Singing The Blues

With a burst of private-equity money behind it, Blue Microphones is set to turn up the volume on sales and revenue. The Westlake Village maker of stylish microphones was acquired in July for an undisclosed amount by Riverside Co., a private equity firm co-headquartered in Cleveland and New York. Blue Microphones’ business was built on supplying premium mikes – such as the Woodpecker, which retails online for an average price of $990 – to professional music groups and recording studios. But with the investment from Riverside, the goal has broadened to better serve amateur broadcasters such as video bloggers and YouTube artists. John Maier, chief executive at Blue Microphones, said the consumer segment is a much larger potential market and eventually could eclipse the professional segment that gave the company its original success. “On the one hand, the pro business is still a really vibrant part of our business,” he said. “It is very active and continues to grow. Our consumer group has really taken off over the past five years.” With the advent of Internet video site YouTube in 2005 and the growing popularity of video blogging, Blue Microphones has an emerging market for its products. Now that more consumers create content at home, they need quality microphones and other production gear – but they don’t need to spend a lot of money. “We think this market is just starting. We see big growth in the next five years,” Maier said. The company’s popular products on the consumer side include the Snowball, Yeti and Nessie microphones. Snowball retails for $69.95 online on Apple.com, and the Yeti goes for $149.95 on the site. The company has a relationship with Apple; the computer giant sells Blue’s products both online and at its retail stores. Spark Digital, the first studio condenser microphone that has adaptability for both the iPad and USB, is another product that professionals use but has wide applicability for consumers. It sells for about $200 on Guitar Center’s online store. The company does not disclose revenue figures but Maier said the average annual growth rate was more than 50 percent for the last five years. He said it reached the point where it needed a capital infusion to fuel further expansion. Among its competitors are Shure Inc. of Niles, Ill., and German microphone maker Sennheiser Electronic Corp., both of which serve the professional market. Fernando Curiel Jr., editor-in-chief of Spanish recording industry magazine Musica Pro in Boulder, Colo., said Blue Microphones have always stood out from the competition because its products’ sleek visual designs. Making the microphones look hip has gained loyalty among professional musicians, and it also makes for an easy transition to the consumer market. “Now technology allows for users to have high-resolution audio in their homes, for the best part it does the trick and saves thousands of dollars,” Curiel said. Sound acquisition Maier said Blue Microphones had been looking to partner with an experienced investment firm for some time, and Riverside hit the cue on what the company was looking for. “They really build companies – they are specialists in the smaller part of the mid-market,” he said. “They have experience with companies facing the opportunities we are facing.” Riverside’s investment strategy focuses on the long-term growth of companies, with a portfolio that includes a wide-ranging array of companies, such as Helsinki cast steel component manufacturer Keycast Group, Chicago marketing services company BrandMuscle Inc., and CPA Site Solutions, an online marketing solutions company for accountants located in Winooski, Vt. Brian Sauer, a principal at Riverside who worked on the acquisition, said the company wanted to acquire Blue after seeing how its company’s image and products appealed to consumers. “They have a great culture and developed great products that are better than what else is out there – the quality of the sound, the design and the technology and the ability to bring professional quality sound recording to the consumer,” he said. U.S. Bank provided the financing for the acquisition but financial details of the transaction were not disclosed. Riverside plans to focus on growing sales abroad. In recent years Blue already has doubled its international markets, said Maier. It sells in the United Kingdom, Australia, China, Europe and Japan. “The economic challenges in Europe are an opportunity in a very big consumer space as opposed to the high-end stuff,” said Maier, who added there is also potential in Latin America. Meanwhile, he sees looming competition from new companies eager to cash in on the growing consumer market. He noted competitors in the consumer market include Apogee Electronics Corp. in Santa Monica and Italian music application and manufacturer IK Multimedia Production. Apogee produces products including microphones for iPads, such as the MiC, and IK Multimedia has its own line of consumer products, which include the iRig Mic, also for the iPad. “There isn’t anyone who focuses their microphone business on the consumer electronics market quite like we do, but there are a few non-microphone companies who have seen the potential and are starting to address it,” he said.