MartinLogan, Ltd.

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MartinLogan, Ltd.

2101 Delaware Street
Lawrence, Kansas 66046
U.S.A.
Telephone: (785) 749-0133
Fax: (785) 749-5320
Web site: http://www.martinlogan.com

Wholly Owned Subsidiary of ShoreView Industries, Inc.
Incorporated: 1982
Employees: 83
Sales: $24 million (2005 est.)
NAIC: 334310 Audio and Video Equipment Manufacturing

MartinLogan, Ltd., manufactures audio speakers that are regarded by many reviewers and listeners as the best in the world. The company's speakers range in price from $600 to $20,000 each, with top-end models popular among well-heeled audiophiles, musicians, and celebrities. In 2005 MartinLogan was purchased by investment firm ShoreView Industries from cofounder Gayle Martin Sanders, who continues to serve as a consultant to the company.

BEGINNINGS

MartinLogan traces its origins to the 1970s, when Ron Sutherland and Gayle Sanders met at a stereo shop the latter managed in Lawrence, Kansas. Sanders, who had studied advertising and architecture, and Sutherland, an electrical engineering student, shared similar musical tastes and were both keenly interested in electrostatic loudspeakers, an esoteric but highly accurate audio reproduction technology that had seen only limited success in the marketplace.

First successfully demonstrated in the 1920s, electrostatic speakers used a different principle from the standard dynamic type in which an electromagnet moved a cone rapidly in and out to create sound waves. In electrostatics a thin, positively charged sheet of film was housed between two flat metal "stators," which were perforated to allow sound to pass through. Prompted by the audio signal, the electrical charge of the stators rapidly changed between positive and negative, which caused the film to move back and forth and replicate the sound waves of a recording. The result was highly accurate audio reproduction, but a great deal of electrical power was needed to create enough sound volume to fill a room, and the speakers could be temperamental or even dangerous unless designed and manufactured with care. Because very low-frequency sounds required the greatest amount of air movement, electrostatic speaker systems often used a conventional "woofer" speaker for this part of the audible spectrum.

Inspired by their mutual interest, Sanders decided to visit the University of Kansas library to research methods for building such a device. Working with several friends, he completed a prototype in 1980, and though it sounded good at first, when the volume was increased the electrical connections short-circuited and the speaker quit in a puff of smoke. Undeterred, Sanders soon began rebuilding it using newer, aerospace-derived composite materials.

Over the following months a number of improvements were made, and in 1982 Sanders and Sutherland traveled to the Consumer Electronics Show (CES) in Chicago to demonstrate their speaker concept. The response was enthusiastic, and the design won an award. During the next year the pair worked with other engineers and firms to fine-tune it, and in 1983 they were able to demonstrate a working prototype at the CES. Named the Monolith, the speaker's electrostatic midrange and high-frequency sound element had a unique see-through design, while a conventional woofer reproduced the low frequencies. Production soon began under the company name of Martin-Logan, Sanders and Sutherland having decided that their respective middle names sounded good together.

During the firm's first two years sales were slow and profits were consumed by several costly setbacks, including having to rebuild three of the first ten pairs of the 330-pound, $5,000-per-set Monoliths after inadequate packing resulted in shipping damage. From the outset Martin-Logan instituted a policy of guaranteeing customer satisfaction, however, which would help build its reputation over the years.

IMPROVED DESIGN, SALES GROWTH: 1985-2000

In 1985 the company introduced a new model, the CLS, which was priced at $2,500 per pair. Named for its "curvilinear line source" design, it was a completely electrostatic speaker (without a low-frequency woofer) whose curvature greatly improved the dispersal of sound in a room. After selling the first batch of 100 and buying raw materials for more, the firm learned that the speakers were coming apart in use due to a flaw in the design. With the company facing possible ruin, Sanders managed to solve the problem, and the improved CLS won rave reviews in audiophile magazines.

The company had initially operated with just one full- and one part-time employee, but with sales on the rise more were hired to expand production. Meanwhile, cofounder Sutherland decided to sell his stake to found an electronics firm called Sutherland Engineering, which would later build subsystems for Martin-Logan.

In 1986 the firm moved to a new, larger site on Delaware Street in Lawrence as it began aggressively marketing its speakers in the United States and launched foreign distribution. Over the next two years sales grew tenfold, and the facility was expanded. In 1989 Martin-Logan was named one of the 500 fastest-growing private companies in the United States by Inc. magazine, and at the end of the decade the firm hired several experienced new managers to help it cope with this growth.

The early 1990s saw Martin-Logan broaden its product mix, in part by adding several speakers targeted at the burgeoning home theater market. In addition to standard audio system left and right speakers, special units for center channel and rear-mounted surround-sound were introduced. Sales increases were averaging 20 percent per year.

