Florida Specialist Absolute Sound Is Latest Notable AV Casualty

"Why rebuild an entire showroom and then close the doors?” read a recent post from a fan on Absolute Sound’s Facebook page after the Winter Park, Fla.-based specialty AV store went out of business in early August. The once-prominent specialty AV dealer was celebrating its 31st year in business, having weathered transitions from two-channel audio to home theater, from multi-room audio to whole-house custom electronics. In the end, owner Charles O'Meara said, a “perfect storm” of adverse business conditions and misfortune caused the company to shut down operations just a month after completing a $900,000 showroom renovation, leaving him to shutter operations of his retail and custom businesses when he couldn’t make the payroll.

Once regarded by community members and sports celebrities as a go-to business for home electronics, Absolute Sound is the latest in a series of once-thriving specialty AV retailers unable to survive in a parched economy where consumer wallets and banks’ credit lines dried up simultaneously. The economy, combined with consumers’ collective shift away from traditional AV, along with a preference for online versus in-store shopping, has darkened the outlook for the archetypal stereo store. The casualty list includes MyerEmco, Wild West Stereo, Flanner’s Home Entertainment, Ken Crane’s and Classic Stereo, with many more, according to industry sources, hanging in the balance.

"I hung on as long as I could,” said O'Meara, who has hired a lawyer to begin personal bankruptcy proceedings, after he and his family made cash infusions into the struggling company over the past couple of years. Assuming that the economy would turn around and the showroom would be a magnet for retail business, “I overspent and overloaded my debt knowing that we'd go into the fall and I'd pay it all back in spades because in our heyday we were doing $6 million and we had projections to go up to $10 million,” O'Meara said. “All of a sudden we fell from $6 to $3 million,” he said, citing the economy and consumer confidence that “dropped like a stone in June” and fell further in July. The economy bit back on the installation side, too, he said. Absolute Sound was counting on a $300,000 home theater earlier in the year, part of a larger whole-house project. “They canceled the theater, and that was something we were counting on,” he said.

"The dealers who will die are those who are selling and buying one box at a time, scrambling for advertising money,” said David Berman, training manager for the Home Technology Specialists Association. O'Meara was a member, and its name changed from Home Theater Specialists earlier in the year to broaden the scope of its membership. “They make enough money to survive, but the banks see the revenues drop and they pull the credit line,” Berman said. “That really inhibits the small independent business guy and you have to decide if you're going to put your own money in the game and support business or decide that the model isn’t viable.” In the case of Absolute Sound, Berman said, “the worst part was Charles had a viable installation business but retail was draining him. The fact that he opened the brand-new showroom was a crusher."

O'Meara said he tried paring operating costs but “we had a fair amount of overhead that I felt was required in order to be poised to do business as the business came back.” He needed to keep design and service people on staff for complicated lighting and home control systems, he said. “When you have 30 years of legacy jobs, there’s a ton of service,” he said. “The flip side of it is, today people are needier than they've ever been. As technology gets more complicated, they need us more than ever, but the fact is today people are prepared to spend less than they used to on service.”

One of the issues leaving a black mark on the industry, Berman noted, is what happens -- and what impression is left of the custom electronics industry -- when a company goes out of business and customers don’t know who to turn to for service. Stereotypes, a Daytona-based dealer, posted a note to the Absolute Sound Facebook page, urging Absolute Sound customers to call their store for any home electronics needs. A second company, Premier Electronics Solutions, based in Melbourne, posted its own referral to the Absolute Sound page on Wednesday. Those invitations come at a price, according to salesman Bruce Bundy of Stereotypes, who said he’s borne some of the brunt of the Absolute Sound storm from customers who saw the Facebook post and assumed the companies were related. “We're just dancing on his grave trying to pick up new customers, which is working very well for us,” Bundy said, adding that his previous experiences with O'Meara were “very good. They were good competitors. They won some, we won some.”

Stereotypes also is getting calls from people trying to collect money, Bundy said. “One woman called very angry about a service contract and I told her I didn’t sell the contract, and I have nothing to do with any Absolute Sound debts,” he said. “I finally hung up on her when she started yelling about the service contract.” Another former Absolute Sound client had a multi-room audio system, with two nonworking keypads still under warranty. The customer called Stereotypes wanting a service call, “but he’s not willing to pay anything for it,” Bundy said. “He just spent $15,000 updating his system, and I understand his point of view that he shouldn’t have to pay more money, but I'd have to drive 1-1/2 hours with two guys, put in two new keypads, drive back home and not get a dime for it? If I do that, I'll be going out of business and joining Mr. O'Meara."

O'Meara said he wasn’t sure how many custom projects were in the works when the company folded. Its installation staff is still in the area and all of the Absolute Sound technicians are either working on their own or have joined forces with other businesses, he said “We've been referring customers to them,” he said. “We're still trying to take care of customers as best we can,” he said. “We did everything we could to try to make things right,” O'Meara said, noting that the bank has taken over all the assets of Absolute Sound, along with O'Meara’s Ferrari, which he borrowed against to fund the company. “I tried to offer some customers alternative products on jobs we couldn’t finish,” he said. “There wasn’t a hell of a lot of inventory.” With the bank’s approval, “I gave back a bunch of product to vendors of what I had left. I tried to satisfy as many people as possible,” he said. “We're not satisfying anybody 100 percent but we tried to satisfy everyone somewhat.” Several of Absolute Sound’s vendors didn’t respond to requests for comment.

The credit managers for all of Absolute Sound’s suppliers were “wonderful and understanding” and the reason the company was able to keep going as long as it did, O'Meara said. “If I ever did get back into business and the market was right, I'd want go back to every manufacturer I did business with to try to work with them again,” he said. “I'd like to make it up to them and give them business if they sustained any loss with us."

Lutron “was saddened to hear the news” about Absolute Sound, said Jeff Zemanek, director of residential new business development, who spoke fondly of meeting O'Meara at CEDIA Expo in 1996. O'Meara “has been a great customer for more than 15 years,” Zemanek said. “The custom AV industry has suffered a great deal as a result of the economic downturn.” Lutron is trying to help dealers sustain a profitable business model in the current economy with lower-priced, energy-saving products that can be sold into existing homes and commercial applications versus large-scale systems for new-home construction, he said.

Al Burdett, vice president of products at Niles Audio, said he was surprised about Absolute Sound’s closing and it raised “some level of concern” on an industry level. “A lot of things are happening to lots of good businessmen,” Burdett said. “They're getting caught up in the economy.” Even when the economy bounces back, it’s a changing world and veteran audio dealers need to adapt, Burdett said. “You have to understand what people value."

HTSA is encouraging its members to think more lifestyle and less product, Berman said. “If you're giving away the gear to earn a labor contract, if it’s not about lifestyle and building a relationship but about getting a sale instead, you lose.” With consumers cutting back on spending, he said, dealers have to work on profitability and explore areas outside of their core competency. “The reason they're getting hurt isn’t that they can’t make enough money to survive, but the banks see the revenues drop and they pull the credit lines,” he said. “It’s going to kill several hundred more businesses."

Those dealers who survive have a chance to shore up consumers’ impressions of the custom electronics industry and build a loyal clientele in the process, Berman said. He cited Brian Hudkins of two-store operation Gramophone in Virginia, who offered to take care of MyerEmco clients that had service agreements in place when the chain closed earlier this year. “They offered a credit for a large part of the contract that was less than what it would have cost the customer to find someone new,” Berman said. “So they endeared themselves to the client and engendered good trust in the community. That’s a great way for the independent specialists to generate revenue and build a new customer base in a down economy -- take over where other guys are failing.”