Music Trade Review

Music Trade Review -- © mbsi.org, arcade-museum.com -- digitized with support from namm.org
DECEMBER 10,
1921
THE MUSIC TRADE
REVIEW
THE FINANCIAL SITU A TION AND ITS
PROSPECTS FOR THE COMING YEAR
gas
I
An Interview With Joseph A. Bower, Vice-president of the New York Trust Co,, in
Which He Advises Against Long Term Paper in the Piano Trade
Jlli
It is generally recognized that one of the domi-
nating problems of the music industry during
the coming year will be that of financing busi-
ness; in other words, the handling of credits.
Although in the past many suggestions from
bankers have been ignored, probably due to the
exigencies of the business, it is nevertheless im-
portant to present the banker's side of the ques-
tion as it affects the present-day situation and
conditions as they promise to develop. The fol-
lowing interview with Jos'eph A. Bower, vice-
president of the New York Trust Co., is there-
fore most timely, for Mr. Bower is not only a
recognized authority on banking matters, but in
addition has direct knowledge of piano trade
conditions.
It has been noted that banking paper rose
from a point where it was ignored almost en-
tirely by bankers to a position where it received
consideration almost equal to that of paper in
other lines, due to the curtailing of credit terms
during the period of the war. The tendency to
go back to long credit has naturally had an effect
upon bankers, and in this connection Mr. Bower's
comments are particularly pertinent.
"The main trouble with piano trade credits,"
declared Mr. Bower in an interview with The
Review, "is that the retail credit terms are too
long. This is not only unnecessary, but serves
t o r e a c t directly against the business, for it leads
the buying public to the belief that pianos may
be bought easily and cheaply and that they will
not be forced to make regular payments and can
enjoy a valuable product at little or no expense,
all of which increases the collection costs, which
are very high now.
"On long-time credits the dealer has to reckon
particularly with the expense of collection, be-
cause that is his largest expense. It is recog-
nized that if piano terms generally could be
brought within reasonable limits it would me^an
a material saving in overhead expense and per-
mit of lower selling prices, which naturally would
mean a larger volume of turnover and propor-
tionately larger profits. It is my belief, based
upon experience, that all piano accounts should
be cleaned up within a year, that the first pay-
ment should amount to at least 25 per cent of
the cost of the instrument, and that the balance
should be divided into equal monthly payments
not exceeding ten or eleven. The automobile
dealers have demonstrated the fact that this
basis of payment may be established and main-
tained on their products, which, in the main, call
for a greater outlay of cash than do pianos.
"The great trouble between the piano dealer
and the banker is that when the dealer seeks to
secure loans with his instalment paper as col-
lateral he finds that paper not desirable for a
bank, for in the majority of cases he has actually
asked the bank to make an investment rather
than a loan. The function of the bank is to have
its assets in such condition that it can meet the
demands of its customers for current loans and
have a sufficient amount on hand to meet the
peak of demand at certain times during the year.
The ordinary piano paper cannot be considered
by the bank for the reason that it is not liquid
and serves to tie up the bank's money as an in-
vestment for a long term, frequently running
into several years.
"The trouble is not with the quality of piano
paper, but rather with the length of the terms.
I have been called upon on several occasions to
liquidate piano paper and have found that it
may be expected to pay out lOO per cent if the
collections are followed with a polite persistency.
Bankers generally have had this experience, but,
unfortunately, perhaps, for the trade, are not in
the collection business.
"I believe that a more liberal use of trade ac-
ceptances, whereby the dealers would make the
manufacturers that form of payment, would
greatly help the industry and put it on a sounder
credit basis, provided the trade acceptances were
not given in any other manner or for any other
reason than that for which they are supposed to
be given. By that I mean they should not be
given for past due accounts, renewals accepted,
etc., but simply in payment of the original in-
voice on terms to be agreed upon."
Regarding the general national business situa-
tion, Mr. Bower held to the opinion that the
present work of liquidation on the part of the
banks was calculated to benefit business mate-
rially. He said:
"Money is not going to be very cheap for any
length of time, but is likely to find a higher level
shortly. There is no occasion to be overoptimistic
regarding great business developments during
the coming year, but it is certain that industry
generally is getting back on its feet slowly but
surely, and the gradual liquidation "being carried
on is calculated to put business on a sound basis
and open the way for healthy expansion. The
progress of liquidation is evidenced in the ten-
dency of commodity prices to rise again to a
sound level, although I do not expect the in-
crease will amount to more than 10 or 25 per
cent. This is a natural reaction and is to be
considered healthy rather than otherwise."
Carl D. and Roberty L. Laverty are continu-
ing the business of the Laverty Music Co., at
Gadsen and Talladega, which was founded in
1888 by their father, John S. Laverty, who died
recently.
THE OUTLOOK FOR THE COMING YEAR
{Continued from page 3)
to note that, though having been weaned by necessity from the credit evils of pre-war days, many retailers
have forgotten their lesson and have again permitted themselves to be entangled in the meshes of long
instalment contracts.
Although money is easier, bankers are apparently not in the frame of mind to make long-time in-
vestments in piano paper, and for them to make loans with the average piano instalment paper as col-
lateral means that they are becoming partners with piano merchants for several years at least. A promi-
nent banker stated recently that piano paper was good paper and paid out IOO per cent in the final analysis.
The trouble is that it takes too long to pay out.
Taking all the various factors into consideration, it is not expected that there will be any great
volume of business for the first few months of next year, although it is the general opinion that the busi-
ness totals will measure up considerably better than those for the first six months of 1921. If, as is ex-
pected, the general movement of liquidation and readjustment is completed by the Summer, then the music
industry will come into its own in the Fall and get back to a normal, healthy business basis calculated to
continue indefinitely.
A normal business basis does not mean the inflated demands that were enjoyed during the war
period and immediately thereafter. It means an average of business that will keep the wheels of industry
turning steadily and keep the goods moving through the retail channels and into the homes at a rate that
means turnover and profits.
Last year we offered as a slogan for the coming twelve months: "Work hard, move fast and watch
your step." It seems that the same slogan stands good for 1922.