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Pioneer's exit from stereo components marks end of era

TOKYO -- Another renowned audio equipment brand will be forever silenced when Pioneer quits the business to focus on automotive gear, a result of waning demand for high-end audio components.

     The Japanese company announced Tuesday that its consumer audiovisual equipment business, which includes Blu-ray Disc players, will be spun off and integrated with Onkyo. It will also sell its DJ equipment business to U.S. investment fund Kohlberg Kravis Roberts.

     Although Pioneer will hold small stakes in both businesses, it is effectively withdrawing from the audiovisual equipment market. The company also revealed that it plans to eliminate 2,200 jobs, or roughly a tenth of its groupwide workforce.

     "This is the last chance for Pioneer to change," President Susumu Kotani said at a news conference. "We'll take on this challenge with indomitable resolve."

Decline of the "Big Three"

Pioneer's predecessor was established in 1938, a year after the founder developed a high-quality speaker, a rarity at that time in Japan. The company grew to become one of the three big players in Japan's audio equipment industry alongside amplifier manufacturer Sansui Electric and tuner maker Trio, which would later become Kenwood. During Japan's high-growth era, consumers yearned to have a stereo set in their living rooms.

     The three stayed at the top by steadfastly pursuing sound quality. But their presence weakened rapidly with the emergence of CDs, which triggered the shift from analog to digital recordings. The popularity of Sony's Walkman portable music player and affordable shelf stereos from various manufacturers also dealt a damaging blow.

     Nowadays, many consumers listen to music on their smartphones. The domestic audio equipment market shrank to 101.7 billion yen ($966 million) in 2013, less than a sixth of the peak of 662 billion yen in 1988.

     The two rivals have also suffered. Kenwood combined with Victor Co. of Japan, or JVC, to form JVC Kenwood in 2008, but the company continues to struggle due to the contracting market. Sansui tried to get back on its feet under the umbrella of a Hong Kong business group, but the Tokyo District Court ordered it to enter bankruptcy proceedings in July.

Missed opportunities

Pioneer had chances to make a comeback. The first was with the LaserDisc, a technology for storing high-quality video and audio on a single optical disc. Pioneer released the first domestic LaserDisc player in 1981, and the devices were popular in posh clubs and karaoke establishments across Japan. But the company became complacent as the industry leader and failed to adapt as karaoke machines switched to on-demand systems instead of music recorded on discs.

     In 1997, Pioneer debuted the world's first large-screen plasma television for consumers. It dominated the domestic market at one point, but eventually became embroiled in price competition with LCD TVs as technological advances made the production of large LCDs possible. In both cases, technological innovations doomed Pioneer.

     This time, however, Pioneer is restructuring its audiovisual equipment business to focus on car electronics, according to Kotani. He said that the company will boost direct sales to automakers, an area that has been weak, by drawing on the strength of its popular carrozzeria brand and the cloud computing technologies it acquired with car navigation systems. It is betting that automotive electronics will grow dramatically in the advent of the smart-car era.

     As car navigation systems and smartphones increasingly become intertwined, Pioneer has also been joining with major information technology companies. It will release car multimedia systems compatible with Apple CarPlay, which connects automotive equipment with iPhones, in the U.S. and Europe as early as this fall. It is also participating in a Google-led effort to develop auto information systems.

     Unlike in previous market shifts, Pioneer is poised to keep up with technological advances. Whether it can learn from past mistakes will determine its future.

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