»Sennheiser has always stood for excellence in the field of audio and this is what we will continue to stand for in the future.«
2020 is an extraordinary year for Sennheiser: On the one hand the company celebrates its 75th anniversary, on the other hand the COVID-19 pandemic has turned the world upside down. What does that mean for you and how do you handle this?
Daniel Sennheiser: We are looking on this year with mixed feelings. We were looking forward to celebrating 75 years of Sennheiser with our employees, customers and partners but then the COVID-19 pandemic confronted us with a whole set of unprecedented challenges.
Andreas Sennheiser: We first felt the impact of the pandemic in China. We had to close our office there. Then we were faced with the task of maintaining our supply chains. Afterwards the turnover in the consumer business decreased due to the closure of bricks and mortar retail outlets worldwide. At the same time, the entire events industry has practically been brought to a standstill with the cancellation of almost all live events. We saw how the situation affected the entire world, continent by continent: first Asia, then Europe and then the USA. The effects of the pandemic are having a significant impact on our business performance this year – in the consumer as well as in the professional division. And we expect the COVID-19 crisis to have a negative impact on our turnover until next year.
Daniel Sennheiser: We must react to the changing conditions and new realities. This also means making decisions that are difficult for us but which are essential for the future of our company. Nevertheless, we are confident for the future and expect to emerge from these difficulties even stronger. In its history of 75 years, Sennheiser has achieved this several times.
How did Sennheiser handle the pandemic?
Andreas Sennheiser: We reacted very quickly. Within very short space of time almost all our employees worldwide were able to work from home. Our IT was prepared excellently and together we have learned a lot in the field of virtual work. Our employees set a strong example for our customers; they embodied our anniversary motto ‘This Is Your Crew’ by sharing photos of themselves working from home to demonstrate: that ‘no matter where we are, we keep going and provide audio solutions for you’.
Daniel Sennheiser: At the same time, many things changed in our markets suddenly. From the middle of March, we closed our stores to protect our employees’ and customers’ health. Worldwide, almost all concerts and events were canceled because of the event regulations. This hit many of our customers really hard, especially rental companies, but also content creators. If a rental company cannot use its products at events for several months, its existence is endangered. But the lockdown also led to many ideas and new creativity among musicians who started streaming living room concerts to their fans.
Andreas Sennheiser: Since the beginning of the COVID-19 pandemic we have tried to support our customers by giving musicians and other professionals a common platform on our social media channels. Together, we have created new formats with the hashtags #DontStopTheMusic, #DontStopTheEducation or #AtHomeWithNeumann. Some of these ideas are likely to live on after the COVID-19 pandemic because we expect long-term changes for the future due to the current situation of the industry. But we are all looking forward to the next live concerts, of course, this simply is something different.
To what extent does Sennheiser feel the economic impact of the COVID-19 pandemic?
Daniel Sennheiser: We feel the effects significantly, in the consumer as well as the professional division. Sales in the headphone market have declined by 30 to 40 percent in recent months. This is of course due to closed stores in many countries, but also to the very cautious purchase behavior of consumers in general.
Andreas Sennheiser: Some of our pro audio customers are heavily affected and for the long term. We expect the concert and event industry to recover slowly. The only exceptions of this development are the studio microphones from Neumann that exceeded our expectations. This is driven by the fact that many people currently equip their home office or home studio. In total, we see massive effects of the COVID-19 pandemic on our business. Therefore, we have had to take various measures to reduce costs and had to introduce reduced working hours. Nevertheless, we do not expect positive results for 2020.
»We will overcome this challenge.
As a family-owned company we act for the long term.«
What do times like these mean to you as a family-owned company?
Andreas Sennheiser: Through our 75-year history and three generations as a family business, we have overcome difficult situations several times. To manage these issues successfully and to emerge even stronger, we had to take on new perspectives, align with new realities and transform the company. This is another such moment.
Daniel Sennheiser: We will overcome this challenge. As a family-owned company we act for the long term. We take measures to set the course for the future. This also means making difficult decisions. And the most difficult decisions are always the ones that involve our employees. The Sennheiser team behind our products and audio experiences.
Andreas Sennheiser: Over the next two years, we will need to continually reduce the size of our workforce across the company – especially in central functions such as Supply Chain and Operations. Decisions like these are very hard. Our employees have done excellent work with high motivation and great commitment for years. And yet now, we must part with employees to align our organization with the new requirements. This is difficult for us and we deeply regret having to take this step.
Daniel Sennheiser: We are a family-owned company which of course corresponds with a responsibility for every single employee. Therefore, the reduction is to be implemented in the most socially responsible manner possible, and here in Germany more detailed plans are currently being discussed with the Sennheiser works council. For example, we are planning not to fill open positions and to offer opportunities for partial and early retirement as well as a voluntary redundancy scheme and severance packages. It is important to us to primarily avoid redundancies for operational reasons and to find individual solutions together with the employees.
»Our employees have done excellent work with high motivation and great commitment for years. And yet now, we must part with employees to align our organization with the new requirements. This is difficult for us and we deeply regret having to take this step.«
How will you position the company in the future?
