This document provides background information on Steinway & Sons, a famous piano manufacturer. It discusses Steinway's history and traditions, leadership under different owners, industry trends, competitors, and financial performance. In 1995, Steinway was purchased by Dana Messina and Kyle Kirkland for $100 million. The new owners aimed to continue Steinway's focus on high-end pianos while also expanding into new markets to drive revenue growth.

1. Case Study
STEINWAY AND SONS: BUYING A LEGEND

2. Quiz?
Level I
• How many presidents have managed Steinway & Sons till 1995 ?
• Yamaha held __ % of the market share in the year of 1994
• A Steinway piano’s lifetime is reportedly _______ .
• When was Steinway’s 500,000th Piano was produced?
Level II
• Estimate the total number of Piano’s sold by Steinway & Sons.
• Was integration of Steinway and Selmer favourable for Selmer? (Sales increase/ decrease %)
• What was Steinway’s biggest market? What was the net sales there in the year of 1994?
• What is the average profit margin that Steinway & Sons gain over sale of each piano?

3. Quiz?
Level I
• How many presidents have managed Steinway & Sons till 1995 ? (7 presidents)
• Yamaha held __ % of the market share in the year of 1994 (35 %)
• A Steinway piano’s lifetime is reportedly _______ . (ageless…. Jk (80 years))
• When was Steinway’s 500,000th Piano was produced? (1988)
Level II
• Estimate the total number of Piano’s sold by Steinway & Sons. (3,60,000 grand pinos)
• Was integration of Steinway and Selmer favourable for Selmer? (Sales increase/ decrease %)
(Yes, no actual gross profit increase, however EBITDA increased by 1%)
• What was Steinway’s biggest market? What was the net sales there in the year of 1994?
(USA was Steinways biggest market, $59.100 million)
• What is the average profit margin that Steinway & Sons gain over sale of each piano? ($5651)

4. The Steinway Purchase
April 18, 1995 saw an historic moment in Steinway's history as Dana Messina and Kyle Kirkland
had purchased Steinway & Sons for 100 million dollars

5. The New York Times article
stated that “… people familiar
with Steinway and the piano
industry’s problems … were
amazed that the company
fetched [$100 million].”
People couldn’t believe that the
company fetched such an
exorbitant amount

6. Challenges
• No synergy between Selmer and
Steinway
• Sales was declining steeply
• Competitors such as Yamaha who were
marginalizing Steinway and Sons
• Introduction of mid-prized Piano
which did not go along with their ‘elite’
status
Opportunities
• An pre-eminent brand name as the
producer of highest quality grand
pianos
• Piano of choice for the world’s greatest
artists
• Improving economic conditions in the
Europe and U.S
• Unexplored markets such as China,
Korea etc. (scope for expansion)

7. The Piano Industry
The industry is basically split into two- concert grand pianos for institutions and professional
performances, vertical pianos for private (or individual) market

8. Industrial Trend (1/4) – Drop in sales
• Sustained downturn in the piano industry
• Global sales dropped by 40%
• Reasons:
 Rise of computer as a home entertainment device
 Natural cycle of piano sales
 Growing popularity of the ‘electric keyboard’
 Global recession in the 90’s

9. Industrial Trend (2/4)- consolidation of piano
manufacturers
From over 100’s of piano’s in the 1900’s,
there were only 8 piano makers by 1992

10. Industrial Trend (3/4) - Asian manufacturers
• Emergence of Asian manufacturers
who used automation and assembly
line techniques to produce in bulk
• Provided cheaper alternatives to their
American and European counter-parts
Yamaha Kawai
Young chang Fazioli

11. Industrial Trend (4/4)- New markets
• Opening of new and potentially large markets in countries such as
Japan, South Korea, China

12. Competitors (1/4)- Baldwin
Sole remaining large-scale producer of
vertical and grand pianos in the United
states
Sold over 20,000 pianos domestically
through a network of 700 dealers with a
revenue of $122 million
Offered full line of pianos unlike S&S

13. Competitors (2/4)- Yamaha*
• Largest producer of piano in the world
• With $1 billion in piano sales, it holds
35% of the world market share
• Has successfully monopolized the
Japanese market

14. Competitors (2/4)- Yamaha**- strategy towards Steinway
Used noticeably high quality raw materials in its concert grand pianos and publicized the use of same
Engineers regularly purchased and disassembled Steinway concert grands in an effort to duplicate the
techniques of Steinway
Production process was automated wherever possible, with transportation carried about in moving
assembly lines
Employed a high degree of vertical integration
Worker discretion was kept to minimum to maintain consistency
Launched the “artist program” that was a direct copy of Steinway’s “Concert and Artist Program”

15. Competitors (3/4)- Kawai
• Specialized in the production of vertical pianos
and hence wasn’t a direct competitor of
Steinway and Sons
• Manufactured on highly automated assembly
lines

