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  1. #1
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    Dirty Little Secrets

    In my time here at AR, and at other sites, I've tried to offer whatever I've gleaned from my experience in the industry to those who might find such information useful and helpful. I hope I've been successful in that endeavor.

    There's another side to this industry though, and it's not particularly pretty. It's the proliferation of ego-maniacal, and often drug-crazed idiots who, regrettably, ruined company after company. I'll list just a few in my own history.

    LAFAYETTE RADIO

    Lafayette Radio was a hugely successful ($110 million/annually), 50+ year-old company that was put out of business in the amazingly short span of about 3 years by one individual - Arthur Blackburn - who was brought in as the company president in 1976. Blackburn not only systematically replaced all the long-standing Lafayette buyers and store managers with his pals from J.C. Penny (from which he came) but actually purchased $15 million (at cost) of obsolete 23- channel CB equipment which he knew would arrive on U.S. shores after the FCC's edict that only 40-channel equipment could be legally sold. Blackburn stupidly believed that everything would fall into a cycle: if that item was not successful at one time, then just put it away in the warehouse for a few years, and when it's popular again, bring it back out and sell it. This was the philosophy he used with the 23-channel CB equipment, and it bankrupted the company.

    Most of Lafayette's long-standing buyers were Jewish folks from New York. Blackburn, an avowed anti-semite, actually had the temerity to state one day, "I'm going to clean house of all these aging Jewish shop-keepers." It's susrpising he wasn't shot!

    PICKERING

    Pickering and Stanton, whose products were identical, and were made with the same parts and on the same assembly lines, were still two fiercely competitive companies, each owned outright by Walter Stanton. Stanton surrounded himself with about 8 or so "yes-men," who all but swore blind allegiance to him, and who Stanton himself trusted implicitly. God help the poor salesman who defied some of the presposterous logic of these yes-men, and tried to tell Stanton the truth. Such people earned the title of being "negative," and, while not always fired outright, were ordered to stay away from the factory for long periods of time.

    Fortunately, PIckering made a good product that sounded good, worked well, and held up under abuse. PIckering (and Stanton to a large degree too) was a company that succeeded in spite of itself, especially in light of the view of these yes-men that then newcomer, Audio Technica, was "a flash in the pan," that "would be gone in two weeks."

    Pickering had its "Dustamatic Brush," and Stanton its "Longhair Brush" both of which were subject to decades of industry ridicule. The fact was that the brushes actually were highly beneficial in helping the cartridge/tonearm play warped records, in keeping clean records clean and in damping low frequency resonance, but instead of informing the buying public of these benefits immediately, it took me (with the help of some of the company's top engineers) to print a pamphlet, "The Do's and the Don'ts of the Dustamatic Brush Assembly," in 1977, to finally try to put the record straight (no pun intended). By then, however, the damage was all but irreversable.

    ESS

    ESS had the Heil Air Motion Transformer to its credit, and when I joined the company in 1979, I truly believed the company had a vast potential to be the single largest speaker company in the country, with the best sales story too. Unfortunately, the company's head officers played dirty little games with money. They often stiffed their suppliers, which then put them on credit hold, and put the company in the untenable position of not being able to manufacture speakers for which they had orders, since they didn't have the parts in the first place! Bouncing employees' expense checks didn't encourage much admiration either.

    What can you say about a company when the Chairman of the Board, in a sales meeting to all ESS sales personnel, says, "Every dealer is out to screw me, and I'm going to screw them first!" This person declared he wanted to be the center of his own empire (he actually used the word, "empire!") and invested the company's profits in no less than 13 entirelly divergent enterprises, all of which did nothing other than drain the coffers. That the company didn't delcare bankruptcy long before it did is a wonder.

    ONKYO

    Working for Onkyo was my first experience working for a Japanese company, and my indoctrination to the Japanese work ethic of "business as war." I learned all too quickly that "honor" meant absolutely nothing to the Japanese at Onkyo, and that all of us American "round-eyed infidels" were nothing less than expendable commodities.

    In 1982, those of us in the sales department put on a series of dealer pre-shows, at which we invited key dealers to come to various hotels in which we'd rented suites, to show them prototypes of the new line of product the company was planning, and to get their opinions. The results of all of these shows were unamimously negative: the dealers thought the prototypes looked "cheap," or "cheezy," or were at the very least, "non-competitive." We reported all of this back to the Japanese at the company, but nothing whatsoever was done to them, and the new product line that fall arrived exactly as the prototypes had appeared. Sales plummeted from $27 million annually to $18 million, and I'm sure no one reading this needs to guess who took the fall for that.

