Gibson Brands, the makers of rock’s favorite Les Paul, SG and Flying V guitars, has filed for bankruptcy protection citing a “devastating” financial fall after its investments in consumer electronic brands failed to pay off.
The company said in a statement accompanying its chapter 11 bankruptcy filing on Tuesday that it required court protection from creditors to reorganize its business.
The Nashville-based company, which was founded in 1894, said it planned to continue in the business of designing, building and selling musical instruments and equipment, including brands such as Wurlitzer, Dobro and Epiphone, but it would close its arm that makes Philips-branded headphones and other electronic accessories.
“Over the past 12 months, we have made substantial strides through an operational restructuring,” Gibson’s CEO, Henry Juszkiewicz, owner of 36% of the company, said in a statement.
He added that Gibson, which employs 875 workers in Nashville, Memphis and Bozeman, Montana, will “refocus on our core business” of musical instruments, which “we believe will assure the company’s long-term stability and financial health.”
The company said it had debts of between $100m and $500m, including owing at least $100,000 to 26 other companies. It also said it has agreements with holders of more than 69% of its debt that would allow it to continue to operate.
Juszkiewicz bought the company in 1986 for just $5m. He is known as a temperamental executive, once inviting company executives to join him shooting up Fender Stratocasters at a gun range.
As sales fell, Juszkiewicz made the decision to diversify into electronics, leveraging the Gibson name. In another turnaround effort, Juszkiewicz added a self-tuning feature, “G Force” to the company’s guitars, which consumers roundly rejected.
“Everything we do is about music,” Juszkiewicz told the Washington Post last year.
“It doesn’t matter whether it’s the making of music with instruments or the listening of music with a player. To me, we’re a music company. That’s what I want to be. And I want to be number one. And, you know, nobody else seems to be applying for the job right now.”
Over the past several years, Gibson’s annual revenue has fallen from $2.1bn to $1.7bn in 2017. The company’s 2014 purchase of Philips’s audio division for $135m proved to be a poor decision and led to Moody’s downgrading the company in 2016.
The turmoil afflicting the maker of guitars favored by Neil Young, Jimmy Page and Slash is a common story across the industry.
Over the past decade, electric guitar sales have plummeted, from about 1.5m sold annually to around 1m. In 2010, sales of acoustic guitars outstripped electric. Some industry analysts thank Taylor Swift for that shift.
Like Gibson, Fender, which had to abandon a public offering in 2012, has struggled under debt. The US’s largest retail guitar supplier, Guitar Center, recently had its corporate credit rating downgraded to junk status by S&P after racking up debts of $1.6bn.
According to Digital Music News, “younger buyers, who once drove the guitar surge, have now shifted towards [EDM], rap and less guitar-driven indie music – even though interest in music itself has never been higher”.
Last year legendary Nashville guitar dealer George Gruhn told the Washington Post that the industry’s troubles stemmed from a flat market and competition from more numerous copies of the classics.
But fundamentally, he said, the generation that aspired to be rock guitar gods like Led Zeppelin’s Page have lost their mojo. Despite the success of Jack White, Gary Clark Jr and analog-rock bands like The Black Keys, the new generation of musicians are more likely to be masters of DJ technology like Ableton.
“What we need is guitar heroes,” Gruhn explained.