The document summarizes information about the global musical instrument market and related topics such as deforestation and climate change. It notes that while the musical instrument market was once considered "recession proof", the global economic downturn in 2008-2009 caused a significant 13.7% decline in sales. It also discusses concerns about deforestation reducing supplies of rare tonewoods used to make instruments and explores sustainable alternatives. The US represents the largest market at 40.5% of global sales but markets in India and China are growing. Deforestation is reducing forests worldwide which store carbon and harbor biodiversity.

1. The Interrelationship of The Global Musical Instrument Market, the Scarcity of Tonewoods, Climate Change and NFC’s.TONIC Joensuu, Finland 14-16 September 2011

2. The Global Musical Instrument Market “Recession proof” at one time. No longer – video games, etc. From 2008 to 2009 world economy down 2.4% World “M.I.” down from 13.8%; $17.5 billion (€12.1; £10.6) to $15.1 billion (€10.4; £9.15) School Music

3. MUSICAL INSTRUMENTS Electronic & Acoustic Guitars Violin Family Stringed Instruments Strings for the Above Woodwinds Brass winds Keyboards Percussion Sound Reinforcement Studio Audio Software Computer Peripherals Printed Music Accessories

4. GLOBAL MUSIC PRODUCT SALES 2009 $15.1, €104, £9.43 Billion 2008 17.5, 12.1, 10.9 2007 18.2, 12.6, 11.4 2006 18.2, 12.6, 11.4 2005 17.8, 12.3, 11.1 2004 17.0, 11.7, 10.6 2003 16.6, 11.4, 10.4

5. THE WORLD ECONOMY In 2009, world economy shrunk by 2.4% Worldwide MI sales down 13.7% Largest decline EVER! (2010 world number available in 2011.)

6. MARKET SIZES US – 40.5% of the World Market 2010 - $6.392, €4.4, £3.99 Billion 2009 – 5.91, 3.17, 3.7 Guitar Center (WWBW, MF) Most of US Volume is fretted 2010 $1.43, €.98, £.89 Billion 2.4 million units 2009 991, 683, 619 million 2.3 2008 1.216, .838, .760 2.8

7. THE TOP 7 MARKETS IN THE WORLD US 2009 - $5.9, €4.1, £3.7 Billion 2008 - 7.13, 4.91, 4.5 -17.5% JAPAN 2009 – 2.1; 2008 2.55 -16.8 GERMANY 2009 – 989 million 2008 – 1.089 billion -8.8 CHINA 2009 - 933 million 2008 - 931 -.2 FRANCE 2009 - 718 million 2008 – 775 -7.4 CANADA 2009 – 660 2008 – 776 -14.9 UK 2009 – 628 2008 – 805 -22

8. SALES BY AREA - 2009 North America $6.6 billion -17% Central America 154 million -11 South America 331 -.1 Europe 4.04 billion -12 Asia 3.73 -11 Australia 329 million -6

9. FINLAND’S M I SALES 2009 $68.8 million, €47.4 million,£43 million Down 8.1% from 2008 $13.10 (€9.00, £8.20) per capita .5% of Global Market Median age: 42.3 Market Rank: 25 (114th “largest” country) World Economic Rank: 15 (2009)

10. CHINA- 2009 $933, €643, £583 million $.79, €.54, £.49 per capita Large, wealthy middle class, BUT…

11. SOURCES World Trade Organization Public Company Filings The Global Report doe not include the Middle East, large parts of Central Asia, and Africa; there are no clearly defined distribution networks in these areas. Volumes are small.

12. THE BEST PERFORMING MARKETS IN 2009 India +4.4% $66, €45.5, £41.25 million Brazil +1.1 209, 144, 131 China +.2 933, 643.4, 583 Argentina -.07 84, 58, 52.5 Poland -3 47.1, 32.5, 29.4

13. WORST PERFORMERS - 2009 Greece -27.6% $25, €17.2, £15.6 million Ireland -24.4 27.2, 18.8, 17 *UK -22 627.5, 432.8, 392.2 *Russia -17.8 197.7, 136.3, 123.6 *US -17.2 5.9, 4.06, 3.68 billion

14. WORLD’S LARGEST M I, AUDIO COMPANIES & DISTRIBUTORS -2009 Yamaha $4.322, €2.981, £2.701 billion Roland 921, 635, 576 million Kawai 688, 474, 430 Fender 601, 414, 430 Harman 493, 340, 308 Sennheiser 452, 312, 283 Shure 395, 272, 247 Steinway 306, 211, 191 Gibson 287, 198, 179 KHS/Music 279, 192, 174

15. CHINA’S FACTORIES… Many closed in 2009 Inefficient, rising labor & operating costs May cause shortages in future So far (I) haven’t noticed any Delivery times longer, depending on segment Prices increasing at an alarming rate (20-60%)

16. INTERESTING STATISTICS Not everyone can live like an American/W European! M I prices have dropped in past several years US & Canada spent $19 (€13,10, £11.90) per capita; India spent $.06, €.04, £.03 !! Obviously, the higher the GNP, the more spent on M I Median Age in US, eg, is 36.8 vs 37.2 Worldwide – Older = Smaller Market!

