Issue 27

In the last issue of Copper we briefly looked at loudspeaker manufacturer Spica, the company’s founder John Bau, and the company’s speakers, which are still used and revered by many, decades after the company’s demise.

Luckily, founder/designer Bau is still alive and well; I spoke at length with John on February 7th, 2017. What follows is a transcription of that conversation, edited for brevity and clarity (C= Copper, JB=John Bau).

C: For a company that’s been out of business for 20 years, there’s certainly a wealth of material on the ‘net about Spica.

JB: Yeah. There’s a very loyal group of users out there. John Allen’s website spicaspeakers.com is a great resource for Spica owners.

C: Personally,  I was surprised to discover your involvement with PS. They just did the plate amps on the subs?

JB: Well, as far as product, yes. Paul and Stan were in a big way responsible for getting me into the mainstream  of audio marketing, really. Back around 1979 I was sitting in my house making these speakers and pretty much selling as many as I could make, locally. A friend of mine in Albuquerque said, “you should talk to the guys at PS Audio, they’re really cool guys and you’ll like them, and they’ll give you some pointers on getting going in the business, maybe a little more scale.”

So I took his advice and called them, and just hit it off with both Paul and Stan immediately. At one point they asked if I was going to the summer CES show, and I said, “what’s that?” I had no idea what it was. They explained to me what t was, and I thought it sounded pretty interesting. All the exhibit rooms were at the Americana Congress [in Chicago], which had a different name back then. They said, “all our rooms are sold out, but we’ll put you on the waiting list.” I said, “okay, that’s cool.”

My wife was scheduled to have our first baby right around the time of the show anyway, so there was some conflict there. A week or two before the show I got a call from CES saying,  “we have a room open on the fourth floor. ESS just bought out Dynaco… and so you can have their room.”

I didn’t know until I got there, but this was a prime location. Right as you came up the stairs you’d see Spica’s room (laughs)…I don’t need to tell the rest of that story, but Paul and Stan were the ones who got me to show my stuff and got me to go for more national marketing.

C: That was back in the day when you could do that at CES, and get results.

JB: Yup, I think that’s true. I got lucky—I was the only one on that level. Most of the guys got rooms on like the 20th floor…I really lucked out.

C: At CES this year we were a little disheartened by how little presence there is of high-end audio [at the show].

JB: I’m amazed there’s any, to be honest with you. I haven’t kept track of audio, but it seems to me….I was surprised when you told me PS Audio was still in business. I was like, “you’re KIDDING!!”

C: I read your interview with John Atkinson from almost thirty years ago, 1988, and the beginning of how you got into speakers sounds suspiciously like the way Dave Wilson got into building speakers: you’re doing recording, you wanted to have a reliable portable monitor, couldn’t find anything you liked and/or could afford, and you just started making your own. Your first product, the SC-50…were they made out of Sonotube [the cardboard tubing used as a concrete form]?

JB: Yep, they were Sonotube with a glued-in baffle and solid wood end-caps.

C: I recall being impressed with them at the time, and then a few years downstream the “wedgies” [the TC-50] came out, and those were even more astounding. You  always made products that performed well above their price. Was that by design, is that just the way you are?

JB: Yeah, I’m a minimalist at heart…I wanted the Henry Ford thing, I wanted normal people to buy my products. That’s the audience I was trying to serve.

C: I think that’s the thing that has splintered the audio business—there’s the one-percenter products, and then there’s everything else down at the bottom….at CES there were speakers being shown that were $400,000 per pair. I can’t in my wildest dreams come up with any way to justify those kinds of prices.

JB: I just find it offensive, and I ignore it. I don’t care how good it is, creating unobtanium is to me an empty exercise. There’s no challenge in it.

C: The big question about Spica is : you had a fairly popular brand, within the realm of high-performance audio. The company is sold to Parasound, and then it just kinda goes away. So…what happened?

JB: The answer to that is multi-leveled. Part of it is that at some point in the early to mid-’90’s I saw the writing on the wall for what I was trying to pursue in audio,as far as being able to market it at an affordable price to a broad audience that could afford it. That’s when VCRs started having stereo, and then pretty good stereo recording, and then digital. I wasn’t interested in making speakers that were essentially a video accessory. My interest was in chasing after two-channel holography, that was my total focus. When it became  clear to me that I wasn’t going to be able to survive—-I had the advantage of owning the company,and being the designer AND the owner, and when the challenge and the carrot disappears—the obvious thing was to collaborate with someone who was good at the marketing end, which was Parasound…I really liked Richard Schram and the crew, but it was a little late in the game and a couple critical mistakes were made in the transition. We needed the home-theater stuff, the surround-sound, and that’s when it kinda became a job for me, rather than a creative deal.

