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State of HeadRoom Report  

post #1 of 75
Thread Starter 
Hi Folks,

The year has come and gone, and I thought it would be nice to make some comments on what HeadRoom has seen this year, and what will be going on in the coming year for HeadRoom---at least as far as I’m allowed to say.

HeadRoom Logo Change

The re-branding of HeadRoom was a daunting task. It was quite expensive, and the amount of work and money that goes into re-producing all our materials (website, to ads, to letterhead, to shipping boxes) was a huge load. Ivy’s (HeadRoom’s Marketing Communications Manager) outstanding job of pulling and putting it all together was simply heroic.

We’re very pleased with the outcome. We think our new logo and look is a solid reflection of who we are. We hope you’re enjoying it as much as we are.
(And I swear on all that’s holy, we will make a Hawaiian shirt using this new look one of these years.)

HeadRoom Product Line Change

As I’m sure you are all aware, we completely re-engineered our entire product line inside and out. Of course, we were all exited as we did the work, but the introduction itself was a nail-biter.

We discovered that re-branding and re-engineering the entire product line all at once caused people to wonder what the heck we were up to: Did we get new ownership? Were the new products as good as the old? No, and yes but better, of course are the answers. But how was the public going to know that? We did some ads and newsletters on the subject, and we find ourselves in the interesting position of having sold more amps in 2005 than the year before. We were surprised. I guess people caught on after a bit.

Anyway, we’re quite pleased at this point with the new line; because they are selling well obviously, but mostly because we love the sound and personally enjoy these amps more than our previous models because of all the digital inputs and switching functions.

Summer Head-Fi Meet Tour

It really was a pleasure touring the country and meeting folks. From my position at HeadRoom I thought it was particularly successful in terms of getting the word out on the new look and product line. (Something terribly important at the time for reasons mentioned above.) It was much less expensive than the World of Headphones Tour previously (though it was still costly … especially in terms of the amount of time I spent on the road away from my family) and it does appear to be a lovely way to communicate with headphone enthusiasts and ensure that we are on everybody’s radar.

Also from the perspective as CEO, I was very encouraged to see the sustained growth and interest in the hobby of enthusiastic headphone listening, and especially interested in observing that its center is so strongly attached to Head-Fi and its members. Sure, going to meets is a self-selecting way to make this observation, but where else could you possibly go to get a view of this hobby? Head-Fi is where it’s at, and it’s growing strongly. As I mentioned numerous times at meets, I may be able to take a bit of credit for some things in this market, but I didn’t see the whole “meet” thing coming at all. In my wildest dreams I would have never believed that people could make a legitimate hobby out of this. In HeadRoom’s beginning, I was simply looking to make gear in a category that hadn’t existed before, but when I continue see the level of personal enthusiastic interest in headphones and see how it plays out so marvelously in the on-line forum/off-line meet activity. I’ve come to believe it is a real thing that will deliver sustained niche market purchasing power and, more importantly, I believe it continues to provide an ever stronger and broader-market influence with its power to communicate on-line. I have believed that the influence of on-line communities would be realized eventually; I’ve believed that since way back before the Headwize days and even before the internet with my participation on The Audiophile Network. But to see and feel it exist as a legitimately existing power and not just something in potential is something recent, and is evidenced by the willingness of vendors to participate in the upcoming Head-Fi First Annual National Meet. You guys should be proud as peacocks with your success in creating a vibrant on-line community that has a very real and unique type of voice as a market player. Well done!

