With more than $1 billion in outstanding loans, and annual guitar sales plunging from 1.5 million to 1 million in 2017, Guitar Center faces a potential bankruptcy. Having just dodged an S&P (rating agency) score of ‘CCC—’, which indicates a serious risk, Guitar Center took part in an emergency loan renegotiation that involves debt mounting over $615 million.
“All of today’s rating actions are in response to the closing of an exchange offer that was announced by Guitar Center this past March,” wrote Keith Foley, Senior Vice President of the bond credit rating agency, Moody's. Despite not considering Guitar Center to be in default, “the rating outlook remains negative,” the agency stated.
With annual sales falling just below the million mark, as claimed by the Washington Post, an economic downturn, or any other serious blow could mean a crisis for Guitar Center. Earlier this year, analysts pointed to an imminent financial disaster for Gibson Guitars, who is anticipated to begin a bankruptcy this summer.
The status of rock music has been in jeopardy for some time, especially now that rap music has toppled it as the most popular genre; this could be due to changing trends and technology, but one must also consider that executives in the music industry still have control over what type of music they allow the public access to. Independent rock musicians have more opportunities than ever before to be heard by the listeners, however, to reach the ears of the majority, musicians must still appease the gate keepers. And right now, rap and pop are the kinds of sounds they are pushing.
It appears that in order for guitar based companies to thrive in the new market, they must be willing to appeal to genres outside of rock, as well as create new technology in order to stand out in an electronically dominated music world. With the advent of social media and influencer fame, it would suit businesses such as Guitar Center, or even, Gibson Guitars, to consider redeveloping their tightly sealed endorsement deals and pro account options; these types of advertisement opportunities have typically been available only to a select few, and what now are considered to be "the aging rockstars of yesteryear." Allowing fresh, new faces to represent their brands, would show off their products to a younger generation thus opening up the potential for greater sales. If Guitar Center wants the chance to weather the storm of potential bankruptcy, it needs to captivate the untapped market.