C: I think we’ve all experienced that at one time or another (laughs).

JB: Well, yeah (laughs). I’m a realist, and there are levels of trade-offs in that, there are things in designs that I didn’t incorporate because I knew they wouldn’t be acceptable aesthetically. What we all jokingly call the “wife acceptance factor”, well, that’s a real thing (laughs). There’s a 3-way speaker we didn’t come out with even though it was finished, just because I didn’t think people would accept having a 12-inch step in front of the woofer that sat next to the floor because it  needed a predictably-reflective surface for that first 12 inches in front of the driver in order for it to couple with the midrange.

C: That’s probably still a deal-killer (laughs).

JB: Yeah! It probably is (laughs). I was just going after what satisfies the need. Back in the ’70’s I remember going to hear an author talk here in town, and she said, “to be a successful artist, you have to create to fulfill your own need.”  If you’re creating to fulfill what somebody else wants or expects, that’s kinda bogus creativity.

C: Regarding creativity, one of the things that came through in your products was the sense of traveling to the beat of a different drummer. They weren’t “me too” products, they were incredibly well thought out. I look back at the performance you got out of them at the price-points you had, and it’s still astonishing to me. Even now, compensating for inflation, the Angelus would sell for about $2500/pair today [about double what they cost originally]. I can’t imagine being able to make them today even for that amount of money.

JB: Wow. The cabinet is the kicker. Going back to your earlier question, that was one of the other factors [which caused the company’s demise]. Our cabinet-maker in Colorado went out of business….He closed down and turned his facility into a paintball range! (laughs) Sitting here in New Mexico, that was like the kicker—you can’t be in the speaker business without a good, reliable, affordable source of cabinets….there’s just a huge labor component involved in making cabinets. And the minute you get away from 90-degree angles in a speaker enclosure, the prices just soar.

C: There was a very interesting interview with you on Enjoy the Music in 2000,  and you mentioned some of the things you’d been working on when you closed up shop. The one that jumped out at me was a “resonance-free helical transmission line subwoofer”.

JB: Yeah, I still haven’t built one of those…

C: What the hell does that mean, exactly?

JB: When you look at a transmission line and what makes it work…the ideal implementation of it is a smoothly-tapered line. You need a certain amount of volume behind the driver so it doesn’t interact, so it doesn’t load the driver. Then you want the line smoothly tapered with a damping material interspersed uniformly throughout it, and then the dimensions of the port at the other end are tuned….it’s basically a damped, attenuated line.

C: Sure. But what’s helical about it?

JB: The dimensions are typically a quarter-wavelength or longer of the frequency you’re tuning to, which means it’s LONG! (laughs) And so, racking my brains, like how do we DO that?—I woke up one morning and went aHA! We’ll just have two tubes, one inside, one outside, and then have a smoothly-tapered line as a helix within those tubes. And BAM!, you’ve got it,  there’s no reflections due to right angles, you can pack a long line in a small enclosure—in theory it’s a great idea. I’ve just never gotten around to making one.

C: That sounds like it could still work.

JB: It could still work, it’s still a great idea. I don’t know if anybody’s doing transmission lines any more.

C: Not so much. I think it’s largely due to the labor component and the cost of lambswool, or the resistive elements….

JB: (laughs) I haven’t been monitoring that one….

C: Well, I haven’t either. That was kind of a shot in the dark….  Over the last 20 years [since Spica shut down] you apparently have kept busy rehabbing test equipment and selling it?

JB: Yes. One of the things I loved [designing at Spica] was the test equipment. The way I did speaker design was very measurement-intensive, and computationally-intensive, too. When I look back—learning computer languages and programming, and learning about the test equipment and techniques—that took more time and …challenged me intellectually more than just the acoustical and reproductive aspects of speakers. From the measurement aspect, I quickly developed a really deep respect for the folks that were designing test equipment.