I have something else to say about the summer tour…something personal and not corporate. I liked the people I met. I am attracted to this hobby from a personal stand point as well as from my position as Prez of HeadRoom. It doesn’t have as much to do with the hardware side (as I am steeped in that daily from my corporate position) as it does from the personal and personality side: I love Head-Fiers. There is just something terribly refreshing to me mingling with people who revel in and accept a significant amount of personal …err… quirkiness. Hey, I’m an odd duck; I like being an odd duck. I accept it …nay, embrace it in myself---and in others. I think humans are simultaneously the most beautiful thing and most destructive thing for 100,000 light years in any direction. Humans are amazingly beautiful in their diverse manifestations and I can’t think of a better thing to do than gather in a room full of folks willing to share their … “Ugly Beauty” (a Thelonious Monk tune---and one of my favorite guys) with each other. Whether I was meeting in a church (Thanks Mr. Don and devwild) or the private basement bar below the main floor saloon (thanks BHD812), people were always thoughtfully expressive and genuinely interested in the experience we all share in this hobby. Head-Fiers would actively try to ensure that the experience of each individual, and the group as a whole, was as positive as possible. To me this speaks of a sense of security and care for each other that can only be achieved when people love first and put their stupidities voluntarily aside as best they can. The resulting level of collective strength is not so commonly available in today’s world, and not so easy to achieve that it should go without recognition. So, thank you all so much for having the restraint to act wisely and lovingly in an area of communication (on-line forums) that so easily fails by flame in this regard. It is really quite an accomplishment---much more important, IMHO, than Head-Fi member’s accomplishments as a legitimate market force. It gives people who participate in this enthusiast community atmosphere a type of opportunity to have faith in humankind that might otherwise not be had.

HeadRoom Management Re-engineering

One of the reasons I’ve been so absent from discussions here of late is that we are working on re-engineering HeadRoom’s management. For the last 13 years HeadRoom has essentially been run in a completely entrepreneurial manner. What that means is that I have been willing to take significant risks in developing HeadRoom’s capabilities and market presence. Corporate activities have been driven by an opportunistic and task oriented management style. Examples would be: building the world’s first commercially available balanced headphone amp (the BlockHead); the first headphone measurement lab to publish measurement data on-line; the World of Headphones Tour; and developing the ability to manufacture rubber (urethane, actually) parts for our bags and bezels. These activities and this management style has served us well, but there comes a point when opportunism must be balanced with stability and more traditional measures of financial performance. You can’t bet the company year after year and get away with it. So, this year we’ve decided to install a formal management structure. This is a bit complicated, and more than a bit boring, but I’ll briefly talk about it, and mention what you might be able to detect of this activity.

The basic foundation of good management is a system of internal accounting that allows company managers to track and measure performance in terms of efficiency and effectiveness for each isolatable area of functionality. This system is called “cost accounting” or “management accounting”. The bookkeeping system (chart of accounts) is configured to allow us to track costs and output from each area separately. Labor is added to the manufactured product as it moves through the system, and the whole cost of each item manufactured (including labor and overhead costs) is put into inventory as it moves from raw materials to work in process to finished good. Each area of manufacture is analyzed separately, and the efficiency is measured by looking at how much direct labor (actually hands on time building the product) vs. indirect labor (management time, manufacturing process set-up time) goes into each product sold, and also by comparing the costs of producing a product with the amount of value added by the manufacturing process.

I told you it was boring.

The above is just the tip of the iceberg. This type of cost analysis is done not only for manufacturing but also for all functional areas of the company from product design to order processing. But what difference does that make to you? Well, over time as we get better at monitoring and improving systems, we should be able to make products less expensive, improve inventory controls so that product availability is more consistent, and ensure that customer returns are processed and the customers credit card refunded more rapidly, just to name a few. The most important take-away point here is that HeadRoom is becoming a company big enough to be legitimate corporate entity, and it has done that because enthusiastic headphone listening has become a large enough market to support it. Quite an achievement for this not-so-little-anymore hobby of ours.

The Head-Fi Discount

As Head-Fi becomes an evermore popular site, and a larger percentage of the audiophile market as a whole, we find ourselves at risk of loosing a larger and larger percentage of profit to the Head-Fi discount. This wouldn’t be so bad if the money was actually showing up in Jude’s pocket as a way to offset the costs of this service he so generously offers, but it doesn’t.

For example, if someone buys a Micro Stack, they would get about $60 off the price, but they will have only had to contribute $25 to become a contributing member and there is no obligation to re-up their membership the next year. If they get a full blown Max they would receive a whopping $500 discount for their $25 contribution to Head-Fi. Add to that the fact that we hope to operate somewhere near a 7% net profit at HeadRoom and that giving a 10% discount means we’re loosing 3% on every Head-Fi sale. It seems to me the only real winner here is the Head-Fi member. Not that it’s bad for a Head-Fi member to get a win in a HeadRoom transaction, but I strongly believe that arrangements like this need to have wins all the way around---and that if there is a big winner it should be Head-Fi, not the member.