    I learned very quickly that the Japanese in a Japanese-owned company were "beyond reproach," and that "honor" meant absolutely nothing to them. They never admitted to any mistakes, and always blamed us Americans instead.

    That's it for this time. Based on the reactions I may get from this thread, I'll either print lots more of these "gory details," or just stop here. 'Hope you enjoyed reading this stuff.

  2. #2
    Shostakovich fan Feanor's Avatar
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    Fascinating

    Thanks, emaidel.

    I love to hear stories of corporate mismanagement. I would relate a few of my own except they aren't related to the audio business.

    There are many people who insist that goverment can't do anything right and if it's to be done right, leave it to private enterprise. This is an extremely naive notion but right-wing polititians still flog it every day. The idea invoked to justify, e.g. inaction with respect the deplorable state of health care for so many people in the U.S.

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    Thanks, I found this very interesting and hope you do decide to post more. I worked for an electronics company in the late 80's and early 90's before they went out of business. The company was a distributor as well as had some retail stores. The owner built his business distributing parts where there was a large mark up and then moved to trying to do consumer electronics. The owner just refused to change with the times. With a Wal-Mart in every town selling electronics for what our distributing price was you can see how it didn't take long for this business to disappear along with the "mom & pop" shops we supplied. It wasn't just Wal-Mart, it was also Best Buy and other warehouse mass market stores. We had some good line like Infinity, Kenwood home, Electro-Voice but the owner just wouldn't reduce margin in favor of moving more volume and soon you get a rep for being the highest price and we weren't the only distributor in the U.S. What's odd is he had retail stores and our warehouse was full of older model gear but he wouldn't bring it up on the floor at a proper discount to move it. I enjoyed the time I worked there though. Oh, Stanton was one of our lines. Man was I amazed at the mark up on cartridges. So much so I feel dirty when I have to buy a cart now retail.

    Any idea why Kenwood pulled out of the home market? Ever notice that when Carver tried to expand into cassette decks and other components to go with their amps and preamps that they looked like Yamaha? Or, the fact that Carver could never keep a line a float for any length of time. We carried Carver for a while, we called the stuff "boomerangs" because it was surprising when we sold a piece and it didn't come back defective. Did my ears change or did Harmon allow Infinity to go to the dogs? Just requests if you have any insight

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    All the adjectives used above and then some! Absolutely emaidel, keep it coming! I remember Lafayette and Pickering very well, but they just faded away from my conscienceness as time went by. I'm particularly interested in more of Onkyo's history and how Integra sprang from their arrogant and dis-honorable loins.

    See Melvin? When presented in a non-pompous a$$ed manner, we here at AR are very receptive to the history, good and bad of audio.

  5. #5
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    Quote Originally Posted by emaidel
    especially in light of the view of these yes-men that then newcomer, Audio Technica, was "a flash in the pan," that "would be gone in two weeks."
    Very nice write up, very good read. For what its worth, my AT cart sounded great all weekend long. I hooked up my Goldring last weekend just for fun, but went back the the AT this weekend.
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  6. #6
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    Well, it seems I sparked some interest. Onkyo's lack of honor wasn't unique to them alone: the same was true of most Japanese audio companies. Pioneer blatantly mistreated its sales manager, firing him only because he was making too much money. Silly him - he made the money he did based on the incentive program the Japanese put together, and he was simply selling so much gear, that his incentives skyrocketed. Rather than thank him for his efforts, the Japanese fired him. Same thing with Onkyo's first sales manager, but at least he was given the line to represent in the New York market

    The Integra line had been around for a while and was always a step up from the "standard" Onkyo line. The 1982 lineup I referred to was simply a very big, and arrogant, mistake which the Japanese refused to take the blame for. Once new products were designed, sales again increased.

    Markup on cartridges wasn't unique to Stanton: the biggest and most egregious marketing effort for profit was that of "private label" cartridges, and the initiator of such was Audio Technica. A private label cartridge was a standard model from a given manufacturer (the AT-11 for example) sold at greatly reduced cost, and under a different and unique (to the specific dealer) model number. The reason for the reduced cost was quantitiy: such cartridges were purchased in the thousands, rather than dozens, and so AT accepted less profit for greater volume. The price to the dealer for the AT-11 varied all over the place also, due to the packaging used. Ultimately, the loser was the unwary consumer: not having a clue as to what a given model number a dealer was carrying was worth, the $100 or more that hapless consumer spent may more than likely have been for a cartridge that cost the dealer less than $10.