It involved relationships with Richard Heyser of course, but also Deane Jensen, who had created a computerized optimization program that suited my needs almost perfectly. Heyser’s work led me to make good measurements; Jensen’s work led me to take that data, make accurate models of the system and optimize them via computer, in order to make the models work before building prototypes. I built very few prototypes, maybe a dozen over 17 years. Another relationship was with Gerald Stanley, the guy at Crown who eventually built the first time delay spectrometry (TDS) box run by a computer. The measurement angle [of design] was really big, and I absolutely loved it.

I sit here in New Mexico surrounded by two Department of Energy-funded laboratories at Los Alamos, about 30 miles north, and Sandia Labs about 60 miles south, they’re spitting out about 1,000 pieces of surplus a month. So, it was a really natural transition.

C: That makes sense, now that I understand the bigger picture.

JB: Now I get to own all the boxes that I drooled over, I get to play with them for a short period of time, and once I realize that they’re overkill for anything I might possibly do with them, I get to sell them (laughs), and make somebody happy….it gets me over my addiction, my infatuation, and keeps me real.

[We’ll conclude our talk with John Bau in the next issue of Copper. We’ll look at how John’s way of  designing speakers was different from almost anyone else, the influence and legacy of Richard Heyser, and would Bau do it all again?—Ed.]

“I held on to my Angeluses for 25 years. It wasn’t because of ‘sonic holography’. Instead, there was something addictive about the way they energized a room— almost like a spigot filling a glass with beer—that made me want to listen to music. They lent an excitement and humanity to recordings that I haven’t encountered since. In the end I went in for the jump and presence of vintage 15″ coaxial drivers, but the Spicas will always be my first love.”—Alex Halberstadt, who reviewed the Angelus for Listener.

That same pair of Angeluses (Angeli?) in the Monkeyhaus—the listening room at DeVore Fidelity. Photo by John DeVore.

Uncle Jim was a chemist who worked for General Mills for over forty years, developing food products (I know, I know—the organic-eating Coloradan in me shudders a bit at that idea, but let’s move on).  I recall my professorial-looking unk ranting about “the kids”—probably PhDs in their 30’s and 40’s—who came up with brilliant ideas that, surprise, surprise, he had investigated and rejected decades before. And of course, “kids” being kids, they wouldn’t believe him, wouldn’t listen to “the Old Man”, couldn’t conceive that they weren’t the first to arrive at a particular insight.

As I was in my twenties when I heard Uncle Jim’s rant, I smiled and nodded sympathetically, and tried not to smirk while I secretly sided with “the kids”.

One of the countless corollaries of Leebens’ Law of Life (“Things Change”, in case you’ve forgotten) is, “Be careful what thou smirketh at, for yea verily, it shall return to biteth thou in thine behind.” —Okay, it isn’t normally stated in Shakespeare-speak. It’s just more fun that way.

Fast forward to a white-haired Leebs: sure enough, I’m in Uncle Jim’s spot. Those damn kids just won’t listen. Again, I smile— ruefully this time, amused by the arrogance that made me think that I would never be like that.

This came home to roost at CES a couple years back, when I found myself berating a potential client for pitching their product as the FIRST self-energizing electrostatic speaker….and I of course simply had to set the record straight, listing the lineage of such things back to the ’20’s in Germany and the Koss ‘stat speakers, and…and…

Is that twenty-something giving me the same fixed, tolerant smile I wore when Uncle Jim was ranting?

OMG.

No surprise then that I didn’t pick up a client that day. I’d like to think that I learned from that event, and that I now gently point out such historical missteps with patience, and not pit bull ferocity. It’s a work in progress, like all of life.

The truth is,  audio is a field with a truly lousy sense of its own history, more interested in advancement of the latest and greatest than in introspection or preservation of its past. The history is largely preserved in the minds and memories of those who have been involved in designing or selling the gear…and when those souls pass on, those memories are lost.

The AES has some historical archives, but much of the material available from them pertains more to the history of the society itself, than to the anecdotal and technical history of audio in general. Few biographies or autobios of audio notables are available, aside from the occasional oral history like this one from audio pioneer Harry F. Olson— which makes books like those from The Absolute Sound and Ken Kessler even more valuable (a real cynic would point to the triple digit prices of those books, but I understand the issues of small-scale, research-intensive publishing).

I’ve attempted to do a tiny bit to preserve the history of a few innovators in the field with my Vintage Whine columns, but there’s an awful lot more to be done. I don’t know what to say about that, other than to encourage industry veterans to record their memories while they can: audio, video, on paper. Just do it.