I can’t emphasize enough the incredible importance of Head-Fi and Jude’s generosity is to this activity we all enjoy. Imagine for a moment that Head-Fi shuts down. The loss would be staggering! Sure, for HeadRoom, but really more so for the members here. The loss of human relationship would be difficult to bear; friendships and future relationships would cease; there would be no center for our hobby; members would loose all influence and communication with vendors. I simply can’t stand the thought of it. My first and only though in response to contemplating the loss of Head-Fi is how rapidly we could start up another community to replace it. So, PLEASE, let’s focus this year on raising money that shows up in ways that Jude can count on. My fondest hope is that he starts getting enough revenue that he begins to consider hiring someone as a Head-Fi employee to take care of a variety of administrative issues that he now does himself in his spare time. (Do you have any idea how little “spare time” a CEO has?)

So, with this post we are discontinuing our previous “Head-Fi Discount” and instantiating a new Head-Fi support program: anybody (members and non-members alike) who puts the word Head-Fi in the coupon box on an order will have 5% of the proceeds from any HeadRoom amp purchased donated to Head-Fi. I know that a lot of you are not going to like this---tough! I am very grateful to Jude for his willingness to put hard, cold cash into this affair, and I think we owe it to him to cough up our fair share to make it work. And I am disappointed when I hear from him how little revenue actually comes in from annual member contributions. Shame on you who reside here without compensating him for his hospitality!

The First Annual National Head-Fi Meet

As a boss I’ve come to learn that one of the hardest thing to get from people is a sense of agency. An agent is (from Merriam-Webster www.m-w.com):

1 a : something that produces or is capable of producing a certain effect : an active or efficient cause : a force effecting or facilitating a certain result

2 a : one that acts or exerts power (as by driving, inciting, or setting in motion) : a moving force <the distinction between agent and patient, between something which acts and some other thing which is acted upon -- Francis Bowen>

3 : one that acts or performs an act (as an act involving reason, conscience, and free will)

4 : a means or instrument by which a guiding intelligence achieves a result

This ability to be a powerful, driving force toward some end is not something that is easy to come by. Most people, the vast majority in my experience, are content to sit in their own world in comfort, or just complain when things aren’t going their way. The inertia of the status quo, plus the caustic nature of entropy and ignorance make progress a very difficult job indeed. The members of Head-Fi have every reason to be very proud of acting as agents for the “high-quality personal listening experience” as evidenced by the willingness of major industry players to support upcoming First Annual National Head-Fi Meet.

As I have called various vendors and asked them to participate in this event, I am continually surprised at their willingness to go along for the ride. Corporations are pretty conservative by nature; generally they don’t like to do things unless they know what the payoff will be. This National Meet is the first of its kind; it has no track record; it is not underwritten by a major industry organization with a track record of delivering on PR promises; and it has a limited attendance. Why in the world would companies be so willing to bet that their participation will deliver results? I’ll tell you why: you guys are AMAZING agents! For example: AKG’s K701 sales are three times their projections! Why? Because you guys spread the word like wildfire that these were great cans. You did something that no amount of advertising can do: You made the K701 an instant contender in the field. If Head-Fi didn’t exist the word-of-mouth needed to make a classic out of a brand new headphone would take years! In this case, it was a classic within a month of its introduction. As definition 2 says above, Head-Fi members are able to “act or exert power (as by driving, inciting, or setting in motion)” in the world of headphones.

I am completely stoked by this upcoming event, and encourage you strongly to participate if possible in this unique and powerful happening. There are few times in life when one can join hands with others and lend their energy to an agenda which contains the promise of so much good.

