, while larger ones required a wheelbarrow. The partners' first sale was more like a postwar, black-market deal than it was a conventional business exchange: unable to pay for Görike and Pless's wares in cash, the customer traded butter, cigarettes, and fresh meat for them.

Occupation authorities granted the partners their first permit to do business in July 1946. The new firm, with five employees and offices in a basement, was formally established the following year. Görike and Pless originally intended to call their company Photophon. Because the name was so similar to that of other companies at the time, they settled instead on Akustische u. Kino-Geräte, GesMBH—Acoustic and Film Equipment, Limited—which was abbreviated AKG. Görike was AKG's jack-of-all-trades. In addition to being a trained physicist and a skilled electrical engineer, he was also a talented violinist, painter, and draftsman. He designed AKG's first logo and was responsible for a stream of products that were soon to pour out of the Vienna headquarters.

In AKG's first year, under Görike's oversight, the company developed a varied array of products that included exposure meters, automobile horns, intercoms, and extra handsets for telephones. Almost immediately after the war, AKG began producing microphones, again thanks to Görike's expertise. In the 1930s, he had overseen the development of microphones for the Viennese company Henry Radio. AKG brought out the first of its innovative DYN Series microphones in 1946. Designed to amplify vocals and instruments, the DYN mics rapidly became popular at radio stations, music clubs, and theaters. The firm was able to produce about 500 DYN mics a year, each of them completely handmade. The C1, AKG's first condenser tube microphone, was introduced in 1947. Only six C1s were ever produced, but the design led to the CK12, a breakthrough microphone for the company. In 1949, with the release of the K120 DYN, the company's first headphone set, AKG launched another product line that would eventually become a pillar of the business.

Sound Innovations in the 1950s

By the early 1950s, AKG products were being distributed throughout Austria by Siemens/WSW. The company was also beginning to build a significant customer base in Eastern Europe. Product development also took off in the fifties. One of Görike's revolutionary developments in microphone technology was the moving coil transducer and mass-loaded diaphragm, which eliminated much of the shrillness characteristic of earlier microphones and extended frequency response deeper into the bass range. The first AKG microphone to make use of the new technology was the D12. Introduced in 1953, the D12 was the world's first dynamic cardioid mic, that is, it had a "unidirectional" design that served to reduce the amplification of extraneous sound and the production of feedback. The mic was an immediate success at radio stations, recording studios, and movie sets throughout the world. A number of other AKG microphones would be based on the D12, including the D20, D25, D30, D36, and the D45. The introduction of the D12 led AKG to modify its logo, replacing its three overlapping circles, representing omnidirectional polar diagrams, with three overlapping cardioid diagrams, a design the company still uses.

Around the same time, Konrad Wolf, a young AKG engineer, developed another classic mic design, the C12, the world's first remote-controlled, multi-pattern capacitor microphone. Designed on commission for Austria's national radio, RAVAG, C12's polar pattern could be switched noiselessly during operation without changing its output, thereby maintaining consistent volume levels. Major European makers of tape recorders, such as Philips, Grundig, Uher, Nordmende, Telefunken, and Saba, were relying increasingly on AKG microphones. To overcome the difficulties involved with exporting goods from occupied Austria, the company established its first foreign subsidiary in Germany in 1955. Located in Munich, it handled both production and distribution. At the same time, exports to Eastern Bloc countries expanded and AKG established itself for the first time in Asia and Latin America. In 1957, AKG expanded its Vienna facilities with the purchase of a larger building.

Beginning in the 1950s and extending into the following decade, standard studio equipment featured AKG's most successful product lines, including the BX10 E, the first portable reverb unit. In 1963, the company introduced a unique if unsuccessful reverb-microphone combo, the DX11. It was a dynamic microphone that contained a miniature reverb unit that gave the performer fingertip control of the reverb level during a performance.

Earning a Reputation for Quality in the 1960s

By the 1960s, AKG had established a solid reputation as a producer of high quality sound equipment. Many of the firm's sound products, notably its K58 lightweight headphones, were used at the 1964 Winter Olympics in Innsbruck, Austria. AKG engineers experienced a scare at the games opening ceremonies. When the welcoming speech began—spoken into an AKG microphone—the assembled athletes and dignitaries heard nothing. After a few frantic moments, the problem was traced to water from thawing snow that had seeped into a cable connection, causing a short circuit. The part was replaced and the games continued without further problems.

