Crosley Brands, a venerable Louisville electronics company that has its origins in the heyday of radio, has been capitalizing on a surprising trend: a resurgence of vinyl.
The analog technology, which requires a physical medium (the phonograph record) and a mechanical device that spins the record and decodes it with a needle, is finding ever more fans in an era dominated by streaming music and handheld devices that hold tens of thousands of songs.
And if it weren’t for a gutsy decision and impromptu trip to China by a young CEO in the early 1990s — when vinyl, thanks to the dominance of CDs, seemed to go the way of 8-track — Crosley might have folded long before the vinyl renaissance.
In 2017, vinyl sales grew for the 12th consecutive year and comprised 14 percent of all physical album sales, according to Nielsen. Unit sales, at 14.3 million, were up about more than 200 percent from 2012. The week of Record Store Day, in April, vinyl albums made up 23 percent of physical album sales. That week, retailers sold 733,000 LPs, a record high since the day was founded a decade ago and up 23 percent from RSD week of 2017.
While subscription and streaming revenue rose from 2016 to 2017 and continue to dominate the music industry, digital downloads fell nearly 25 percent, and demand for CDs dropped 6 percent, according to the Recording Industry Association of America. Meanwhile, revenue from vinyl sales jumped 10 percent, to $395 million.
So what makes hippies, hipsters and millennials alike gravitate (back) toward fragile plastic discs that hold about 12 songs in an era in which they can carry all of their music with them on their smartphones at all times?
“It’s a different experience,” said Michael Kurtz, founder of Record Store Day.
People usually listen to records together with other people and make it a communal event, like going to a concert or a movie theater, he said. It’s also a bit of a rebellion against the disposability of music, in a period in which nobody really owns the product, but just pays for access to it. Most people now listen to music while doing something else — exercising, driving, working — which can relegate tunes to soundtrack status, or even elevator music, a barely tolerable distraction that neither requires nor deserves one’s full attention.
And rather than letting algorithms or randomness determine which song one will be played next, listening to records requires premeditation. One has to choose which album, side or even song to place the needle.
For older people, who grew up listening to vinyl, hearing familiar songs while examining the artful covers or reading the lyrics also evokes a sense of nostalgia, Kurtz said. The top-selling album last year: The Beatles’ “Sgt. Pepper’s Lonely Hearts Club Band,” was first released in May 1967.
And both younger and older vinyl enthusiasts swear by the superior sound quality compared to cheap earbuds with which they usually consume music, Kurtz said.
“We sell more vinyl to people under the age of 28 than older people,” he said.
A decade ago, around the time he started RSD, vinyl albums sold for less than a dollar, but now they routinely sell for $7, with rare discs changing hands for $50.
“The whole thing’s changed now,” Kurtz said.
Adventures in the Far East
Those changes have meant big business for Crosley Brands, which has continued to sell record players over the decades, even when very few people wanted them. (You can see one of Crosley’s turntables featured in a recent Target ad.)
Based at 1220 E. Oak, in a green-roofed, one story building in Germantown, Crosley employs about 100, plus another 40 in a warehouse in Simpsonville and 12 in an office in Shenzen, China, just outside of Hong Kong.
In the early 1990s, when electronics generated about 90 percent of sales, the bankruptcy of a supplier threatened to reduce its major revenue stream to a trickle — or less.
Crosley President Keith Starr, who has been with the company 28 years, told Insider that Crosley’s business primarily involved acquiring electronic devices from a U.S. company and selling them to clients, such as mail order companies. However, the supplier suddenly went out of business in 1991-92, leaving Crosley with clients demanding products — but no way to supply them.
Within a week of the supplier’s folding, CEO Bo LeMastus flew to southern China, where the products were manufactured, to talk to factory officials to protect the supply chain.
LeMastus doesn’t speak Chinese, had never before traveled to China, and had no one to guide him once he got there, Starr said. Research, in an era before wide use of email and in the early days of the internet, proved difficult.
“Definitely it was a challenging time for our future,” Starr said.
LeMastus agreed to buy six months’ worth of products from the Chinese manufacturer — about six times as much as Crosley usually stored in its warehouse. Beyond storage complications, the new venture introduced the company to new challenges involving customs, international shipping and direct interaction with a foreign supplier.
But the gamble paid off.
LeMastus saved the company’s most important business line, while also prodding Crosley to pivot: The Louisville-based domestic distributor suddenly had become an international manufacturer.
“It was a big change,” Starr said.
He said the anecdote illustrates how LeMastus retains an entrepreneurial spirit and can make decisions quickly in difficult circumstances, taking risks with potentially huge rewards.
“He never does anything halfway,” Starr said. “A lot of it is his energy, his willingness to try different things.”
Crosley now manufactures all over Asia, primarily because of low labor costs. It also sells overseas, with sales or distributors in the United Kingdom, Germany, France, South Africa, Central and South America, Australia and even China.
From intern to CEO
When LeMastus joined Crosley in 1983, he did not plan to stick around. He wanted to merely fulfill an internship requirement for his business degree from Western Kentucky, where he had enrolled two years earlier.