In Closing

It’s hard to describe the personal satisfaction I get from my relationships with people here at HeadRoom, within the industry, and here at Head-Fi. It’s a dream job! Sure I can take some credit for the bed I’ve made for myself, but I also recognize that my bed is just a stick of furniture in this House of Headphones. And this house is filled with a family of employees, competitors, customers, and headphone enthusiasts that have truly made it a comfortable home for me. One in which I am motivated to contribute to the common good far more than to extract personal gain. That motivation is born not from some artificial sense of duty, but rather because I am attracted to its other members and simply wish to contribute to our collective happiness together. Thank you for making my job so personally satisfying. I love you guys!
post #2 of 75
Thread Starter 
BTW, I welcome any questions you might have.
post #3 of 75
Quote:
Originally Posted by Tyll Hertsens
(And I swear on all that’s holy, we will make a Hawaiian shirt using this new look one of these years.)
Oh man, I'd be sure to grab one & wear it with pride I really love the logo, and have the stickers given away at the meet on lots of stuff including my dap & car.

Quote:
So, with this post we are discontinuing our previous “Head-Fi Discount” and instantiating a new Head-Fi support program: anybody (members and non-members alike) who puts the word Head-Fi in the coupon box on an order will have 5% of the proceeds from any HeadRoom amp purchased donated to Head-Fi.
I like this idea! With the ever growing Head-Fi community, Jude could definately use the extra cash for bandwidth, new server hardware, and maybe a little extra funds in his pocket too. So this only applies to amp purchases?

BTW, I've said it before, but great work with the new case designs. I couldn't help but gasp at the Max when first seeing it. They are so sexy! Lastly, you guys have been in business for 13 years? Congrats
post #4 of 75
Quote:
Originally Posted by Tyll Hertsens
anybody (members and non-members alike) who puts the word Head-Fi in the coupon box on an order will have 5% of the proceeds from any HeadRoom amp purchased donated to Head-Fi.
Should we enter our Head-Fi username as well? Does the "donation" count towards Paid Subscription on Head-Fiend or end up being anonymous?

-Ed
post #5 of 75
Man, Tyll, you brought me back to my college days with that one! Direct Costs, don'tforget Indirect costs, allocated overhead....AGGGHHHH! Thought I escaped that by moving into IT!

This was a great message, one that you could tell was from the heart. I applaud your honesty, and your continued willingness to support this forum (and therefore indirectly its members).

Good luck in the business, and stay away from those accounting books! It's not healthy!

Thanks,

Todd - skullguise

PS - an occasional "special" would still be nice
post #6 of 75
Tyll,

Congrats to you and all of Headroom on what sounds like a great year! And thanks for sharing your unique perspective on this hobby. I'm really looking forward to seeing what you roll out this year at the national meet, I'm guessing you've got something up your sleeve .

Just a quick note on the new Head-Fi policy, I think it's great! I personally have never used the Head-Fi discount as my recent purchases have been small and I'd rather not nickle and dime you on HD201s or ER20s .

Best of luck in 06 and beyond.

Nate
post #7 of 75
I like the idea of the 5% donation to Head-Fi. I'll miss the 10% discount, but it's a great way to support the community AND one of it's advertisers.
post #8 of 75
Quote:
Originally Posted by Edwood
Should we enter our Head-Fi username as well? Does the "donation" count towards Paid Subscription on Head-Fiend or end up being anonymous?

-Ed
I can't speak for Jude, but I'm thinking it would probably not count towards paid subscription status. That's just my $0.02...
post #9 of 75
Quote:
Originally Posted by Tyll Hertsens
So, with this post we are discontinuing our previous “Head-Fi Discount” and instantiating a new Head-Fi support program: anybody (members and non-members alike) who puts the word Head-Fi in the coupon box on an order will have 5% of the proceeds from any HeadRoom amp purchased donated to Head-Fi. I know that a lot of you are not going to like this---tough!
Well Tyll, it's no big deal to me if I find a lower price and buy from there instead of Headroom -- I assume the costs of the 10% discount was outweighing the increased business you got from the discounting, otherwise your decision wouldn't make sense from a business standpoint.

Guess the new policy is 'tough' on both of us, as I probably won't be able to get as good a price, and it's possible/likely that someone else will be getting my business instead of Headroom. Sometimes you guys are cheaper, but without the discount you tend to be equal or pricier more often than not.