17. MORE INTERESTING STATISTICS US has high GNP/Capita, this & age = good market Europe’s low birth rate = graying population, less MI bought English speakers represent only 10% of world population, but… In every country polled, the guitar is the most popular instrument; same top 5 brands same in most countries

18. EVEN MORE INTERESTING STATISTICS Global M I sales represent a potent argument for the benefits of free trade… Top 225 M I Firms (MI,Audio,Distributors) account for $18,308,836,565, €16,626,783,837, £11,443,022,855) Employ 121,405 worldwide Top 225: 157 (69%) are manufacturers; 50 (22%) distributors, 10 (4%) distributor/retailers, and 6 (2%) are publishers. Countries with more than 10 of the 225: US (79), Japan (27), China (25), Germany (16), Taiwan (10)

19. ARE WE THERE YET?(MORE STATS) Every 225 company does business with at least one other 225 company Many of the 225 do business outside of the MI industry: Yamaha makes bathtubs!! A lot of the volume is counted twice: e.g., Remo heads appear on other company’s products, Gold Peak Electronics, D’Addario… A GLOBAL MARKET ALLOWS FOR GREATER PRODUCTION VOLUMES; BETTER VALUE FOR THE END USER.

20. CHINA’S STRINGED INSTRUMENT OUTPUT - 2010 STRINGED INSTRUMENTS (VIOLIN FAMILY): Violin/Viola 808,808 (92%) Cello 48,477 (5.5) Double bass 24,638 (2.8) Other (?) 52,771 Total 934,694 770,784 (82.5%) Exported Above numbers are from 9 factories

21. CHINA’S 2010 GUITAR PRODUCTION Acoustic 3,977,243 (83%) Electric 669,436 (14%) Other (?) 89,365 (1%) Exported 4,001,940 or 84.5% of total (Electric numbers seem low to me. Indonesia?) Source: China Music Instrument(s) Association

22. DEFORESTATION What is deforestation? At one time, almost 1/2 of the US, ¾ of Canada, ½ of Europe, the Plains of the Levant (Mideast) were forested! Every year an area the size of Panama (29,340 square miles, 75,991 square kilometers disappear! Some experts believe, at this rate, there may be no trees in 20, 30 or 100 years! Perfect example is Easter Island. The World Resources Institute estimates that only about 22% of the world’s old growth forest remains intact. Today forests cover more than ¼ of the world’s total land area

23. Deforestation For millennia humankind has influenced the forests, impact was minor Today, the impact is enormous! Regrown forests differ in structure & composition from their predecessors. Spruce

26. THE IMPORTANCE OF FORESTS Provide wood for cooking Building materials Furniture, paper, cartons Non-Wood: bark, dyes, fibers, gums, incense, latexes, oils, resins, shellac, tanning compounds & waxes Food: Fruit, nuts, berries, Maple syrup! Influence the climate

27. FORESTS HARBOR TREMENDOUS BIOLOGICAL DIVERSITY New crop varieties & medicines Less than 1% of tropical plants have been screened for drug use! Tropical deforestation contributes up to 90% of the current net release of biotic CO2 into the atmosphere. Recent estimate says that tropical forests are disappearing at the rate of 38,600 square miles/year.

28. LOSS OF FORESTS Tropical forests once occupied 6,177,600 square miles; only about half remain It’s estimated that Latin America and Asia have already lost 40% of their original forests Africa has lost more than half (except the Congo) Some areas of the Amazon basin are largely intact.

29. FOREST MANAGEMENT & RECOVERY Deforestation has slowed over the last 10 years Still 19,730 square miles a year is destroyed. (These numbers vary, but situation is serious.) More forests are designated for conservation. Ambitious tree planting in China, India, US and Vietnam + natural expansion has added 7 million hectares (2.8 million acres)

30. CLIMATE CHANGE World’s forests play an important part in climate change mitigation. Forests store a vast amount of carbon; when cut, the carbon is released back into the atmosphere

31. MUSICAL INSTRUMENT WOODS Account for less than 5% of world consumption Many tonewoods are impossible or very difficult to find: Pernambuco (Brazil got its name from the tree!), Brazilian Rosewood, ebony With proper harvesting , a steady supply is possible. With humankind being what it is, we must be ready with sustainable substitutes! There are alternate woods, but cell structure doesn’t lend itself to good sound; low end instruments.

32. ALTERNATIVE WOODS Nyatoh: a non-threatened hardwood; necks Paulownia: sub for mahogany, grows from sustainable root stock; large leaves gobble up CO2 Sonokeling: fingerboards; species of rosewood All above can be sustainably farmed on plantations. (Some already are.) Bamboo?

33. THANK YOU VERY MUCH! Neil Lilien RS Berkeley Musical Instruments/USA