Mackie Designs Inc.

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Mackie Designs Inc.

16220 Wood-Red Road, N.E.
Woodinville, Washington 98072
U.S.A.
Telephone: (425) 487-4333
Fax: (425) 487-4337
Web site: http://www.mackie.com

Public Company
Incorporated: 1988
Employees: 946
Sales: $153.8 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: MKIE
NAIC: 33431 Audio and Video Equipment Manufacturing

Mackie Designs Inc. is a leading developer and manufacturer of professional audio equipment, whose products are used in sound recordings, live presentations, and in an array of applications, such as CD-ROM authoring, video production, and public address systems. Mackie Designs established its reputation by producing high-quality, mid-priced audio mixers. After several years of record sales, the company expanded into new areas of the market with products such as amplifiers, professional audio speakers, and digital audio mixers. Mackie Designs’ equipment has served a range of consumers—from enthusiastic amateur musicians in home studios to pop music superstar Madonna. Its products are sold in over 1,000 retail outlets in 100 countries.

The Genesis of Mackie Designs: 1969-88

Although the company was not founded until 1988, Mackie Designs’ roots date back to 1969, when Greg Mackie founded Technical Audio Products (TAPCO) with his partner Martin Schneider. A musician in a Seattle rock band, Mackie was frustrated by the poor quality of most audio mixers. Mixers are used to adjust the tone, volume, and quality of the different sound sources that make up recordings and soundtracks, and that are fed into the speakers at live performances. For instance, audio mixers allow bands to adjust the pitch and volume of the different instruments and/or vocals before broadcasting the audio signal through the speakers; likewise movie production companies will use mixers to adjust the levels of background music and dialogue in the making of soundtracks.

TAPCO’s first success occurred with the release of its Model 6000 audio mixer, which was the first mixer designed specifically for the louder volumes required by rock bands. Musicians quickly embraced the equipment. Not only were TAPCO’s mixers inexpensive and effective, they were also durable. Within a few years the company had made millions of dollars. When the firm began implementing stringent cost-cutting measures, however, Mackie parted ways with TAPCO in 1977.

Mackie launched his second business venture, Audio-Control, that same year. This new company soon established itself as a leading producer of stereo equalizers and analyzers for home consumers. Despite his good fortunes at Audio-Control, though, Mackie left the business in 1985 to pursue a new endeavor. The music industry had changed radically in the early 1980s, and Mackie identified a niche market that he believed could be profitably captured. A wave of technology had led to the proliferation of high-tech music equipment, with polyphonic keyboards, tone modules, and outdoor processors becoming the norm throughout the industry. Audio mixers—Mackie’s former area of expertise—had changed little, though. The market for mixers was effectively split between high-end units used by professional recording studios and cheap, mass-produced mixers intended for more recreational consumers. As Mackie would later tell the Seattle Post-Intelligencer, “nobody took mixers seriously.”

Early Success: 1988-91

Mackie formed Mackie Designs in 1988 to fill this need for high-quality, reasonably priced compact mixers. He initially ran his eponymous business from his three bedroom condominium in Edmonds, Washington. Using a closetful of spare parts from his prior companies, Mackie was determined to produce an inexpensive mixer that performed well. He stripped down mixing boards to determine which components were essential for excellent sound, and which could be eliminated. For instance, he found that he needed microphones on only six of the mixer’s channels, rather than on 16, as most other models. His efforts were a resounding success. According to Forbes, “the result of this tinkering was a mixing board that cost much less and sounded much better than similar models from big competitors.”

The company’s first product offering—the LM-1602—was an instant hit. In addition to providing an excellent product, Mackie Designs reaped the rewards of fortuitous timing. Few in the industry realized how popular a mid-level mixing board would prove to be. Although most considered sophisticated equipment such as mixing boards to be solely the purview of professionals, an array of consumers bought Mackie’s product. Amateur musicians who had long wanted to build home recording studios drove early sales, but corporate video departments, churches, and schools were important customers as well.

Rapid Growth in the Early 1990s

Buoyed by this early success, Mackie Designs moved from its founder’s home to a factory. In 1991, the company released the CR-1604 audio mixer, which would revolutionize the industry. (The CR-1604’s effect on the music business would later be equated with the impact the computer had on publishing). Despite his company’s flourishing sales, though, Greg Mackie adhered to his original strategy. Instead of moving outside the niche he had identified, Mackie stuck to mixers—and he made them well. For the most part, his products contained no proprietary technology. His formula was simply that “he made [them] better, cheaper, and easier to use,” a company spokesperson told the Post-Intelligencer. He kept his product line small, and reinvested a hefty percentage of his profits into production, purchasing top-of-the-line manufacturing equipment.