This will probably result in me being involved in even more projects in the future. I’m okay with that—although  I suspect that statement will likely come back to biteth me in my behind. ;->

I started to write a column about Tower of Power, a band that had a huge influence on all of us, and realized quickly I couldn’t start that story without some of the history of Funk, which naturally begins with James Brown.

JB had started his singing career in the early 1950’s with a gospel group and an R&B group called the Flames, then the Famous Flames, and as Brown started to find his pipes and leadership jones James Brown and the Famous Flames.  The Flames with Bobbie Byrd didn’t consider themselves a backup group and there were problems that resulted in them breaking from JB in 1970, but they couldn’t argue with success.  In 1956 the band released “Please Please Please”, a soul staple that stayed in JB’s show set for the remainder of his career.  By the mid 60’s James Brown had a string of R&B/Soul hits and in 1962 released “Live at the Apollo”, a live album of his hits.  His record company wouldn’t release the album, believing people wouldn’t buy it because they’d already bought the records.  Brown had to finance it himself.  The album was released in June ’63, reached #2 on the LP list and stayed on the charts for 14 months.

This event really underlined JB’s confidence in himself and his music.  There are some great videos and documentaries from this period where band members spoke to his studio style.  Brown knew what he wanted, but without formal music education had to resort to mouthing parts and hand signals to coax the groove out of his players.  The musicians, especially the horn players, were more studio trained and accustomed to charts.  But everything was in JB’s head, and the only way to release it was to “boop, UH, bopa-de-bop, cha OWW, bopa-de-bop” until they got what he was after.   What Brown was doing with these guys was laying a groove, and turning the entire band, drums, bass, horns and vocals, into one big driving drum.  What he was doing was inventing Funk.

Now I’m going to get some argument here.  Critical voices will point to “Cold Sweat” in 1967 as the first true funk song.  But the essential element of funk is the emphasis on the 1, and the SPACE between beats in the bars.  Most R&B, Motown, Pop and the like lived on the 2 and 4. Funk hit you in the face with entire band on the 1.  And that started with this.  Turn it UP, and Get On Up, because we be going dancing.  1965.

If you can sit still during that you ain’t human, man.  I think the pundits don’t use “Papa” as the first example of funk because it was such a huge hit.  But dudes and dudettes, you is just wrong.

Certainly after “Cold Sweat” in ’67 shit started happening.  The Meters formed by Art Neville, with George Porter Jr bass, Leo Nocentelli guitar, and Zigaboo Modeliste drums, set a New Orleans tone to funk and as Alan Toussiant’s backup group carried the funky torch through several renditions of the band which later added some of Neville’s brothers.  Sly and the Family Stone, formed in ’66 woke us all UP, with stage style and a groove that just grabbed us hard.  Larry Graham on bass with Sly would later be a huge funk artist with Graham Central Station.  Graham started the slap-pop bass style, later copied by Everybody, when he was a kid working in his mother’s R&B band and she couldn’t afford a drummer.  Larry developed that slap-pop style to make up for no kick drum and no snare.  And all you have to do is think about that groove in Sly’s hit “Thank You (Falettinme Be Mice Elf Again)” in 1969. Boo-oom Bat bop Bat, Boo-oom bat bop.  That’s right.

George Clinton and Parliament-Funkadelic.  Bootsy Collins and his older brother (Catfish Collins!!—Ed.) joined James Brown in 1970 (Bootsy was 18) and became funk brothers.  There was a lot of cross pollination going on in the early 70’s including Bootsy playing with Parliament-Funkadelic after JB.

In the summer of 1968 Emilio Castillo met Stephen ‘Doc’ Kupka.  Castillo sang and played tenor sax, Doc played bari sax.  The legend says Castillo was starting a band and auditioned Doc first in the living room of the family home, and Emilio’s dad told him to ‘hire that guy’ and they became the nucleus of  Tower of Power, arguably the greatest and certainly the longest tenured horn band in the business.  My favorite part of this story is these two clowns sat down in the Castillo living room and wrote their first song, “You’re Still a Young Man”, one of the most beautiful soul songs ever performed and written, with Mic Gillette (RIP man) on that soaring trumpet solo that defines the beginning of this killer ballad.  I wasn’t going to add this audio since it ain’t about funk, but it popped up when I was looking for another title, and, well, it’s a dear friend’s favorite and she’s currently in the hospital.  So, for Terri..