16. Competitors (4/4)- Bösendorfer and Fazioli
• Produced very small volumes of top quality pianos
• Their quality was considered at par with Steinway’s

17. Piano retailers/ dealers
• Most pianos were distributed through
independent dealers
• Each dealer sold three type of brands
Primary brand: Steinway or Yamaha
Mid Tier brand: Kawai or Boston
High end level brand: Bosendorfer
Entry level brand: Samick or Young Chang

18. Used piano market
• Over 40 million Pianos are
believed to exist around the world
• With Steinway pianos quality and
extremely long life- 70 to 80 years
• With a major restoration the
lifetime is further extended

19. Steinway & Sons
For 140 years, Steinway and Sons has been recognized as the market leader for high-quality piano.
Established in 1853 Steinway has a rich heritage and has always stayed true to its commitment to
quality

20. History

21. Early years
• A 140 year-old company, established in New York City in 1853.
Success
Mantra
Technical excellence with over 120 patents in piano making
1854: Gold medal at Metropolitan Fair in Washington DC
1860: Factory on Fourth avenue in New York
1866: Opening of the Steinway Hall
Brand proposition: “build the best piano possible and sell it at the lowest price consistent with quality
1871: Long Island City headquarters
1880: Factory in Hamburg, Germany

22. The Steinway tradition(1/4) – craft method
• All Steinways are assembled by craft method with limited use of
assembly-line techniques.
• Each grand piano took 2 years to build from scratch and contained over
12,000 individual parts

23. Exhibit 12
The intricate methodology used to
manufacture pianos

24. The Steinway tradition(2/4)- skilled labor and
attention to detail
Skilled labour was employed with average experience of 15 years
Bought its own material by sourcing the best quality available in market
Their attention to detail contributed to the legendary sound and durability
No 2 Steinways sounded the same

25. The Steinway tradition(3/4)- Steinway’s concert and
artist programme
• 330 pianos (valued at $17 million)was dedicated for this programme
which took place across 160 cities
• Artists:
 Use Steinways for all performances
 Only pay for transportation costs
 Test at a showroom and request for use
• Company:
 Long standing relationships between performers and pianos
 Visibility during performances
 Endorsement from world renown artists

26. The Steinway tradition(4/4)- Artist relations
• Artists considered each Piano to be unique
• Master piano technicians were provided by Steinway to adjust and tune
the pianos to suit the performers need
• They tested and endorsed the pianos they used

27. Steinway & Sons – The CBS years
In 1972, Steinway and sons was sold to CBS musical instruments division. Steinway could no
longer serve as a family business

28. The CBS years (1972-1985) (1/3)- Developments
• Invested millions in Steinway’s aging Long island and Hamburg
facilities
Aim: increase revenues and decrease manufacturing costs
• Expanded the dealer network
Adding small dealers
Accepting dealers who had Yamaha as their primary product line.

29. The CBS years (1972-1985) (2/3)- Effects
Effects
The quality of the
Steinway pianos were put
to test
Sales volume and profits
increased
The dealer network was
under a lot of scrutiny

30. The CBS years (1972-1985) (3/3)- Downfall
• The concerns about quality coupled with the steady turnover of
Steinway management further weakened the company’s image
• In order focus primarily on its broadcasting CBS decided to sell of
Steinway despite it being a moderately profitable company
• In 1985 the company was sold to the Birmingham brothers for a sum of
50 million

31. Steinway & Sons – The
Birmingham years
In 1985, Steinway and sons was sold to the Birmingham brothers. CBS wanted to shift all its focus
on broadcasting

32. Birmingham Brothers (1985-1995)
• Their family was centred around the fuel oil distrubution business
Aim: to re-establish Steinway as the maker of the highest quality piano in
the world
Bruce Stevens was appointed as the CEO and president of Steinway

33. Developments (1/4)- The First Six months
• Assuring Steinway’s employees, dealers, customers that the owners
were committed to quality
Each of the 740 boxed, stagnant pianos were unboxed, inspected for quality and
then shipped for delivery
Stevens personally visited the dealers and re-assured them about the managed
(built relationships)

34. Developments (2/4)- Manufacturing
• The manufacturing units were upgraded and modernized
• The documentation of Steinway’s entire piano manufacturing process
was for the first time.

35. Developments (3/4)- The dealer network
The overextended and unfocused distrubution network was acted upon
 Only dealers who were fully committed to Steinway were retained
• Reduced the dealership in America from 153 to 93
 A “partnership program” was developed which included
• formal sales training programs
• formal technical support programs
• Promotional events planning
• coordinated advertising and public relations
• institutional sales programs, etc.
These helped in the improvement in the quality of their
dealers

36. Developments (3/4)- The dealer network
How important it is?
The shortcomings of the dealer network
during the CBS times hurt Steinway heavily as
one of their most valuable artists Andre Watts
defected to Yamaha. This was because of the
dissatisfactory service provided by one of
Steinway’s dealers. Hence, Yamaha had
attracted a high profile artist, who played
about 150 concerts per year, to endorse its
concert grand pianos and this endorsement
came at the expense of Steinway.