The company continued to introduce audio mixers that won it the loyalty of consumers worldwide. In 1993, Mackie Designs debuted its 8-Bus mixer consoles, which were designed specifically for multi-track recording and live sounds. Still a privately owned enterprise, Mackie Designs’ annual growth rate was spectacular throughout the early 1990s, averaging well over 100 percent each year. Nevertheless, the company remained focused on its targeted sector. Over 48 percent of its sales in the mid-1990s were derived from one product (the CR-1604), and it had not strayed beyond audio mixers. As Music Trades succinctly explained on April 1, 1995, what made” Mackie’s runaway success particularly noteworthy [was] the fact it was all accomplished with narrow product offerings.” Revenues for 1994 topped $35.5 million, and the company had over 250 employees.

A Public Company: 1995

The year 1995 would prove to be a momentous one for Mackie Designs. The company sold its 100,000th mixer and moved into a new 89,000-square-foot manufacturing facility that was equipped with state-of-the-art production machines. By pioneering the implementation of semi-automated manufacturing in the audio industry, Mackie Designs was able to boost its production. It launched important product lines that year as well. In May, the SR 32-4, a 32 channel mixer designed exclusively for live sound applications, debuted. Soon after, the company introduced the SR-24-4 and the UltraMix Universal Automation System. As Mackie Designs’ first software-based mixer, the UltraMix allowed the consumer to automate, store, and replicate over 136 channels. Despite its innovative nature, the UltraMix retailed for $2,795, which was well within the company’s average typical product price range of $399-$5,000.

Mackie Designs’ success brought with it unique challenges, as the company’s profitability awakened its once dormant rivals. According to the Post-Intelligencer, Mackie Designs had “so thoroughly defined and dominated the market that competitors [could] now promote their products as ‘Mackie-style’ mixers.” Moreover, as its operations expanded, Mackie Designs had difficulty finding enough employees to fulfill its needs. To surmount these hurdles and to fuel future growth, Greg Mackie opted to take his company public. In August 1995, Mackie Designs made an initial public stock offering in hopes of raising over $25 million in operating capital. Mackie would continue to serve as president and chief executive officer.

Despite the company’s entrance onto Wall Street, it vowed to keep alive the spirit of daring and innovation that had characterized the enterprise since its founding. “We’re definitely not your average pro audio company,” Mackie Designs would crow in press releases. Mackie himself touted the “combination of intense professionalism and sheer silliness that sets us apart from the big conglomerate companies.” Whatever its attitude, the company closed 1995 with record sales of $63.9 million, a 28 percent increase from 1994 and three times 1993’s results. Its employee rolls had grown to 320, and international sales had swelled during the year to account for 34 percent of total sales. Reflecting for Music Trades on the year’s many developments, Mackie encapsulated his company’s position: “Our challenge is to keep investing in new products, production technology, and services to maintain our current position and set the stage for future growth.”

Company Perspectives:

Through aggressive advertising and fanatical attention to quality and reliability, Mackie has developed a loyal customer base and a very positive image in the market place. The Company believes it can leverage the Mackie brand name to introduce products at a wider variety of price points within the professional audio equipment market. Over the past several years, Mackie has continually expanded its product lines to address the need for professional audio systems in existing and new markets.

Expansion into New Sectors and New Markets: 1996 and Beyond

In keeping with his commitment to remain on the cutting edge of manufacturing, Mackie oversaw an 81,000-square-foot addition to the company’s recently completed headquarters in February 1996. The expansion housed an advanced silk screening facility, a metal shop, and a training center, and allowed Mackie Designs to perform inhouse many of the services it had once contracted out. Mackie’s emphasis on infrastructure was logical. By vertically integrating its operations, Mackie could stay ahead of its competitors. Although the audio mixer market had grown more crowded, Mackie Designs had a head start on its rivals. Because it had channeled its capital into factory technology, it could keep its prices down—thereby underselling newer entrants to the audio mixer sector.

Following on the heels of its public stock offering, Mackie Designs charted a new course in 1996. Its footing was solid in the mid-price audio mixer market. Drawn by the potential to access a market more than twice the size of the $735 million audio mixer sector, Mackie Designs planned to expand its product offerings. The company slated a line of studio monitors (high-end speakers used in recording studios), amplifiers, and public address systems for release that year. Moreover, Mackie Designs announced that it would venture into the realm of higher-tech audio mixers with the planned debuts of digital mixers and desk-top mixing systems.