Before someone complains that I'm not supporting Head-Fi -- I like to do that in my own way, with direct donations and active participation helping newcomers. As far as buying though, I buy where I can get the best price (as long as the customer support is decent, which it is in most places). I find it admirable that Headroom is donating 5% to Head-Fi, and I will continue to be a contributing member and donate in my own way also.
post #10 of 75
Thread Starter 
Quote:
Originally Posted by fewtch
I assume the costs of the 10% discount was outweighing the increased business you got from the discounting, otherwise your decision wouldn't make sense from a business standpoint.
Well it really wasn't, and that's the point. (Though I do think it did raise the awareness of the need to contribute, and that was good enough for me for a little while.) We were loosing money on the deal---especially the headphones since competition is so tough and margins so slim. Lossing money on the deal was in some modest measure probably making us a little less competative on price overall. Headphone margins are very slim, and its tough for us to be competative with all the extra work we do compared to most retailers (graphs, photos, subjective evaluations, ratings, etc), adding the Head-Fi discount on top of that was just one more burden on a bad situation.

I have to say that I fundimentally agree with your view. I was allways of the opinion that we might be able to charge 5% more than others for our headphone pricing and get it due to increased customer satisfaction with the rest of the service we offer, but over 5% and I think people start going elsewhere. The discount change and the management re-engineering should help us be more competative in our headphone pricing. Just do me a favor and keep checking our prices along with your other shopping habits and give me some time; I believe within a year we should have strongly competative pricing ... especially on the more expensive cans. (The cheaper ones we'll never really be able to be competative, but on the expensive ones our price is already pretty good and will get better.) So, thanks for your comments, I think they are legitimate; and I take them as inspiration to do better.

Quote:
Originally Posted by edwood
Should we enter our Head-Fi username as well? Does the "donation" count towards Paid Subscription on Head-Fi
No need to enter your name, and sorry, it does not count towards your membership contribution.

Quote:
Originally Posted by skullguise
Man, Tyll, you brought me back to my college days with that one! Direct Costs, don'tforget Indirect costs, allocated overhead, labor time studies, allocation base....AGGGHHHH! Thought I escaped that by moving into IT!
Oh, yeah...I said it was only the tip of the iceberg. Cost objects, departmentalized overhead distributions, inventoriable costs, break-even analysis, transfer pricing, eeeee-friggen-gads!

Quote:
Originally Posted by n_maher
I'm really looking forward to seeing what you roll out this year at the national meet, I'm guessing you've got something up your sleeve
We haven't really intentionally plan anything to introduce at the National Head-Fi meet. But, unintentionally, there just happens to be a couple of small things coming up that folks may want to hear, and the first opportunity will be at the National Meet. I will spill the beans here first, though...just a few more weeks on that.
post #11 of 75
Thread Starter 
Forgot you, saturnine:

Quote:
Originally Posted by saturnine
BTW, I've said it before, but great work with the new case designs. I couldn't help but gasp at the Max when first seeing it. They are so sexy!
Thanks! I drew the basic shapes and Joe C. (our Mechanical Engineer) made it work----that was the tough bit. I like them very much also. I think they have a very comfortable feel but still radiate a tank-like seriousness.
post #12 of 75
Regarding the discount, it seems to me that the biggest difficulty was offering a 10% discount on products that you don't actually make and therefore are already at a very low margin on. Does it not make financial sense to continue to offer the 10% discount on HeadRoom amplifiers/bags only, and sell all other other stuff at retail, or even a 5% off, 5% to head-fi system?
post #13 of 75
Well spoken, Tyll. I applaud your decision to further support Jude's selfless efforts in PROVIDING our community. Also, as one of your earlier customers (mid '90's), it's heartening to see that your enthusiasm has not waned one bit since the 'start-up' years, despite what your bean-counters might like to see. Keep it up, man!
post #14 of 75
Bravo on all counts...
post #15 of 75
Hi Tyll,
regarding the head fi discount, does this only apply to orders placed after 3/7?

what if an order was placed before this notice but has yet to ship?
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