By Greg Gagliano

Copyright 1999, 20th Century Guitar Magazine.

Most vintage enthusiasts and collectors know that 1965 and 1966 were boom years for guitars. The number of guitars sold peaked during these years and finding a '65 Fender Jaguar or '66 Gretsch Tennessean are no problem since there were many of these made in those years. But what about guitars from '67? Guitars from this year seem to be less common, though not for all models (Fender Telecaster) or brands (Gretsch). In general, we can attribute the boom to the rise in popularity of the electric guitar catalyzed by rock and roll, but chiefly due to the British Invasion of 1964.

Now for some background information. Within the music industry, the electric guitar, and guitars in general, were not thought to be popular compared to keyboards (piano, organ, accordion) and band instruments. In 1963, 700,000 guitars were sold. An editorial in a 1964 issue of Musical Merchandise Review cautioned dealers to "hedge themselves in the event of a decline in the guitar market." Well, that turned out to be a false alarm, didn't it! The industry sold about 1.1 million guitars in 1964 alone!

According to information from August 1965 issue of The Music Trades, the popularity of the guitar was "still very definitely increasing in magnificent leaps and bounds." So much so, according to The Music Trades, that dealers were having trouble getting guitars to sell. Despite the backorders, 1.5 million guitars were sold in 1965 (Piano Trade Magazine, June 15, 1967).

The market showed signs of leveling off, probably due to manufacturers stepping up production to finally catch up and surpass demand. In 1966, a little over 1.4 million guitars were sold which included nearly half a million imports (I wonder how many of the half million were Hofner Beatle Basses?). The slight drop in guitars sold was attributed to the decrease in student model imports. But then came 1967 and sales were down markedly due to over-saturation of the market.

Can that crash repeat itself? According to several dealers I've spoken to, it’s already happening!

What is happening with electric guitar industry is somewhat complex, but the main factor seems to be that the guitar manufacturers have simply over-produced. They have put far more electric guitars into the marketplace than the present demand for the guitars will bear.

However, as a result of the overbuilding, the street prices of electric guitars have fallen dramatically. For the consumer this is a very positive thing in general. For small music stores it is a disaster. Small music stores survived by selling an electric guitar or two at a 30% margin. The extra profit paid their bills. That margin has dropped for them. The guitars stay longer on their shelves. Plus, there is a true critical mass of investment in the guitars before the dealer can create a local market for the guitars.

Another factor is that large manufacturers began cutting deals with "supermarket" stores like Mars and Guitar Center. That merely increased the supply over the demand and reduced the sales of electric guitars by smaller dealers. Mail order and even the internet further exacerbated this problem. Virtually every small dealer is feeling the effects of these market forces. The first places smaller dealers tend to cut are the guitar brands that do less advertising (generally small makers such as G&L). For the consumer, we'll probably see fewer music stores, but the stores that exist will be relatively large. It will also mean that more buying (and selling) will be conducted over the internet rather than transactions actually being conducted in-person in a music store.

Yet another factor is foreign guitar quality. The Koreans just keep making better guitars and the prices get lower. Mexican-made Fenders are much better than those made just a few years ago. This may hurt sales of US-made guitars though the companies will still be selling lots of guitars and generating profits.

Next we need to look at the consumers themselves. Baby Boomers are beginning to outgrow electric guitars. The Boomers had disposable income and tried to recapture their teen years by buying their dream guitar(s). This fueled the vintage and reissue markets which began in earnest in the mid-1980s, peaked in the early to mid-1990s, and now is clearly on the downside. The supply of vintage guitars will continue to increase and the demand will continue to drop as aging Baby Boomers sell off their guitar collections in preparation for their impending retirements.

Conversely, the cohort known as "Generation X" represents a lesser market and it's easier to saturate this market with sheer numbers of guitars given the smaller number of potential buyers in this class. Plus these buyers aren't "nostalgia driven" and, therefore, they have much less interest in vintage or reissue guitars.

And for the Generation X'ers, at least, the electric guitar is not the pre-eminent pop music instrument it was for Baby Boomers. In the 1950s, 60s and 70s, rock and pop music was guitar driven. With today's music, such as hip hop, DJ turntable rigs, sampler synths, keyboards, and drum machines are mainstays. Baby Boomers may be incredulous that a turntable (which we used to play our vinyl record albums) could be considered a musical instrument, but they need to remember that the accordion was once the premier popular instrument (yes, a lot of early to mid-Boomers actually took accordion lessons). And once the British Invasion started, you couldn't give away an accordion to a teenager. Granted, electric guitars will always be around, but it's clear that their role in pop music has been adjusted downward somewhat.

As mentioned previously, internet shopping has greatly influenced the current guitar market. Just a few years ago, guitar buyers would stop by every pawn shop and music store they could find until they found the guitar they wanted. Now potential buyers log on the internet and check dealer stock lists as well as auction sites such as eBay. Of course, the internet is a two-way street. It gives the consumer convenient accessibility, but it also gives the dealer access to distant buyers. A guitar that has been hanging around a dealer's shop for years unsold at $250 may quickly fetch $400 on the internet.

So how far will this decline go and how long will it take to bottom out? Nobody seems to know for sure, but right now the guitar makers are still churning out tons o' guitars. We'll have to wait until it looks as though they've cut production. After the "crash" in production in 1967, it took Fender about 2 years to recover and production didn't substantially increase until 1970. For now, however, the glut means great selection and generally low prices for buyers.

About the author: Greg Gagliano is author of the recently released "A Viewer's Glossary for Southern Italian and Sicilian Dialect Phrases and Naughty Words used in HBO's 'The Sopranos.'"  The glossary was written for Midwestern "madigans" who have absolutely no clue.