At a National Association of Music Merchants (NAMM) convention in July 1996, the company previewed its first-ever non-mixer product—the M-1200 premium power amplifier designed for private studios, theater/cinema broadcasts, and disk jockeys—as well as the Mackie 8200 Accuracy Active Studio Reference Monitor professional speakers. At the same time that it strove to break into new product spheres, Mackie Designs also hoped to enter the high-end market for audio mixers. In keeping with this shift, the company also unveiled its SR40-8 large-format mixing console, which, at $8,995, was priced well above any other audio mixer it had ever sold.

Mackie Designs appeared to be unstoppable. Its bold expansion plan coupled with its stellar past performance was impressive. In May 1996, Inc. Magazine ranked the company 78th on its list of the fastest-growing American companies. The magazine cited as particularly impressive Mackie Designs’ 1,583% growth from 1991 to 1995, during which time its sales had risen from $3.8 million to over $64 million. Nevertheless, the company faltered toward the end of 1996. Delays in shipping its new products caused its earnings—and thus its stock price—to sink. After finally sending out its large format mixer boards and the power amplifiers in December 1996, company officials vowed that Mackie Designs’ troubles were over. Even with late shipments eroding its profits, though, 1996 sales rose 15 percent to $73.2 million.

Undeterred, the company continued to stress product launches in 1997, devoting its largest budget ever to research and development. That year, Mackie Designs launched additional new products, beginning in January when it debuted its first digital product—the Digital 8-Bus Recording Console. By year-end, five new Mackie product lines had shipped, including power amplifiers and a studio monitor. Its breakneck pace of expansion depleted the company’s resources. Though its sales and income grew during the year, the rate of increase had slowed markedly. Sales for 1997 were $74.7 million.

In 1998, Mackie Designs ventured into new territory once again when it made international expansion its top priority. Although international sales had always played a significant role in the company’s earnings, in 1998 Mackie Designs aggressively sought to enter the global market for a wide range of audio equipment—not just audio mixers. In keeping with this strategy, the company acquired an Italian company, Radio Cine Forniture (RCF) S.p.A., as well as Fussion Audio of California. Since both RCF and Fussion were well-established high performance speaker companies, Mackie Designs planned to use them as a springboard to establish itself in sound delivery system markets across the globe. RCF also provided the company with its first international manufacturing facility. Upon completing the acquisition, Mackie took over speaker production at RCF’s plant in Reggio Emilia, Italy. Furthermore, Mackie Designs began construction on its first overseas reload center in 1998. Its goal was to establish closer contact with its international customer base.

The company’s strategy was overseen by Roy Wemyss, who had been named Mackie’s chief operating officer in November 1996, and assumed the helm of the company in April 1999. As Wemyss would later explain in a press release, he had presided over the company during a tumultuous period when it grew from an “entity serving a single niche in the music market” to a “full-line, pro-quality music equipment business with substantial operations in both the United States and Europe.” Despite these achievements, Mackie Designs continued to be hindered by slow product shipments. Although its 1998 sales grew to over $100.97 million, the company’s net profit had lagged. Following these revelations, Wemyss resigned in October 1999.

Mackie Designs’ blistering pace of expansion did not slow, however, as over 20 new products were launched in 1999 alone. Among its other offerings that year, the company released the CFX Series Compact Mixers and the C300 Sound Reinforcement Loudspeakers. Mackie also stepped up production at the manufacturing facility in Reggio Emilia, Italy. In February 2000, Mackie Designs acquired Eastern Acoustic Works (EAW), a leading designer and manufacturer of high-end professional loudspeakers, based in Whitinsville, Massachusetts. EAW’s 1999 sales exceeded $40 million.

Despite the difficulties Mackie Designs experienced in the late 1990s in integrating its acquisitions and adjusting to manufacturing new products, the company’s outlook in the early 21st century looked bright.

Key Dates:

1988:: Greg Mackie founds Mackie Designs Inc.
1991:: Company introduces its CR-1604 audio mixer.
1995:: Mackie Designs completes an initial public stock offering.
1996:: Company expands product lines beyond audio mixers.
1998:: Mackie Designs acquires Radio Cine Forniture S.p.A. and Fussion Audio of California.
2000:: Company purchases Eastern Acoustic Works Inc.

Principal Subsidiaries

Radio Cine Forniture S.p.A.; Fussion Audio; Eastern Acoustic Works Inc.

Principal Competitors

Alesis; Harman International Industries, Inc.; Koninklijke Philip Electronics N.V.; Pioneer Corporation; Sony Corporation; TEAC Corporation; Telex Communications, Inc.; Yamaha Corporation.