By 1995 Martin-Logan was producing about 5,600 speakers per year, which were priced at between $2,000 and $8,000 per pair. One hundred retailers in the United States carried its products, as did 35 international distributors. Foreign sales made up half of the total, with Japan, Germany, France, and the United Kingdom the top overseas markets.

In 1997 the company added speaker lines called Cinema and Theater, which further expanded its home theater offerings. The following year, with annual sales topping $10 million, the company bought five acres near its headquarters in Lawrence to build a new 17,000-square-foot facility. Martin-Logan already occupied three nearby buildings on Delaware Street, and the new space would allow it to relocate cabinet-making and research and development operations from a more distant site. A powder-coating line was also added so the firm could bring in-house work that had previously been outsourced. The $1.5 million project, which included $300,000 worth of manufacturing equipment, would add a half-dozen employees to the payroll.

COMPANY PERSPECTIVES

MartinLogan has a dream. It's a dream we've always had: To provide ultimate access to all media—music, film, entertainment, education, and communications—all of it there perfectly resolved, elegantly accessible, and pure.

STATEMENT DEBUTS IN 2000

In 2000 Martin-Logan unveiled a new top-of-the line speaker model, the Statement. Priced at $80,000 per system, the Statement was the firm's ultimate, no-expense-spared product and garnered much attention in the press for its price, size, and sound. It utilized twin 7½-foot tall electrostatic panels that were housed in finely finished wood cabinets, with 16 conventional subwoofer speakers and 16 midrange drivers handling the low frequencies. The firm sent a technician to unpack the 15 wooden shipping crates and install the nearly one-ton system, with a second visit made, after it was broken in, for evaluation and tweaking. Martin-Logan had briefly made a top-end model called the Statement in the late 1980s, thus this version was dubbed the e2 (for "evolution 2"). Few could afford such expensive equipment, with the handful of purchasers reputedly including celebrities and business executives. Company head Gayle Sanders also had one installed in his home, using demonstrations of it to build enthusiasm among dealers who visited the firm's Lawrence headquarters.

In 2001 MartinLogan (as the company had begun rendering its name) won a grant from the Kansas Department of Commerce and Housing to train its 80 employees in lean manufacturing techniques. The following year a new president, Rafael Nevares, was named to head the firm.

While awareness of MartinLogan speakers had long been high among audio enthusiasts, the speakers had reached a broader audience due to the firm's success with "product placement" through Discover Card TV commercials and the popular sitcom Friends, for example. In 2003 the firm took advantage of this wider recognition by introducing a new lower-priced line of speakers called Design, which started at less than $2,000 per pair. For the first time in the company's history manufacturing was outsourced to China, while sales were expanded beyond traditional high-end audio dealers to Magnolia Home Theater outlets, located in 200 Best Buy electronics stores. Designed by the firm in Kansas, some speakers in the Design series used a non-electrostatic technology called Advanced Thin-Film (ATF).

In the summer of 2004 MartinLogan introduced two new speakers for flush-mounted installation inside of walls. Although such designs were viewed skeptically by most audiophiles, the firm's entry-level Passage and more expensive Voyage models won positive reviews in the press.

SALE TO SHOREVIEW INDUSTRIES IN 2005

In the fall of 2005 MartinLogan majority owner Gayle Sanders, who now lived in California, sold the firm to ShoreView Industries, Inc., a Minnesota-based investment company. Sanders would remain involved as a consultant, with the company's new owner expected to take a passive role in its management.

Driven by the popularity of the Design series, sales grew by 40 percent during the year to a record $24 million. As it focused on more popular models, the company quietly discontinued the Statement e2, which sold only a few units annually and was not economical to produce even at its current list price of more than $100,000 per system.

In the spring of 2006 MartinLogan won approval to begin selling its products in China. Although expected to constitute only a small percentage of the total at first, the firm projected steady growth there over time. Annual sales were again on track for a 30 percent increase, and the company announced new plans to expand production in Lawrence. In the fall it leased a 15,000-square-foot space near its four-building, 43,000-square-foot campus, budgeting $1 million for improvements and additions.

KEY DATES

1982:: Martin-Logan is founded in Kansas; Monolith electrostatic speaker is introduced.
1985:: New CLS model boosts sales; cofounder Ron Sutherland sells stake.
1986:: Operations are moved to larger site; international sales begin.
1990s:: Popularity of home theater speakers brings steady annual growth.
1998:: Company begins $1.5 million expansion.
2000:: Statement e2 speaker system is unveiled.
2003:: Lower-priced, Design line is introduced.
2005:: ShoreView Industries buys control of Martin-Logan, Ltd., from Gayle Sanders.

Nearly a quarter-century after its founding, Kansas-based MartinLogan, Ltd., had grown to become one of the premier manufacturers of audio speakers in the world. With offerings ranging from the affordable Design series to models for home theaters, to high-end systems priced at $20,000 or more, the firm had expanded its portfolio to meet the demands of the marketplace while maintaining the reputation for quality its founders had envisioned.

Frank Uhle