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Scott Jagow: All right, now that we’ve started with some private equity doom and gloom, let’s talk out the other side of our mouth. Today, a big private-equity deal on Wall Street. The company being bought: Guitar Center.
Guitar Center started almost half a century ago as a small appliance and organ shop in Hollywood. So how does it go from that to a company worth $2 billion?Rachel Dornhelm looked into it.
Rachel Dornhelm: The name is a little misleading. Guitar Center also stocks drums, band instruments, software and digital recording equipment.
Retail analyst Alex Biesada says the buyer, private-equity firm Bain Capital Partners, likely made a shrewd move scooping up the country’s largest musical instrument retailer.
Alex Biesada: Guitar Center, because it’s successful, it has cash — it has been buying out the smaller competitors, and so it looks like Bain is getting kind of a big fish.
But how does a big-box store play with stereotypically counter-cultural musicians?
Michael Molenda: You know, stereotyping musicians as well is that they’ll get anything they can as cheap as they can.
That’s Michael Molenda, editor-in-chief of Guitar Player magazine. He says in addition to rock-bottom pricing, Guitar Center has boomed on sales of technology that gives people the chance to record and distribute their own music.
He says in the past, beginners bought a bad guitar and bad amp and sounded bad. Now, Molenda says, there are all sorts of digital products that are addictive.
Molenda: Once you get in, it’s kinda hard to get out. You just kinda keep trying to, you know, buy things that make you sound better or play better.
And while musicians might have once found it unthinkable to buy instruments without trying them first, Molenda says Guitar Center has also grown by offering online sales.
I’m Rachel Dornhelm for Marketplace.
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