Really?  Your first song?  Little bastards…

I saw TOP a few years back, with Castillo, Doc, Gillette, and Garibaldi.  Rocco was sick and another bass player sat in and the result suffered a bit.  Vive La Bass Players!  But when Gillette started this song there wasn’t a dry seat in the house.

By 1970 the boys had added horns, including Mic Gillette, but especially Rocco Prestia (bass) and David Garibaldi (drums) who became the sweetest rhythm section on the planet Funkify.  Garibaldi’s work in particular is fascinating to pick out and listen to.  Any drummer will listen to his grooves and be rocked by the style and the sheer slyness of his stick work.  Really innovative and along with Rocco lays the bottom to black earth funk and always turning that stanky mud over and over.

Some of my all-time favorite albums featured the Tower of Power horns on studio and especially live performances backing other groups.  They were the horn section to get.  Elvin Bishop’s  Live Raisin’ Hell!, Little Feat’s best album (also live), Waiting for Columbus.  Backed so many and varied artists because they were, and still are the shit.

A mention for Clyde Stubblefield, an early James Brown drummer who actually laid the groove for “Cold Sweat” in the studio.  We lost Clyde Feb 18 at the ripe drummer age of 74.  Thanks Clyde.

MQA and Universal Music Group to Collaborate on Advancing Hi-Res On-Demand Streaming

[MQA was introduced via an AES paper by Bob Stuart and Peter Craven in 2014; the paper had the daunting title of ” A Hierarchical Approach to Archiving and Distribution”. Since that time, MQA has been the subject of both acclaim and debate. Warner Music signed an agreement with MQA last May; now that UMG is on board, Sony Music is the only unsigned major label. —Ed.]

 LONDON AND SANTA MONICA, FEBRUARY 16, 2017 – Music technology company MQA and Universal Music Group (UMG), the world-leader in music-based entertainment, announced today that the companies have entered into a multi-year agreement that will encode UMG’s extensive catalogue of master recordings in MQA’s industry-leading technology, promising to make some of the world’s most celebrated recordings available for the first time in Hi-Res Audio streaming.

Today’s announcement comes shortly after the launch of the cross-industry marketing campaign “Stream the Studio”, launched at the 2017 Consumer Electronics Show in Las Vegas and spearheaded by the DEG: the Digital Entertainment Group, to raise awareness of the advantages of Hi-Res Audio streaming.

Mike Jbara, CEO of MQA, commented, “We’re very pleased to be working with Universal Music to achieve our goal of moving studio-quality sound into the mainstream.  Universal’s timeless catalogue and impressive artist roster will fuel music streaming services worldwide and enable the premium listening experience for all music fans.”

Michael Nash, Executive Vice President of Digital Strategy at UMG, said, “The promise of Hi-Res Audio streaming is becoming a reality, with one service already in the market and several more committed to launching this year. With MQA, we are working with a partner whose technology is among the best solutions for streaming Hi-Res Audio, and one that doesn’t ask music fans to compromise on sound quality for convenience. We’re looking forward to working with Mike and his team at MQA to make our industry-leading roster of artists and recordings available to music fans in the highest quality possible.”

MQA – the award-winning technology which delivers master quality audio in a file small enough to stream – debuted on global music and entertainment platform, TIDAL, at the beginning of this year, and is also available internationally on several music download services.

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Samsung’s Acting Chairman Arrested

[ Here’s the Reuters report of the latest events at Samsung.

Our second story is unusual for several reasons:

First, we ordinarily present press-releases with minimal comment. In this case, there is no relevant press-release, but I felt the story was significant, relevant, and worthy of mention.

Second, audiophiles may think, “what’s a cellphone company got to do with our little world?”—well, this particular  cellphone company bought Harman International a few months ago, and Harman is the parent company of JBL, Mark Levinson, Revel, Infinity, and a number of other well-known consumer and pro audio brands. The sale was likely driven (pun intended) by Samsung’s need for  Harman’s autonomous car technology, but the end result still overlaps our world.

In the past year Samsung has faced massive recalls of exploding cellphones and exploding washing machines, and now the heir and acting chairman of the massive conglomerate is under arrest. And you think times are tough for your company?

Looking back at better times, here’s a recap of Samsung’s purchase of Harman last November —Ed.]

