Wednesday, June 29 2022

Last year I wrote about how Sound United planned to take over the business of Japanese audio brands Onkyo and Pioneer. The deal fell through for some reason and now there’s news from Japan that could explain why the sale didn’t go through.

According Asian Nikkei, Onkyo Home Entertainment filed for bankruptcy yesterday in the Osaka District Court. Total liabilities have been set at around ¥3.1 billion, which is equivalent to around $24 million. The company is based in Osaka and was delisted in August.

The company’s failure has been attributed to its inability to adapt to the rapidly changing audio market that is increasingly software-based and revolves around streaming music rather than listening to it in physical formats like CDs. More of us use our smartphones to listen to music and even watch movies.

The two Onkyo subsidiaries that were responsible for manufacturing loudspeakers and other equipment for third parties had already filed for voluntary bankruptcy in March this year.

Since then, Onkyo has ceased operations. The company told Nikkei that it “tried to keep the business on a smaller scale, but couldn’t stop its cash flow problems from getting worse.”

The highly revered Onkyo brand has a strong reputation among audiophiles and was founded in 1946. In its heyday, the company was well known for its range of amplifiers, CD players, tuners, AV receivers and all-in-one audio systems. However, with the shift to music consumption on smartphones and the move to multi-room audio systems, the company saw a steady drop in revenue.

In January 2021, when Onkyo first raised the possibility of delisting, shareholders greenlit a plan to grant stock options to a Cayman Islands investment fund to raise up to 6.2 billion yen in fresh capital. However, not all stock options were exercised by the end of the company’s fiscal year in March 2022. This failure caused Onkyo to be delisted from the Tokyo Stock Exchange.

Onkyo transferred its consumer audio-visual business to US-based Sharp and Voxx International. It also managed to sell its headphone business to an investment fund in September. The Sharp and Voxx agreement will continue to develop products using the Onkyo brand.

It’s always sad to see a venerable brand go out of business, but it’s a sign that the consumer audio market is in a state of flux. Many Japanese brands seem to lack the software skills and interface design capabilities to adapt to the new era of streaming. American companies seem to be better at this aspect of the business.

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