Another company that is banking on revenues from music but uses a completely different approach is Singing Machine Company Inc (SMDM). The company was in Las Vegas for the 2013 Consumer Electronics Tradeshow, where the company unveiled its new karaoke product line for 2013.
More than just another karaoke system, the company showcased a working demo of “Home” at CES, featuring wireless Bluetooth speakers, WiFi connectivity, and a direct connection to a digital streaming karaoke service providing access to over 10,000 karaoke songs. “Home” is the first all-digital karaoke system that provides instant access to high-quality lyrics against the backdrop of full-color high definition video on your TV set to make “Home” the hub of any entertainment in the home. The company intends to start shipping the Singing Machine “Home” this fall. This machine was designed to counter the fact that traditionally, home karaoke machines depended on physical CDs which no one is buying anymore. This difficulty has been overcome by introducing a streaming karaoke service on machines that connect to the Internet.
The announcement of the Singing Machine “Home” system comes on the back of a strong holiday season. Third quarter net sales reached $16.6 million, up from $8.7 million in the same quarter of 2011. This marks a whopping 90% increase year-over-year. The increase in sales came from being the exclusive karaoke hardware vendor at a large “big-box” retailer this past holiday season. The company also cited a record setting quarter for its e-commerce business, where online sales volume jumped over 145% compared to the same quarter in 2011.
The Singing Machine Company has had problems in the past and has been in and out of bankruptcy since the early 2000’s. Five years ago, it posted a loss of $3 million but now has a competent and stable management team. Its parent, Starlight, has been providing financial support in the past by shipping new products on open terms. The company’s debt peaked at $5.7 million in 2011, but growing revenues have enabled the company to pay its debt down to $4.3 million in 2012, which was the first profitable year in a long time. The growth in revenues and profits should give the company a much more comfortable cash position, with a continuing reduction in debt during 2013.
In fiscal 2012, the company posted a profit of almost $600,000 and increased sales by 30%. The growth in sales was because of new distribution channels such as Target Corporation (NYSE:TGT), into BJ’s Wholesale Club Wholesale Club and expenses were in line with slightly improved margins. Online sales on Amazon and Wal-Mart Stores, Inc. (NYSE:WMT) took off and as much business was done online as with a couple of Toys R Us stores. With all these developments, the company now has a good story to tell and has turned around from its earlier misfortunes.
The article Will These Musically Inclined Stocks Hit Higher Notes In 2013? originally appeared on Fool.com and is written by Maxwell Fisher.
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