SEOUL, Korea and STAMFORD, CT – Samsung Electronics (KRX: 005930) (“Samsung”) and Harman International Industries, Incorporated (NYSE: HAR) (“HARMAN”) today announced that they have entered into a definitive agreement under which Samsung will acquire HARMAN for $112.00 per share in cash, or total equity value of approximately $8.0 billion.  Upon closing, the transaction will immediately give Samsung a significant presence in the large and rapidly growing market for connected technologies, particularly automotive electronics, which has been a strategic priority for Samsung, and is expected to grow to more than $100 billion by 2025^[1].  HARMAN is the market leader in connected car solutions, with more than 30 million vehicles currently equipped with its connected car and audio systems, including embedded infotainment, telematics, connected safety and security.  Approximately 65% of HARMAN’s $7.0 billion of reported sales during the 12 months ended September 30, 2016 are automotive-related, and its order backlog for this market at June 30, 2016 was approximately $24 billion.

HARMAN’s experience designing and integrating sophisticated in-vehicle technologies, as well as its long-term relationships with most of the world’s largest automakers, will create significant growth opportunities for the combined business by enabling it to leverage Samsung’s expertise in connected mobility, semiconductors, user experience, displays and its global distribution channels.  In addition, the combination of HARMAN’s brands and audio capabilities and Samsung’s expertise in consumer electronics will deliver enhanced customer benefits and elevate user experiences across Samsung’s complete portfolio of consumer and professional products and systems.

“HARMAN perfectly complements Samsung in terms of technologies, products and solutions, and joining forces is a natural extension of the automotive strategy we have been pursuing for some time,” said Oh-Hyun Kwon, Vice Chairman and Chief Executive Officer of Samsung Electronics.  “As a Tier 1 automotive supplier with deep customer relationships, strong brands, leading technology and a recognized portfolio of best-in-class products, HARMAN immediately establishes a strong foundation for Samsung to grow our automotive platform.  Dinesh Paliwal is a proven global leader and, in our extensive discussions, we have developed deep respect for him, his strong senior leadership team and HARMAN’s talented employees.  HARMAN’s sustained track record of rapid growth fueled by technology leadership and an unmatched automotive order pipeline reflects its commitment to innovation and customers.”

“The vehicle of tomorrow will be transformed by smart technology and connectivity in the same way that simple feature phones have become sophisticated smart devices over the past decade,” added Young Sohn, President and Chief Strategy Officer of Samsung Electronics.  “We see substantial long-term growth opportunities in the auto technology market as demand for Samsung’s specialized electronic components and solutions continues to grow.  Working together, we are confident that HARMAN can become a new kind of Tier 1 provider to the OEMs by delivering end-to-end solutions across the connected ecosystem.”

Dinesh Paliwal, HARMAN Chairman, President and CEO, stated, “This compelling all-cash transaction will deliver significant and immediate value to our shareholders and provide new opportunities for our employees as part of a larger, more diversified company.  Today’s announcement is a testament to what we have achieved and the value that we have created for shareholders.  Samsung is an ideal partner for HARMAN and this transaction will provide tremendous benefits to our automotive customers and consumers around the world.  Combining Samsung’s strengths in leading-edge displays, connectivity and processing solutions with HARMAN’s technology leadership and long-standing customer relationships will enable OEMs to provide new offerings for their customers.  Partnerships and scale are essential to winning over the long term in automotive as demand for robust connected car and autonomous driving solutions increases at a rapid pace.  This transaction will bring HARMAN and Samsung’s complementary strengths together to accelerate innovation in this space.  More broadly, this investment underscores the strength of HARMAN’s employees, as well as our success and leadership across our markets.  We look forward to working together with Samsung to elevate experiences for consumers worldwide.”

Customer Benefits and Significant Growth Opportunities

Samsung expects the combination to deliver significant growth opportunities and benefits to customers by leveraging Samsung’s and HARMAN’s complementary technologies, resulting in increased market penetration across important end markets.

