Explainer: What the Steinway Sale Means for Classical Music Fans

Tuesday, July 02, 2013 - 11:00 AM

When Kohlberg & Co. made the surprise announcement on Monday that it was buying Steinway, the private equity firm immediately took pains to assure the public that it wouldn't start cutting corners at the 160-year-old piano manufacturer. Christopher W. Anderson, a Kohlberg partner, said it would ensure that "the artisanal manufacturing processes that make the company’s products unique are preserved, celebrated and treasured."

But the deal has raised questions from pianists and admirers of the New York brand, particularly coming after the sale of its 57th Street showroom on Friday. Here are some of the most common ones:

Why was Kohlberg interested in Steinway? And why would Steinway sell?

Private equity groups have their eyes squarely on the luxury goods market right now as they seek to profit from the recovering finances of the wealthy. For example, retailers like Saks Fifth Avenue and Neiman Marcus recently have been the target of private equity suitors, as The Street reported on Monday. Steinway, whose pianos sell for as much as $218,000, fits this category. Moreover, it has been expanding into Asian markets, where there's lots of new wealth and a demand for better-quality instruments.

What is Kohlberg’s reputation? Will it respect – and protect – the Steinway brand?

Kohlberg, a Mount Kisco, NY, firm, is known to focus on mid-sized companies, and not the kind of huge leveraged buyouts that have attracted negative attention in recent years. Its portfolio includes manufacturers of windshield wipers and hockey equipment. "I'm not convinced they're planning to gut Steinway" said Steve Cohen, a veteran piano industry consultant and owner of Jasons Music Center, a dealer in Pasadena, MD. "I don't think it makes sense to gut Steinway. It has an incredible reputation. They're a brilliant marketing company."

Cohen also believes that Steinway wouldn't want to upset Kim Jong Seop, an influential board member and the owner of Samick Musical Instruments, a Korean manufacturer with a 31.3 percent stake in Steinway. Kim essentially bailed out Steinway when times were tough and there has been speculation he would eventually buy the company (and he still could swoop in and make a competing bid, according to the "go shop" terms of Monday's deal).

Will Steinway no longer be a family-owned business?

In fact, it's been over 40 years since Steinway was family-owned. Henry Z. Steinway, the founder's great-grandson, sold the company to CBS in 1972. In 1985, it was sold again, to a group of Boston-area investors, which developed Steinway Musical Instruments, a conglomerate. It embarked on a series of mergers and acquisitions, which included the Selmer, the band instrument manufacturer. 

What happens to Steinway's factory in Astoria, Queens?

There's long been speculation that Steinway will sell its Queens factory, where 500 workers turn out some 3,000 pianos a year. It sits on highly valuable waterfront property and constitutes a large portion of the company's value. Some observers note that Samick, the majority shareholder, has a 200,000-square-foot headquarters in Gallatin, TN, which recently began operating as a piano manufacturing plant. It would be significantly cheaper for Steinway to move manufacturing to Tennessee, though this would raise questions about quality control. The New York Post reported Tuesday that Steinway plans to add employees in Queens.

Bottom line: should piano aficionados be worried?

Cohen points to Bain Capital's 2007 purchase of Guitar Center as a cautionary example. He notes how the instrument retailer has been in financial decline for some time, closing dozens of stores this year and recently seeing its credit rating drop. But Steinway has endured takeovers before, said Larry Fine, author of The Piano Book. He believes the US-made Steinway pianos have improved of late as operations in Hamburg and New York have consolidated. "The company's been remarkably stable," Fine said. "Through all of these sales, the pianos have overall improved and the management has been very competent and it’s transcended the ownership. I'm not particularly worried."

What do you think of the Steinway sale? Watch a video on the making of a Steinway and leave your comments below:

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Comments [21]

steve oliver pianos from Elmsford,NY

Being a fourth generation Piano specialist, my family and i have seen the l decline of Steinway pianos and their quality over the years. As someone else mentioned, after the first sale to CBS the quality of the pianos and concern for the workers showed. A company that once had 3rd and fourth generation specialists who's family's grew up in the company, you know the ones who had tons of pride and felt they had a stake in what they did, are now and have been gone for quite some time.
It amazes me that hardly anyone knows that Steinway hasn't been family owned for around forty years. Samick music's Kim Jong Seop has probably had a large influence in changing Steinway's finishes and production methods.
Steinway recently spent a couple of million dollars changing their finishing department to accommodate polyester finishes, (plastic), the same finishes that are used on almost all Asian pianos. No more hand rubbed lacquer? The finest and richest looking!
The actions have been changed also, i have friends that work there, the word is that the technicians are having difficulty in fine regulating and adjustments. seems to me the handwriting is on the wall i think you will see another take over, wonder who next?
If you are planning on buying a Steinway, a vintage one is the way to go, you will get their best made pieces and they will go up in value!