    The all-time worst offender of the private label cartridge business was Stereo Village, based in Atlanta, Georgia. The owner/buyer of Stereo Village made it very plain: he would not pay more than $5 for any cartridge from anyone, but he'd place purchase orders for given units of at least 1,000 each time. Not only was he steadfast on the $5, but he also demanded that the manufacturer print a "suggested list price" on each cartridge of $200, and he'd then offer his customers a 50% discount, and sell it for "only" $100. That's $95 profit on a truly lousy cartridge, and this guy actually slept at night!

    The purpose behind the private label cartridge business was to allow dealers to make a profit on the turntables they were all but forced to sell at, or near, cost. Aggressive advertising from competing dealers often all but gave away turntables, and to sell a turntable at or below cost wasn't something dealers wished to do. By combining a popular turntable with a private label cartridge, the profit picture turned around. Private label cartridges was one of the industry's biggest black eyes, and thousands and thousands of consumers wound up paying the price.

    AT wasn't the only manufacturer in the private label business. Empire (now long gone) sold private label products almost exclusively. I was personally responsible (along with my superior) for developing PIckering's "Exclusive Packaging" program in an effort to compete with AT and Empire, but at least our private label program (Walter Stanton couldn't bear the term "private label," hence the "Exclusive Packaging" name) allowed for dealers to make a nice profit, but still be able to carry several standard TOTL PIckering models, specifically the XV/15-625E and the XSV-3000. While dealers could make a nice profit on the Pickering exclusive numbers, they weren't able to gouge the customers as the AT and Empire programs allowed them to do.

    More in a while....

  7. #7
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    Really interesting stories, Emaidel. I use to go to the Lafayette store in Jamaica,Queens in the late 50s and 60s. It was a mad house on a Saturday. Pretty busy during the week too. A tremendous inventory of all kinds of electronics too boot. I thought that the reason they might have gone out of business was the way they tried to spread them selves around the country which seemed haphazard in camparison to Radio Shack.with just too many "associate stores" rather than real live branch stores.

    I knew years back that essentally Pickering and Stanton cartridges were from the same company but I thought that Stanton was the more "Cadillac" cartridge from that company. I cannot deny that their dust brush was quite good at cleaning records of dust, and as you state most likely contributed to dampening and other factors on a disc too. In So. Fla. here there was a outfit that discounted cartridges during the 80s. called LUSKINS. I was able to try the SHURE M91ED, a Audio Technica something, A Empire something and a pickering 681 eee. My overall favorite was the M91ED for its overall sound reproduction. The Tehnicka and the Empire were close to the Shure but different too. The Pickering lacked midrange emphasis but was clean on the highs and lows and sounded nice anyways.

    My brother had the ESS AMT 1b. Some speaker. I did not know how rotten this company was run though. They could have used better foam though. There was trouble with the Heil transformers blowing even though they produced great high frequency sounds. Damm good unique speaker though.

  8. #8
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    Emaidel thanks for the interesting stories. As I was first learning about audio the ESS speakers were of great interest to me.
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  9. #9
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    ESS blew the best thing it had - the Heil Air Motion Transformer - via its silly business practices, and on a more technical side, by crossing over the woofer to the Heil at too high a frequency, leaving a lot of "crud" for the woofer to reproduce. At one point in its history, ESS actually shipped 96 AMT-1b speakers to a retailer in Minneapolis (Shaak Electronics) without the Heils installed! The company ran its business so close to the belt, that orders needed to be shown to the bank before payroll could be met, and in this case, even though ESS didn't have the parts to build the Heils for these 96 speakers (the suppliers of the necessary parts had put ESS on credit hold), actually shipping 96 supposedly complete speakers allowed the bank to release funds for payroll.

    Shortly before I (and my superior) were laid off, the company had also acquired not only the Dynaco name (the way they ruined that effort is a subject for yet another thread!), but also the rights to build the Gale Loudspeaker. While the ESS-manufactured Gale Loudspeaker sounded OK, it was a far cry from the original. And if you think ESS had a bunch of nuts running it, meeting Ira Gale was something else altogether!

    When the "C" series of AMT speakers was designed (around 1982), the crossover was lowered from 1,000HZ to 700HZ, allowing the Heil to truly act as a combination midrange/tweeter unit, and the improvement in sound was significant. Unfortunately, the corporate shenanigans had so outraged so many retailers across the country, that it just about didn't matter.

    A few folks tried to resurrect ESS, but without success. I still think that the Heil is an item worth saving, but it's going to take a small fortune to start up yet another speaker company with it.

  10. #10
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    All good stuff emaidel, keep it coming.


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  11. #11
    Shostakovich fan Feanor's Avatar
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    I remember

    I remember being very impressed with the ESS Heil Air Tranformers speakers back in the '70s. I never owned a pair but I do remember couNseling an acquaintance to by a pair of one of the lower end models; this she did and was very pleased.