• Automotive:  Combining HARMAN’s leadership in new connected car technologies, including its top positions in infotainment, cyber security, over-the-air updates and telematics, with Samsung’s significant expertise and experience in connectivity technologies, including 5G, UX/UI, display technology and security solutions, will enhance HARMAN’s automotive and connected services businesses to drive greater sales and provide significant benefits as automakers speed the adoption of next-generation connected cars.
• Audio:  HARMAN’s leading brands and cutting-edge audio systems include JBL®, Harman Kardon®, Mark Levinson®, AKG®, Lexicon®, Infinity®, and Revel®.  The company also licenses Bowers & Wilkins® and Bang & Olufsen® brands for automotive.  All of these brands will greatly enhance the competitiveness of Samsung’s mobile, display, virtual reality and wearable products to deliver a fully differentiated audio and visual experience for customers.
• Professional:  The combination will also expand the combined company’s business-to-business platform through its ability to deliver integrated, large-scale audio and visual professional solutions at stadiums, concert facilities and other performance centers such as The John F. Kennedy Center for the Performing Arts and STAPLES Center – home of the GRAMMY Awards®.
• Connected Services:  Samsung will gain access to HARMAN’s 8,000 software designers and engineers who are unlocking the potential of the IoT market.  This collaboration will deliver the next generation of cloud-based consumer and enterprise experiences, as well as end-to-end services for the automotive market through the convergence of design, data and devices.

Operating Structure and Leadership

Upon closing, HARMAN will operate as a standalone Samsung subsidiary, and continue to be led by Dinesh Paliwal and HARMAN’s current management team.  Samsung is pursuing a long-term growth strategy in automotive electronics, and plans to retain HARMAN’s work force, headquarters and facilities, as well as all of its consumer and professional audio brands.  Samsung believes the combination will increase career development and advancement opportunities for the employees of both companies.

Samsung’s Automotive Electronics Business Team, which was established in December of 2015 to identify opportunities for Samsung in the automotive sector, will work closely with the HARMAN management team to realize the full growth potential of the combination.

Terms of the Transaction

The purchase price represents a premium of 28% based on HARMAN’s closing stock price on November 11, 2016 and a 37% premium to HARMAN’s 30-calendar day volume weighted average price ending November 11, 2016.  Samsung expects to use cash on hand to fund the transaction.  The agreement has been unanimously approved by the boards of directors of both companies.

The transaction, which is subject to approval by HARMAN shareholders, regulatory approvals and other customary closing conditions, is expected to close in mid-2017.

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Back in Issue 22, in response to my column “Purer, More Perfect Sound”, reader tortuga_Bob made mention of the ‘Crown Jewels’ argument often put forward by the majors to describe their Studio Master “tapes” (which these days are files, rather than tapes).  Bob was absolutely right, and whenever I hear this Crown Jewels idea being spouted it makes my blood boil, because it is nothing but preposterous nonsense.

Imagine this.  German car-maker BMW recently unveiled the latest incarnation of their iconic 5-series luxury sports sedan. I expect if you wanted one, and could afford it, it would be available to purchase from your local BMW dealer in that fetching shade of metallic azure blue.  What you’d get would look as close to what you see above as they can make it.  Imagine, though, that BMW’s marketing mavens instead considered this magnificent paint job to be their Crown Jewels.  Instead of allowing you to experience it for yourself, what they would offer to sell you is the closest match from a Benjamin Moore color swatch, lovingly applied with a 3” paint brush.  Makes any sense to you?  Of course not.  It is clearly nothing but abject preposterous nonsense.

The whole notion of Crown Jewels is that whoever owns them wants to go out of their way to make damn sure you don’t get them.  They’re MY Crown Jewels and you can’t have them.  And for the music industry to apply such a designation to their Studio Masters is nothing but pure … yeah, you got it.

Of course, there was a time when this was the indeed case.  When recordings were made to analog tape, the Studio Master was something special.  You had to treat it very carefully.  Each time you play back an analog tape a little something is lost.  Even if you don’t play it, it slowly degrades in the cupboard.  The process of distributing the music captured on Studio Masters to individual consumers involved making copies of copies of copies, but whenever you made a copy, that copy was slightly less true to the original.  Each generation down the copy chain resulted in slightly lower quality.  Eventually, when you bought the LP and played it at home, the quality was a long way short of what you would have heard if instead they had sold you the Studio Master itself.  Therefore the Studio Master tapes became increasingly valuable as the popularity of the recordings increased.  That is why the Studio Master of Dark Side Of The Moon is kept in a temperature and humidity-controlled vault.  It truly is somebody’s Crown Jewels.  How much do you imagine it might sell for if it were to come up for auction?

