Price-Oriented Direct-to-Consumer Speaker Firm Seeking Retail Presence

OSD Audio -- a direct-to-consumer “under the radar” audio company celebrating its 10th anniversary -- wants to create a name for itself in the retail world. The company will have its coming-out party at CEDIA Expo this fall, Doug Turner, vice president, told Consumer Electronics Daily on a press tour in New York Tuesday. At CEDIA, OSD wants to raise its visibility as it prepares for possible entries into a broad swath of distribution channels including custom integrators, the 12-volt aftermarket, commercial contractors and big-box retailers, Turner said. The company doesn’t expect to court “boutique” specialty AV dealers, he said.

OSD Audio has been selling speakers from its outdoorspeakerdepot.com website with little branding to date, Turner said. OSD Audio wasn’t a brand when the company began selling online. “It was just a business,” Turner said, declining to give annual revenue. The company now sells some OSD-branded product, along with products from Phoenix Gold and Yamaha, among others, and it serves as an OEM for SOME outdoor speaker brands that Turner wouldn’t name due to confidentiality agreements.

The 200-some speaker models at outdoorspeakerdepot.com include a wide assortment of rock speakers, in-wall and in-ceiling models, traditional in-wall and in-wall models, traditional cabinet speakers, subwoofers, weatherproof patio speakers, outdoor Bluetooth speakers and a “sound platform” that’s an alternative to a soundbar. One of the outdoor speakers is shaped like a frog and another shaped like a fish. The site also sells Russound A-Bus and Collage whole-house music systems, along with numerous volume controls and multi-channel amplifiers.

"Value proposition” is a primary message for OSD, coming from the online world, Turner said. A Russound four-source/four-zone audio kit sells at outdoorspeakerdepot.com for $899 compared with the $1,499 list price. Turner said consumers can get a much better product at a much lower cost than in years past in most CE categories. He lifted his $400 Toshiba tablet PC as an example of a much more powerful computer than what he would have been able to get five or 10 years ago for $3,000 or so. Memory, processing power and storage have all fallen in price to the consumer’s advantage. “Then you look at speakers -- not true,” he said. “We might has well be in the caveman age.”

The strategy of OSD founder David Chai was to build speakers with components including Kevlar drivers, silk dome tweeters, high-quality crossovers and Mylar capacitors and offer them direct to consumers “at half the price” compared to what they're selling for at retail, Turner said. The strategy behind OSD Audio is to bring “a very high quality product to market as a reasonable price point,” he said. OSD wants to partner with integrators, starting at CEDIA, “and provide enough margin for them and for that business model to survive.”

After reaching a “peak” online, OSD is now looking to add distribution for its speakers. “We're going to go to retailers and give them a business model that makes sense for them to sell our products,” Turner said. On how he expects retailers to react to selling lower margin products that crimp their ability to make a profit on high-priced soundbars, Turner said, “You have to suit the business model of how you're taking the product to market.” Business practices OSD has learned from e-commerce don’t apply to a national retail chain, he said. “We have to be able to fit into their business model and their margin structures,” he said. “We will give them the kind of profitability they need, and hopefully a higher amount of volume because of our pricing, to replace those profits that would be lost on a $2000-$3,000 soundbar,” he said.

OSD is short for Optimal Speaker Design, which Turner said has a different approach to speaker design from what has been done in the past. Traditionally, acoustical engineers have designed speakers to specs including power range and flat, neutral-sounding frequency response using measurements tested in an anechoic chamber. Because “no two people hear sound the same way,” OSD’s strategy is to design speakers to fit specific applications, Turner said.

Chai designs the speakers himself with “a couple of engineers,” Turner said, which eliminates one of the key cost elements of a speaker company. Other senior management members are also audio designers and engineers, he said, also minimizing costs. As an e-commerce business, the company had low overhead, he said. The “efficiently operated” company can put products in the market that are “very competitively priced with the high-quality, state-of-the art materials,” he said.

At CEDIA, OSD will launch a series of Bluetooth speakers including some for the mobile market, the car market and for commercial applications, Turner said. While CEDIA marks OSD’s branded debut, “I don’t plan to limit the distribution solely to that space as so many companies have,” Turner said, saying OSD products could easily fit into an aisle at a lawn and garden center or home improvement store. At CEDIA it will show mass-market speakers and 70-volt product for commercial use for dealers who have ventured into that side of the installation business. “We're going to show everything we're capable of doing so everyone knows where we're going in the future,” he said. “We're headed for a solution market,” Turner said. “If a product than any company is making isn’t providing a solution to something, it’s going to be hard for a lot of these companies to survive in the future."

In designing speakers with an ear toward application, not specs, “We're throwing out the need to have bass that’s deeper than anyone can hear,” or the need to have 20-20,000 Hz +/- 3dB frequency response, Turner said. Those measurements “just aren’t practical,” he said. Requirements for home theater speakers are different from those for speakers designed for streaming music applications, he said. By building speakers to specific applications, the company can streamline costs and not build in capabilities a speaker doesn’t need to have, he said. Bluetooth speakers are optimized for streaming content, for instance, and don’t have to have the same rigorous requirements of a home theater speaker, he said. Turner, who recently joined the company following a multimedia career spanning the computer industry, TV and high-end audio, called the OSD model “a great way to develop speakers for the future with the way content is changing."

Among OSD’s upcoming introductions is the SP2-1 Sound Platform ($599.95) that sits beneath a flat-screen TV and delivers 80 watts to two down-firing 5.25-inch woofers, four 2.5-inch midrange drivers and two silk dome tweeters. The system includes Bluetooth for music streaming and digital signal processing, but not Dolby or DTS audio, Turner said. Volume for the system can be handled via smartphone, and the company “could” develop an app, Turner said. The company will also show at CEDIA Bluetooth rock speakers, which Turner said will be the first such products on the market.