Aug. 13 2013 02:57 PM
John Eberhardt

My great uncle Jacob, my grandfater, Franz, and my uncle Franz, all worked for Steinway in Astoria for many years. My grt uncle and uncle made the legs (carved as eagles) for the Steinway piano in the White House. During WWII, Steinway made gliders for the Army. Hope they sail through this buyout. JEb

Jul. 08 2013 08:31 PM
Evan from New York

Fans of the Steinway piano are not the only ones who will be affected by this sale. Steinway also owns Conn-Selmer, which is the largest producer of band instruments in the world. For a player of Trumpets, French Horns or Trombones, three of Conn-Selmer's brands, Vincent Bach, C.G.Conn and King musical instruments, are as legendary to those musicians that play them as the Steinway piano is to pianists. Conn -Selmer has greatly increased the quality in recent years of these iconic instruments, and the possibility of relocating the manufacturing to China has many worried about the future of these brands.

Jul. 08 2013 07:16 PM
NYMike from Manhattan

@Michael Meltzer: It's always easy in today's society to blame unions for just about everything, especially after swallowing oligarch propaganda for the last 40 years. Once CBS (as you said) took over, Steinway was no longer a family business that took care of its craftsmen. Enter any corporation beholden to stock holders and a union becomes necessary for the survival of its workers.

Jul. 06 2013 06:09 PM
Kenneth Bennett Lane, Lake Hiawatha, NJ from Richard Wagner Music Drama Institute, Boonton, NJ

When all is said and done, STEINWAY, like many glamorized and worthily warmly appreciated landmarks in our lives will change, will undergo a transformation that may turn good or bad depending upon whom administers the corporation. In the film industry today is the banks and corporate interests that control the end products. Creative artists are shunted aside for "practical" reasons, seen only by the bottom line moneybags. Being an opera singer, a Wagnerian heldentenor, tenore di forza, I have often heard from my Italian colleagues: va piano, va sano, va lontano. Go slowly, go safely, go far. Let's hope that STEINWAY continues on, far into the future.

Jul. 06 2013 04:19 PM
Brian M Ross

Kohlberg is a leveraged buyout firm. They don't get 20% or better off of cutting a lot of corners, which would mean a huge diminution of the quality of the Steinway brand unless their general plan is to sell to interests in China, which want it badly enough to make even Steinway's Korean stake go away, or at least enter into partnership with the Chinese interests.

A 45 day "shop" period is in effect. Sign the petition: http://www.change.org/petitions/keep-160-year-old-american-piano-maker-steinway-sons-in-america-stop-the-sale-of-steinway-to-leveraged-buyout-firm-kohlberg-co

Jul. 05 2013 06:02 PM
David from Flushing

New York City once had a thriving manufacturing segment that included musical instruments. As the demand for these declined, many of the makers vanished. There was once the Roosevelt Organ Works operated by cousins of President Theodore Roosevelt. Their products were eagerly sought by the leading Episcopal churches of the era. However, the surviving brother decided to close the firm in the early 1890s not for lack of business, but what he stated as the strong tendency to cheapen the product. He desired that his late older brother's legacy be kept intact. The first two locations of this firm still stand on West 18th Street while the last in East Harlem has been redeveloped.

There may be some analogies here for the piano business. Pipe organs are no longer a necessary fixture of churches and concert halls. Music lessons and home pianos have also declined in popularity. Electronic keyboards have proved far more affordable and practical to many. The future of both classical instruments depends on what sort of music people want to hear as well as what they want to play. The demographic crash of classical music audiences in about 2030 will surely influence business decisions.

Jul. 04 2013 08:18 AM
booker g

sadly the quality will suffer. This is a trtend when companies buy up other companys/their main purpose is to make profits at all costs

Jul. 03 2013 10:22 PM
Fred from Kew Gardens

@ Mindy: Our politicians have no problem picking winners and losers with our "vulgar" tax dollars. In just a few years Bloomberg has given us three new sports stadiums at taxpayers' expense. It's a matter of priorities and political decisions. (Why not, for example, replace Avery Fisher Hall?) To believe it's a "free-market" and everything and one has an equal opportunity is just nonsense.

Jul. 03 2013 04:52 PM
Andrew B. from Lower Merion, PA

While Steinway has been a great feature of NYC's cultural landscape and history, I'm not sure that we need eulogizing yet. Steinway is not the only "great" piano brand and must compete on quality, and my guess is that Steinway will not disappoint its numerous loyal artists.

@Michael Meltzer: I agree there could be upsides of the southward move. I'd hope that lower costs down south might bring down the price of the instruments but I realize that's not likely because premium brands don't need to be price competitive, and a Steinway is worth every penny.

Could be the PE firm just wants the valuable property, will take the cash, and then spin Steinway off to another musical instruments shop. As is noted above, Steinway has not been family-owned for 40 years. We just need to hope that the expertise and legacy knowledge stays around with the company (sort of like holding on to and not diluting the magic Coca-cola formula).