AKG made a major change in direction in 1965. Television had by then caused worldwide declines in movie theater attendance. In response, the company discontinued its production of film projectors and optical equipment, electing instead to focus completely on developing and producing audio transducers for microphones, headphones, and other audio products. Among the new products introduced in the latter half of the sixties were the D202 and D224, the first two-way cardioid microphones. They would become the standard against which reporters and public speakers measured their equipment. Other new items were the K141 and K240 studio headphones and the C414 condenser mic, which quickly established itself as a versatile studio microphone that could be used for either vocal or instrumental recording. The D1000 dynamic microphone was another innovation, one prized for its styling as much as for its technology. Compared to the bulky square mics frequently used at the time, the D1000 was so slender and elegant that in advertising AKG could boast that "it will not hide the face of the artist." The CMS modular microphone system enabled users to construct microphones from a variety of components for specific needs. The system eventually became a mainstay at the British Broadcasting Company (BBC), which came to rely on AKG mics to such an extent that in 1973, on the occasion of the broadcasting service's 50th anniversary, Britain issued a stamp with the BBC's standard microphones—all of which had been manufactured by AKG.

Company Perspectives:

AKG products translate sounds as encountered in the world of nature, speech, and music into the signals used by the world of audio and communication electronics, and vice versa. Perfectly at home in both worlds, AKG engineers use their unique expertise, knowledge, and innovative spirit to create products that combine advanced engineering with manufacturing excellence at the highest level of audio performance and quality.

Growth and Change in the 1970s

AKG continued to expand in Europe in the late 1960s. In 1968, a Swiss subsidiary was founded in Zurich; a year later, AKG London was established. A Japanese affiliate began operations in 1979. The company's annual sales topped ATS 199 million for the first time in 1970. Four years later, the firm signed its 100th distributor and was awarded its 1000th patent. The year 1977 marked a second major turning point in the company's history. Cofounder Ernst Pless left AKG that year to establish a new plastics molding firm (his father had owned such a company some years before). Pless's new company, Vienna Plex, would become a major supplier to AKG of plastic parts. Pless's departure led to a major reorganization in the ownership of AKG. Until Pless's resignation, he and Görike were AKG's sole owners. Beginning in 1975, however, Philips Austria and the Oesterreichische Laenderbank took over a 75 percent share in the firm.

By 1976, AKG had 105 representatives throughout the world. Its sales reached ATS350 million that year, with the German market accounting for 30 percent of that figure. Also in 1976, AKG held its first international product concept meeting, to which company representatives were invited to exchange ideas on new products. An unexpected result was a restructuring of the firm and the introduction of a new organizational scheme. In 1977, the reorganized firm had 800 employees and could turn out 20,000 microphones every week.

The seventies were also a period of innovation. In 1970, AKG introduced the BX20, the world's first portable studio reverb unit. Before its release, the BX20 had been under development for nine years, including a year's work on a suspension that would enable it to be safely shipped. The unit utilized helix springs with long time delays to create sounds that closely mimicked the reverberation characteristics of a large concert hall. It was a product that solidified and enhanced AKG's evergrowing reputation. The Libero, a set of wireless headphones that utilized infrared light to pick up the sound signal, was less successful. The futuristic device met with suspicion and resistance among consumers and was eventually withdrawn from the market. It would be more than a decade before AKG again marketed cordless headsets. The company introduced a line of phonograph cartridges in 1976.

Publicly Traded in the 1980s

In 1984, shares in a newly founded company, AKG Holding Allen Ginsberg, were publicly offered for the first time on the Vienna Stock Exchange. For the next ten years, AKG Holding would own a 75 percent interest in AKG GesMBH; the remaining 25 percent remained in the hands of founder Rudolf Görike. Following the public offering, however, majority ownership of AKG Holding changed frequently, as banks and other members of the finance industry bought and sold control. Once public, AKG began to take over other firms. In an effort to establish itself as a single source supplier for the sound industry, it concentrated on acquiring companies that also made audio parts or products. In the mid-1980s, AKG made major inroads in the United States, setting up an American subsidiary in 1985 and purchasing Ursa Major, a Boston company that was transformed into AKG's Digital Products Division. An affiliate in India, AKG Acoustics (India) Ltd. was established with its own factory and membership on the Indian Stock Exchange in 1989. The company expanded further in 1990. It acquired a 62 percent majority ownership in the Edge Technology of the United Kingdom while its Japanese subsidiary, AKG Japan, merged with SJC. In 1988, Ernst Pless, who had maintained close ties with the firm since his retirement in the middle seventies, passed away unexpectedly at the age of 73.

Continued Expansion, Challenges, and New Ownership: Late 1980s and 1990s

AKG continued to aggressively pursue acquisitions and expansion. In 1989, it acquired Acquisition of Orban and dbx Professional Products. The company also increased the percentage of some of its foreign holdings and at the same time acquired minority shares in CeoTronics, a German company, and the UK-based AMEK Technology Group PLC. That same year, AKG established a new French subsidiary, AKG Communications France. By 1992, AKG production warehousing had outstripped its buildings. The firm announced that it would consolidate its three Vienna properties at a single large facility in the city's suburbs. The first wing of the new structure was completed in 1993. AKG's rapid growth came at a cost. An early nineties recession, together with exchange rate fluctuations that dampened AKG's cash flow, sent the company into a downward spiral. In 1993, AKG reported a loss for the first time in its history.