In his early days with Crosley, he served as a road rep, trying to get catalog companies such as Spiegel, Fingerhut and Sharper Image to sell Crosley-branded jukeboxes, wooden radios that included modern technology but looked as if they came out of the 1930s, ’40s and ’50s. LeMastus came in Monday mornings, was handed a route sheet by his boss, Pete Balmer, and would visit customers to make presentations with five dedicated components: introduction, body, offer (ask), recap and close.
The experience proved insightful, challenging and interest, and LeMastus found he excelled.
“I liked what I was doing,” he said.
He never went back to finish his degree.
“I probably learned more from … Balmer … that first year than I had in all the business classes at Western,” he said recently, sitting in a Crosley conference room with a mini jukebox, old radios and a turntable.
When the digital revolution in the mid-1980s all but tossed record players on the scrap heap of history, Crosley jukeboxes and radios began to feature CD players. Most manufacturers and retailers abandoned record players. Record labels stopped pressing records.
But LeMastus always retained a record player in Crosley’s repertoire.
“It wasn’t exactly my hottest item,” he said.
But by the end of the decade, it was clear that vinyl would stick around, even if it remained a niche product. In the ’90s, sales of record players improved, but remained low. In the last decade, through, they’ve roared back.
Last year, Crosley sold more than 1.5 million. This year, they company is on pace to see that number eclipsed by 5 percent. Overall electronics sales are up 10 percent.
Scott Bingaman, president and owner of Brownstown, Ill.-based Deer Park Distributors, which handles Crosley’s electronics distribution for smaller retailers, such as record or book stores, said when record sales surged about a decade ago, Crosley already had relationships with lots of retailers.
“I think we were at the right place at the right time,” he said.
Crosley also stayed on top of updating its products with new features and styles. When the TV show “Mad Men” was popular, lots of products had a midcentury modern vibe, Bingaman said. A midcentury style turn table flew off the shelves.
“We couldn’t keep it in stock,” he said.
Today, products that look like they’re from the 1980s are a big draw. The ’90s may be next.
“You’re kind of moving through the decades a little bit,” Bingaman said.
A quote from one of the main “Mad Men” characters, Don Draper, helps explain the vinyl resurgence, he said: “Nostalgia … lets us travel … back home again, to a place where we know are loved.”
Bingaman, 49, said he knows this firsthand: He has the U2 album “Joshua Tree,” as a cassette, CD, digital download and vinyl. He takes it with him, wherever he goes.
Listening to the songs — “With or Without You,” “I still Haven’t Found What I’m Looking For,” “In God’s Country” — take him back to his senior year in high school.
“Never underestimate the power of nostalgia,” he said. “It’s right up there with love.”
The company’s electronics business is currently buoyed by the Cruiser, a portable suitcase turntable that sells for about $80. It’s a way to get customer interested, Bingaman said, and once they see how much they use it, they want higher quality and might spend $150 to $250 on a better product.
College students who had a suitcase turntable in their dorm room probably upgrade once they get their first job and apartment, he said. With economies of scale, product quality also is increasing, while the price stays relatively flat, which also generates interest from more buyers.
He worked with Crosley in 2009 to release an inexpensive Charlie Brown-themed turntable. It was more of a novelty item, cool to have on your desk or bookcase. But as people returned to listening to their old records, they began asking for higher quality record players.
Crosley “was really the only company that believed” in the vinyl resurgence, he said.
Kurtz said he’s developing a new product with Crosley for next year, and while he couldn’t provide details, he said it’s going to be a lot of fun.
Crosley also still remains true to its roots, offering about a dozen old-style jukeboxes and adding about one model every one to two years. They sell from about $150 for a small table top CD version to a full-size $13,000 Beatles jukebox that holds 70 singles.
Crosley tries to stay relevant by updating its products frequently and offering the latest tech, from Bluetooth connectivity to streaming capability.
Not all of the products find enough buyers to keep them around, but LeMastus said that’s “just the nature of the business.”
You’re never done figuring out what the consumer wants, he said.
“It’s a learning game,” LeMastus said.
While LeMastus wouldn’t reveal how much the company is making, he said revenue continues to grow, and Crosley remained profitable even during “three bummer years” in the downturn.
Part of the growth comes from existing retail relationships, he said, but Crosley also continues to try to get its products onto shelves of additional stores. Those relationships might start small, with regional franchisees offering a couple of Crosley items on their shelves. If the items sell well, the corporate office may decide to buy the Crosley items to sell in thousands of stores nationwide.
Electronics still generate a plurality of revenues for Crosley, about 45 percent, but furniture, at 40 percent is close behind.
While Crosley itself has changed a lot since he began his internship, LeMastus said his current role still has significant overlap with his duties when he first traveled the country for Crosley. He still employs the lessons he learned from Balmer — introduction, body, offer (ask), recap, close — to land new clients, though typically on a much larger scale.
“The fundamentals haven’t changed,” he said.
LeMastus, 55, who also is a professional stock car racing driver and racetrack owner, hopes that his daughter, Jackie, a junior at the University of Kentucky, someday will join the business, but he’s doubtful. Her world is equine, he said.
In any case, he said, Crosley’s best days are yet to come.
“I think as a company, we’re just getting started.”