But with today’s digital technology the situation is markedly different.  A digital master can be copied with no loss of fidelity whatsoever.  A 100^th generation copy is bit-for-bit identical to the original.  And so, as a consequence, there is nothing to prevent a Record Label from distributing the actual digital Studio Master all the way to end-user customers.  The only constraining factor is the bandwidth of their web servers – and if they subcontract out to Amazon S3 (or a competing service) then that constraint goes straight out the window.

So why should a marketing type from a major label puff out his chest and bleat about his Studio Masters being Crown Jewels?  What he is telling you is that he has a strong desire to keep it out of everybody else’s hands – and specifically your hands.  Why should that be?  What is in it for the studio to sell you only a crippled version of the product, when for no extra cost he could sell you the Studio Master?  [In fact the opposite is true – it actually costs him money to re-package the Studio Master into a lesser format.]  Why does he only want to offer you a BMW with a Benjamin Moore paint job, and keep the gorgeous spray-painted and lacquered model off the market on the basis that it is his Crown Jewel?  No, it makes no sense to me either.  It’s nothing but preposterous nonsense.

So now let’s ask a different question.  What could a person of nefarious intent do with one of these Crown Jewels that he couldn’t do with the CD of the same album that he bought from a store (or even downloaded illegally)?  One obvious answer is that he could flood the market with illegal copies of the Studio Master, which would be eagerly snapped up by those who were not afforded the opportunity to buy them from an official source in the first place (I’d be crying crocodile tears for the marketing genius and his Crown Jewels).  But in truth, the market for those Studio Masters is actually quite small on the grand scale of things.  So what our nefarious friend is far more likely to do would be to use a cheap (i.e. free) software package to downsample the Studio Master to CD or MP3 or whatever the format-du-jour might be, and use that to undercut the Label on the open market.  But, clearly, our nefarious construct doesn’t actually need the Studio Master for that!  In practice it would be quicker and cheaper to buy the CD (or MP3) and just rip or copy that.  Frankly, having to work from the Studio Master would be a bit of an inconvenience.

There is of course a financial element which is central to all this.  The underlying problem is that there is a perceived value hierarchy across the spectrum of musical quality, with MP3 at the bottom, PCM in the middle, and DSD at the top.  Even if you’re not buying the argument of a progressive increase in sound quality as you go up the chain, at least you are getting a bigger file with every step up.  Hey, bigger is better – so in principle one ought to be able to charge more for the bigger file with the better sound.  But just because there are a small number of enthusiasts out there who willingly shell out $40 for a DSD download, $25 for a 24/96 Flac file, and $10 for MP3, it doesn’t follow that Joe Public shares those value judgments.  Joe has no interest whatsoever in GB-sized DSD files that take up all the space in his iPod.  And he certainly isn’t up for paying $40 for it.  This is what keeps the sales and marketing types awake; they learn on Day 1 of MBA school that it’s a mortal sin to leave a dollar on the table.  After all, the gap between perceived value and actual value is pure profit, baby!  But underneath all this, though, the inconvenient truth is that the actual cost of producing and distributing an MP3 file from a Studio Master source is negligibly different from that of producing any of the other formats.  Any market will always be inefficient when the perceived and the actual values of its products don’t align.

Today the music industries employs a vast number of people in jobs whose function is to try and keep in place tired old structures which fail to serve the needs of either the producers or the consumers of its products.  These people extract a lot of money from the system, and frankly, we don’t need them any more.  They spend their every waking hour trying to extract every last penny they can from us, the consumers, while returning as little as possible to their stable of musicians.  They’re like owning a boat – a hole in the water that you fill with money.

It’s not all doom and gloom, though.  Already, the classical music industry is in the throes of breaking clear of the old structure, and shining a light on a possible way forward for the rest of the industry.  I could easily list (but won’t, for fear off offending someone I’d miss) a couple of dozen small but successful independent labels who are producing a healthy catalog of new classical recordings.  They don’t sell their wares via the old distribution chains – mostly they sell directly or through dedicated web-based outlets.  Downloading is central to their business model.  They seem to be getting by quite successfully, and they all have a couple of key things in common.  First, they are producing recordings of truly exceptional quality, right across the board.  Secondly, they go out of their way to ensure that customers have the closest possible access to their Studio Masters.   Not a Crown Jewel in sight.

And in case anybody was wondering, recording an orchestra is a seriously expensive undertaking – $200,000 per recording is not out of the question.  That’s the equivalent of 3 weeks or more of quality studio time for your average Pop, Rock, or Jazz Band.