Key Dates:

1945:: Dr. Rudolf Görike and Ernst Pless begin supplying movie equipment to theaters in postwar Vienna.
1947:: Görike and Pless found Akustische u. Kino-Geräte, GesMBH.
1953:: AKG develops the D12, the world's first single diaphragm dynamic cardioid microphone.
1954:: AKG Germany is founded.
1960:: The first professional-quality small-sized capacitor microphone, the C60, is introduced.
1965:: The company discontinues its production of movie equipment.
1966:: The first two-way cardioid microphones, are introduced.
1970:: The world's first portable reverb unit, the BX20, is introduced.
1974:: AKG makes its 1,000th patent application.
1978:: AKG launches the K340, the world's first dynamic/electrostatic headphones.
1984:: AKG Holding AG is founded and goes public.
1988:: AKG Acoustics (India) Ltd. is founded; Ernst Pless dies.
1994:: Dr. Rudolf Görike dies.
1997:: AKG Akustische und Kino-Geraete GesMBH is renamed AKG Acoustics GmbH.
2002:: AKG equipment is used at the World Cup soccer tournament in South Korea.

In the wake of its losing year, AKG's majority shareholder GiroCredit inaugurated a search for a new partner/owner for AKG with the expertise and resources to ensure the company's future. Harman International Industries, Inc., a manufacturer of audio and electronic products for consumer and professional use, purchased a 76 percent interest in AKG in September 1993. AKG performed so well under Harman that the following July it exercised its option to acquire the remaining 24 percent from GiroCredit, thus assuming full ownership of AKG. With the assumption of the ownership, Harman ended trading in AKG shares on the Vienna Exchange and in 1994 liquidated AKG's former parent firm, AKG Holding AG, altogether. Harman closed the AKG subsidiaries in Japan, India, and the United Kingdom and substantially changed the ownership status of its United Stated and German subsidiaries. Under Harman, AKG returned to a sharp focus on microphones and headphones, along with industrial and telecommunication audio products. Harman relocated AKG's dbx Professional Products to Salt Lake City, Utah, put Orban under the management of its Lexicon unit, and sold some AKG-owned firms, such as CeoTronics and the French subsidiary. AKG manufacturing, research and development, and marketing and distribution continued to operate out of the company's Vienna headquarters.

The 1990s witnessed a burst of new product development at AKG. The CK77/C577, smaller than a thumbnail, was the world's smallest dual-diaphragm microphone. AKG also brought out its first cordless microphones and a variety of new headphone models, including the re-introduction of cordless, infrared headphones. In 1994, as AKG was moving into its newly completed facilities, Rudolf Görike passed away at age 87. The company celebrated its 50th anniversary in 1997 by producing a number of specially designed, collector's versions of popular AKG products, including the K240 and C414 B-ULS headphones. That same year, after studying the market carefully, AKG lowered the prices on three of its most popular and respected microphones, the C1000S, the C3000B, and the C535EB. The firm hoped the price cuts would lead to a fourfold increase in sales of these models. After the changes were implemented, however, sales leaped to eight to twelve times previous levels.

New Markets in the 2000s

The company, whose reputation had long been based on its expensive high-end products for recording studios, radio, television, movies, and concert amplification, launched its Emotion line of low-priced microphones in the early mid-1990s. Emotion mics were targeted to compete with cheap microphones being exported by Asian producers and marketed to entry-level musicians. Designed with AKG quality and the expertise gained over fifty years of product development, Emotion microphones sold for less than $200—a fifth or less of the price of many of AKG's famous microphones.

In the early 2000s, the explosion of new digital technologies—notably of inexpensive home recording studios—created a broad new market among musicians and home recording enthusiasts for mics that were affordable yet of good quality. To help finance the costs of entering this new market, the firm expanded its original equipment manufacturer business, in particular producing microphones for cell phones and global positioning systems. The OEM sector, which accounted for approximately 10 percent of AKG's revenues in 1997, had grown to more than 45 percent in 2000. In 1999 alone, it increased by 80 percent. That new business helped AKG's entrance into mass production of lower-priced products. In October 2001, AKG's American subsidiary moved to a new, 60,000-square-foot facility in Nashville that doubled available warehousing and office space.

AKG continued to develop groundbreaking new headset and microphone systems in the 2000s. Its products were regularly honored with industry awards for achievement. The C3000B received the Musikmesse International Press Award in 2000 as the best large-diaphragm microphone. AKG received the Plasa and Mercur Awards in 2003. In 2002, AKG products were used for broadcasts of the World Cup soccer championships in South Korea. Looking to the future, the company hoped to use its high-end expertise to develop quality products across the price spectrum to double 2002 revenues by 2007.

Principal Competitors

Shure Inc.; Aiwa; Telex Communications, Inc.; Nady Systems Inc.; CAD Professional Microphones; RODE Microphones; BEHRINGER Spezielle Studiotechnik GmbH; Sennheiser Electronic GmbH & Co. KG; Audio-Technica Corporation; JVC Company of America; Pioneer Corporation.