    Heil-based speakers are available today from Mark & Daniel ...
    http://www.mark-daniel.com/

    and a Swiss company ...
    http://www.precide.ch/eng/eheil/eheil.htm

    I would love to do a DIY speaker project using old Heil drivers; the low 700-1000Hz crossover capabiliity is an extremely attractive feature. Pairs turn up occassionally on eBay, and replacement diaphrams are available ...
    http://www.speakerrepair.com/Merchan...ESS-Diaphragms

  12. #12
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    Quote Originally Posted by Feanor
    .

    Heil-based speakers are available today from Mark & Daniel ...


    and a Swiss company ...
    I had no idea. Any clue as to the price of these speakers?

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    Lafayette was much like most audio companies of that era. Times was changing. I can list over a hundred audio companies that by the 1980's was out of business.
    Old names in audio. Many were sold to multi -national companies who cared little for quality audio equipment. Some was only to make the change from tubes to transistors.
    Burstein -Applebee , Bogen , Fisher , Heath, Knight , Marantz , Realistic , V-M Corp , Gray , Fairchild , Lesa , Rek-0-KUT , Audio Dynamics Gardo , Weathers , Akray , Scott , Eico , Crown , Magnecord , Newcomb , Viking , AR , Bozak , Electro-Voice , Goodmans , Hartley , Jensen , Karlson , University etc. This is only a partical list of American companies that was not around after the 70's.

    Was it bad management , dollars spent in research and development , changing taste in audio , poor merchandising are a combination of all four ? One can point their finger at a few companies that may have had poor management , but was that the general rule ?
    It was the American companies that disappeared . The same with the disappearance of many American auto companies.

    One of the finest tape recording companies bit the dust Ampex . Ampex was unable to meet the competition. Was Crown any different , what about H.H. Scott, Fisher , Bogen all long gone. Stephens speaker company was one of the leading speaker companies of the late 50's early 60's what happen to Stephens ?Who do you blame ? or better yet what do you blame ? Times change , there are losers and winners.
    That's capitalism !

  14. #14
    Forum Regular O'Shag's Avatar
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    Perhaps there may have been a cut-throat attitude to begin with, but one thing is clear. The best Japanese products of today reflect an obsessive attention to detail and quality.

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    The quality of Japanese products was never an issue. It was the marketing of them, and the "business as war" approach used by many Japanese companies. One of the more despicable business practices was that which is called, "dumping." Dumping is what happens when a manufacturer sells his product for a price that's at or about others' manufacturing, as opposed to retail prices. One of the worst offenders in this arena was Kenwood, and the net result was simply for Kenwood to garner a greater market share.

    "Marketing Development Funds," or as it came to be known, "MDF" was another issue. Many Japanese companies offered MDF to their retailers in such huge amounts, that those retailers could sell products at ridiculously low prices, yet still make a profit, much to the detriment of competitors. Instead of developing a market, as the name suggested, MDF merely made it impossible for competitors who didn't receive huge quantities of MDF to sell their products other than at a loss.

    Just as often, retailers (Newmark and Lewis in New York was a perfect example) just pocketed MDF to bolster either the bottom line, or the owner's bank account.

    I have a particular loathing for Newmark & Lewis based on the horrible dealings I had with them both when at ESS, and then later with ADC. N&L would consistently pay their bills late, but still take the prompt-pay discounts, and frequently take unauthorized deductions from just about all of their invoices for matters never discussed with their suppliers. One time, a huge deduction was taken from an ESS invoice for N&L's internal costs for putting together an advertising program, that didn't even include ESS!

    At another time, ADC sent a shipment of brand-new Sound Shaper equalizers for the N&L "Show" that was held annually. These equalizers had to be palatized and shrink-wrapped for security, and I was physically present as the merchandise was brought into the ADC booth one year. I also helped sell each and every piece during the several days of the show. Not to anyone's surprise, N&L not only paid the bill many months late, and took the prompt-pay discount, but had the audacity to claim they were short-shipped well over $10,000 worth of product, which was an out and out lie. They never paid ADC back a cent.

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    Some of those companies were still in business after the 70's, I sold Bogen & E-V and Crown is still in business. Bogen amps, at least the ones we sold were all 70v multi speaker application.