I'll miss Steinway hall--I've been there several times, but I can console myself that some of NYC's other classical music institutions are thriving. Classical music has never been an easy business prospect.

@Mindy: thanks for the laughs.

Jul. 03 2013 10:27 AM
Ronald Vogel from Mount Kisco, NY

Steinway hasn't produced a Steinway in decades.

Jul. 03 2013 10:17 AM
Peter from NYC

In response to Kathy, I too would be nostalgically sad to see Steinway leave NYC, with its long and storied history. But let's not over-romanticize the NYC of old. I for one don't miss old pornographic Times Square or the grungy Meatpacking District. I surely don't miss the tranny prostitutes servicing their johns on my block and leaving the evidence behind or the blood on my building stoop after they get beat up by their pimps in the night. Maybe you could ignore it up on Madison Avenue but a lot of lives were assaulted and trashed in these areas.

And I have no idea how you are comparing the current Meatpacking to Mystic Seaport; shipyard museum with boats and artisanal demonstrations vs. nightclubs and expensive boutiques. I don't love the Meatpacking now either, but I'd probably actually prefer a version of Mystic Seaport.

All this gets away from the issue of Steinway. I'd love to see the city offer some sort of incentives for the company to stay. I can imagine Queens politicians would be happy to try to keep 500 jobs in their borough. And I also imagine there would be plenty in Brooklyn or Staten Island who wouldn't mind the company moving there.

In the end though, NYC has always been about constant change and renewal. This means an evolution of both the things we love and hate ultimately, mostly largely out of our control.

Jul. 03 2013 09:39 AM
Michael Meltzer

@Thomas: You won't see anything mentioned because it's all one company. There is even an interchange of parts and materials between the two factories; they are one final balance sheet.

Jul. 03 2013 08:42 AM
Thomas Mowrey from New York

Does anyone know whether or not this sale to Kohlberg includes the Steinway manufacturing facility in Hamburg, Germany? I assume so, but haven't seen anything mentioned about that.

Jul. 03 2013 05:29 AM
Michael Meltzer

The Steinway factory being moved south could be a positive step, with two big IFs: the dirty little secret is that the biggest obstacle to New York quality control keeping pace with Hamburg has been the interference of the Teamster's Union, going all the way back to the early days of CBS ownership.
If Steinway can get a large core of senior craftspeople to move with them,and shed the union, management can again take control of quality and recapture past glory. The know-how is there.

Jul. 02 2013 11:01 PM
Mindy

Indeed! No change should be allowed until Kathy of Aragon, whose sense of what is authentic about New York is unimpeachable, has personally approved it. And certainly, nothing as vulgar as money should ever be a consideration. I'm sure Kathy, herself, donates her services to whoever requests them and don't doubt that she will take on, free of charge, the additional role of being everyone's arbiter of taste. Too bad that NYC is no longer a source of "terrific creativity and unpredictable joie de vivre" but, there you are. This is what happens when Kathy is not first consulted.

Jul. 02 2013 09:53 PM
Rich-Park Slope

Steinway will mostly likely be outsourced.How sad!

Jul. 02 2013 09:50 PM
Larry Sutin from Saranac Lake, NY

A number of years ago I was downstairs in the room where the concert grands were lined up waiting to be selected by artists and there was a Steinway family member, white shirtsleeves rolled up, caring for the instruments. No longer.

I am glad to be nearly ninety-three and won't have think about the loss of the city's musical facilities much longer.

Jul. 02 2013 02:58 PM
Brian Numme from Stockton, NJ

It is a sad commentary on the state of affairs of music in performance and education, of NYC, the nation, and the world. Does one honestly think the Queens factory will NOT be sold? And that 'some' of the production will not be moved to overseas? Everyone should watch the documentary Note by Note: The Making of Steinway L1037. It is very touching and I dare say more poignant given these recent events.

Jul. 02 2013 02:14 PM
David from Chicago

Guess we're down to Bechstein and Bösendorfer now.

Jul. 02 2013 02:11 PM
Kathy of Aragon from Madison Avenue

There are many ways to look at the Steinway sale, but the prime one is the landscape of the quality of life in New York, which has deteriorated and continues to both slick-up to ever more generic chrome and steel, also to become merely anecdotal (think of the Meatpacking District, now practically a dead ringer for Mystic Seaport)or the Disneyfication of Times Square. Pornography was never as invasive, assaultive, and aggressive as those oversized cartoon critters and superheroes. There is disrespect for if not ignorance of, New York's heritage as a broadly painted landscape of economic and ethnic diversity...of terrific creativity and unpredictable joie de vivre that is giving over to naught but $$$$$. NYC seems to grow more and more generic every day. The loss of Steinway is just another symptom of this, a little more alarming as you go deeper and think what the loss of the plant in Astoria really might mean. I mean, after all, there's all that valuable waterfront, right? You can almost smell the credit cards snapping in the parking lot....

Jul. 02 2013 12:49 PM

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