37. Developments (4/4)- The Product line (mention
products alone)

38. The Boston piano
• Mid-tier product sold at half the price of a Steinway grand
• For “customers who weren’t ready to purchase a Steinway”
• “designed by Steinway &
Sons”, manufactured by
Kawai
• Allow to capture sales
that might otherwise
would go to Yamaha
• $17 million dollar
market

39. Steinway limited edition
• Limited number of high quality
pianos, specially designed for an
occasion were sold at premium rates
“Instrument of Imortals”
• Targeted the elite, niche market

40. The crowned jewel collection
• Traditional Steinway pianos that
were finished in exotic woods such
as east Indian rosewood, kewazinga
etc.
• Sold at 20-30 % price premium to
the traditional alternatives
• 30% of Steinways sales

41. Steinway & Sons – The Messina
and Kirkland acquisition
In 1995, Steinway and sons was sold to Messina and Kirkland. Birmingham brothers weren’t able
to manage the high capital intensive business

42. Who were Messina and Kirkland?
• Harvard MBA
• Investment banker
Dana
Messina
• Stanford MBA
• Investment banker
Kyle
Kirkland

43. Recent past – Selmer company
• The company sold the following high end band equipment such as:
 Selmer saxophones
 Bach trumpets
 Ludwig snare drums etc.
It was a company localized in USA with over 40 % of market share
• It sold a mix of High-end (professional) and mid-tier (student) equipment

44. Selmer were having
very turbulent sales
and were going
through bankruptcy

45. Recent past – Steinway and sons
• The Positive changes bought about by the Birmingham brothers and
the introduction of the Boston pianos boosted sales
• However the sales of Steinway grands was declining due to various
factors affecting the industry in general
• The sales of Boston Pianos however recovered this loss

46. Exhibit 3
The sales of Boston Pianos
helped the company to
recovered from the decrease
in sales of Grands

47. Exhibit 4
The decline in
the number of
grans sold
from 1990 to
1994

48. Sales ?
USA
Germany
Japan
England
Switzerland
Others

49. Exhibit 5
Majority of sales for Steinway’s
sales in USA took place at New
York

50. Dealer’s
Steinway and Boston pianos were sold through a network of
93 dealers in North and South America and 92 dealers in
Europe, Africa and Asia.
Roughly 85% of all Steinway and Boston pianos were sold
through these independent dealers

51. Boston Vs Steinway
The typical buyer of a Steinway piano
was over 45 years old, had an annual
income in excess of $100,000, and had a
serious interest in music.
The typical buyer of a Boston piano
was 5 to 10 years younger and was
slightly less affluent.
Different Target Segments
i.e. segmentation

52. Exhibit 6
Steady flow of
income from the
mid tier Boston
Pianos

53. So what Happened ?
In 1995, Steinway and sons was sold to Messina and Kirkland. Birmingham brothers weren’t able
to manage the high capital intensive business

54. Exhibit 7
Net Income:
$2452 (in
thousands)

55. Questions to ponder upon ?
In 1995, Steinway and sons was sold to Messina and Kirkland.
Birmingham brothers weren’t able to manage the high capital
intensive business

56. Should they stay in the high end market?
Steinway’s has always been known for its High-end, top quality products. Culturally, the company
has been built on it. Quality is Steinway’s principal value proposition and is something that keeps
the loyalty of their customers.
Verdict: It makes sense for them to retain their High-end strategy

57. Boston pianos- the situation
The Boston pianos had a market of $17 million as opposed to the $92
million made by the company.
 Positives:
 Expanded the customer segment of Steinway and Sons by
introducing them to the Mid-Tier
 Directly stole sales from their rivals Yamaha, who were a mid-
tier brand
 Increased revenue
 Negatives:
 Dropped the eliteness or high-end nature possessed by the
Steinway brand
 Steinway was no longer a top-of-the-line prestige piano

58. To analyze a trade off between Revenue and
brand value, one must also incur the risk
currently involved with the brand. Since the
piano industry is on the decline and involves
a high amount of risk. It is in best interest to
choose revenue over brand value

59. What role should Messina and Kirkland Play?
Similar to what the Birmingham brothers did, Messina must hire professionals who are
involved in the line to take care of the management. They must also refrain from trying
to acquire profits at once and to develop the company on a long run.

60. Improve relations with the stakeholders
through setting up departments such as:
● Dealer relations Department
● Artist relations Department
● Set up Steinway schools

61. Explore and expand in
new markets such as
China, Korea, Japan
which have a enormous
scope for business and
sales