  17. #17
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    Cool

    No company ever admits mistakes, that is taught in business school.
    Its not paticular to the Japanese.
    IF YOU WANT A MORE GENERAL HISTORY of the electronics world read the book,
    KINGS OF THE AIR.
    This is a fascinating book, tells how RCA tried to kill FM radio, how the inventor of the vaccume tube, lee deforest, actually was involved in several stock trading scams.
    A must read, really.
    Anyway thanks for the info, I always wondered what happened to lafayette
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  18. #18
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    Along those same lines, Michael Chrichton's book, "Rising Sun," while essentially a murder mystery and a piece of fiction, is also a scathing attack on Japanese business practices and has an astonishing 12-page bibliography to back up Chrichton's claims. Don't use the movie of the book as a guide, as it was completely white-washed for fear of offending Asian-Americans. (Chrichton's accusations and my previous posts all had to do with Japanese business people from Japan, and not Asian Americans.)

    I was working as the VP of Sales and Marketing for Stanton when the book came out, and I told all of my sales representatives that it was "required reading."

  19. #19
    Shostakovich fan Feanor's Avatar
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    Current history

    Quote Originally Posted by pixelthis
    No company ever admits mistakes, that is taught in business school.
    Its not paticular to the Japanese.
    IF YOU WANT A MORE GENERAL HISTORY of the electronics world read the book,
    KINGS OF THE AIR.
    This is a fascinating book, tells how RCA tried to kill FM radio, how the inventor of the vaccume tube, lee deforest, actually was involved in several stock trading scams.
    A must read, really.
    Anyway thanks for the info, I always wondered what happened to lafayette
    Given the way the Japanese government has consistently whitewashed the country's wars in China and the Pacific, it would be easy to image that they are worse than average.

    Unlike Germany that has, for the most part, admitted its guilt in WWII and payed conmpensation in many cases. The Japanese for a long time, and still today, tend to deny their guilt for horrendous atrocities. Japanese school text books still systematically down-play, even justify, the country's role in third and fourth decade 20th century affairs.

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    Quote Originally Posted by O'Shag
    Perhaps there may have been a cut-throat attitude to begin with, but one thing is clear. The best Japanese products of today reflect an obsessive attention to detail and quality.
    if you are referring to mid range products. The Japanese built excellent mid range goods.The Japanese high end goods are not as high in quality as European and American goods.

    An example the high end Nkamichi Dragon cassette recorder , Japan first attempt to compete with the high end cassette recorders made in Europe.
    Revox and Tandberg. The Nkamichi is more likely to have mechanical failure , and is less likely to last as long as the European recorders.
    As a result the European cassette has a higher resale value. This same problem exist with many Japanese products.

  21. #21
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    Quote Originally Posted by Mr Peabody
    Bogen amps, at least the ones we sold were all 70v multi speaker application.
    I can confirm this. I installed Bogen amps (for PA systems) all throughout the 80's.
    Back in my day, we had nine planets.

  22. #22
    Shostakovich fan Feanor's Avatar
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    Some would dispute

    Quote Originally Posted by melvin walker
    if you are referring to mid range products. The Japanese built excellent mid range goods.The Japanese high end goods are not as high in quality as European and American goods.

    ....
    Owners of, say, Accuphase products would dispute this point.

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    Question

    Quote Originally Posted by Feanor
    Owners of, say, Accuphase products would dispute this point.
    I will agree that Accuphase audio equipment is no doubt high end. Will it stand the test of time ?
    Many speakers , amps TT , and tape recorders made by American and European audio companies are still around , still performing 50 years later.
    I have a pair of James B, Lansing Hartsfield , purchased in 1958 ! they still sound great.
    Marantz, McIntosh , Lansing , Revox , Tandberg , Fairchild , Thorens etc , built as far back as the late 50's are still going strong and still bring higher prices today than what they sold for over 50 years ago.

    Nakamichi is an example of Japanese high end products lacking longevity. But maybe Accuphase is different.
    An example if one bought a Lexus 400 15 years ago and another person bought a BMW 540 in the same year which car would have a higher real sale value today ? The two cars are about the same size and cost about the same.

    I also have a Revox A77 purchased in 1967 that still makes excellent recording , has been in for servicing only three times in 40 years ! What have you to say about that ?

  24. #24
    Class of the clown GMichael's Avatar
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    How many 15 year old BMW's still run?
    WARNING! - The Surgeon General has determined that, time spent listening to music is not deducted from one's lifespan.

  25. #25
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    Quote Originally Posted by melvin walker
    I will agree that Accuphase audio equipment is no doubt high end. Will it stand the test of time ?

    have you actually ever heard or seen one? let alone own one? Accuphase is equal to Mcintosh, if not better. their products will last forever, and just like Mcintosh, they sound fantastic, have the greatest build quality, are exclusive and everything you want.

    Saying Accuphase will not stand the test of time is a cheap insult to the company and the owners of the gear.


    This comes from a Mcintosh owner himself (me).


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