Andreas Sennheiser: We will continue to focus on our core competencies and further strengthen both our consumer and professional divisions. We will invest in a dedicated sales team for the different product segments and also in the development of new products. By doing so, we increase the independence of the divisions and transfer operational responsibilities completely to these two business areas. Sennheiser has always stood for excellence in the field of audio and this is what we will continue to stand for in the future.
Daniel Sennheiser: Excellent sound is what differentiates Sennheiser. Of course, it is also crucial that our products are ‘smart and connected’ and that they can seamlessly be integrated in various digital ecosystems. But the big difference is and remains the Sennheiser sound.
You are co-CEOs with equal rights. How do you manage the company together?
Andreas Sennheiser: We have the great advantage of being two. This allows us to exchange and to look on things from different perspectives. Whether it is a structural, investment, or staffing consideration – we always have the opportunity to evaluate these from different perspectives and then make a joint decision.
Daniel Sennheiser: It is important for us to communicate with our employees as openly and transparently as possible. Even if this means that we have to face critical questions. We always want all the steps we take to be understandable. Such communication is particularly important in times of a pandemic, of course. Currently, we therefore regularly inform our employees of the latest updates by video. This is our way to also reach them directly when working from home.
We talked a lot about the current situation so far. Let’s have a look at the past fiscal year. How did it go for Sennheiser in 2019?
Daniel Sennheiser: We were able to achieve a slight increase in turnover; in earnings before interest and taxes (EBIT), on the other hand, we see a decline for which the consumer business is primarily responsible. The circumstances in this market changed drastically in recent years: many large competitors with other business models have accelerated the dynamics across the entire headphone market. On the other hand, the professional business has developed very positively regarding both turnover and earnings. The growth was significantly above market average and exceeded our expectations.
2020 is your anniversary year. A good occasion to look at your history. Your grandfather Fritz Sennheiser founded the company 75 years ago. How did it all start?
Daniel Sennheiser: Sennheiser emerged from a crisis, actually. After the end of World War II our grandfather sat in a farmhouse here in Wedemark near Hanover. He and his fifteen colleagues moved here with Institute of Vibration Engineering and they had to think about how to feed their families. As they did not receive money for research any longer, they started building measuring devices such as voltmeters from the available materials. Soon they also built microphones because the institute of vibration engineering naturally had to deal with all kind of waves, including sound waves. Our grandfather and his colleagues gained a good reputation by developing the microphone ever further and this is where our professional business originated. Already in the 1950s, the first wireless microphones were offered which are the standard on all stages nowadays. The team was not only familiar with acoustic vibrations but also with transmission by radio waves.
Andreas Sennheiser: In the 1960s, Sennheiser revolutionized the product segment of headphones with the HD 414. This was a whole new field back then because the market for music headphones as we know it today did not yet exist. Sennheiser launched new, disruptive solutions time and again that changed the world of the audio industry – for example the shotgun microphone, the Digital 9000 microphone system, the electro static headphones Orpheus in the 1990s or its successor, the HE1, which we presented in 2015 and which are still the best headphones in the world. Innovation is not only part of our past but also of our present. Our new solutions for the hearing impaired are an example of this. They enable them to take part in lectures at universities using their own mobile phone. We use the basic technology of audio streaming to open up new product segments and fields of application.
Sennheiser has been active in the audio industry since its foundation in 1945 and has helped shape it. How has the industry changed?
Andreas Sennheiser: The customer applications have changed very much. At the beginning, there were stereo hi-fi systems with cables, in the 1980s listening to music became mobile with the Walkman – at this time, this was only possible because of Sennheiser’s invention of open headphones. iPods and smartphones brought the second wave of mobility. Now we have the third wave where everything is only connected via Bluetooth and software plays a crucial role. Currently, this is visible in the boom of true wireless models.
Daniel Sennheiser: In all this, AMBEO is a major milestone for us. This is not a product but a 3D audio technology program in which we brought together many research projects in the fields of room acoustics, sound sources and formats as well as propagation of sound in the room. The goal is to experience sound like in reality. Meanwhile Sennheiser has an entire product portfolio of recording devices, software and playback devices from headphones to the AMBEO Soundbar that we launched last year. In the automotive sector, we also presented an all-new solution for immersive listening pleasure in cars together with Continental.
How will the audio industry develop in the future? Which role will Sennheiser play in your opinion?
Andreas Sennheiser: The audio world will be a lot about object-based formats in the future. This means that we place audio objects virtually in a room and rely less on predefined formats. Instead, we think about how sound in the room adapts to the situation. This is relevant in the field of music and also in other application fields such as virtual meetings. While working from home in the past weeks, many of us have realized that several hours of virtual meetings and phone conferences with up to 20 participants can be exhausting. In this context, our AMBEO technology helps to place different speakers virtually in a room which can make the meeting experience much more comfortable.
Daniel Sennheiser: Such projects require an openness to partnerships. We have always developed new solutions together with our clients and partners and we want to continue to do so. We want to offer innovative solutions so that our customers can express their creativity in the best possible way. And we want to create unique listening experiences. Sennheiser remains ‘The Future of Audio‘.