Sennheiser Brothers Discuss The Future Without Their Consumer Business

Family businesses can be a hotbed of sibling rivalry and a battlefield of arguments and egos. On the plus side, family businesses can be agile and quick to respond to rapidly changing markets. You can also say things to a family member that you may not necessarily be able to say to a colleague. There’s much to be said for a well-run family business.

I suspect brothers Daniel and Andreas Sennheiser – the joint CEOs of Sennheiser electronic GmbH & Co. KG – are nearly always in tune with each other because they appear to speak with one voice when it comes to the future of one of the world’s best-known audio brands. The German company that was founded back in 1945 by Prof Dr. Fritz Sennheiser is still an independent family business and the brothers are the third generation of the family to run the company.

Until its recent reorganization, Sennheiser employed 2,450 people worldwide and in 2020 had a turnover of €573.5m. It may be a family business but it’s no small player in the world of audio and, like many of Germany’s Mittelstand companies, Sennheiser has a laser-like focus on engineering and advanced technology that’s made it a world leader in professional audio.

Recently, I joined the two brothers for an exclusive interview for Forbes. Daniel is the elder by a year and has a background in design and marketing. His career has involved working for a variety of agencies and blue-chip FMCG concerns including Procter & Gamble. In 2008, Daniel joined Sennheiser and set up the company’s strategic innovation department.

Younger brother Andreas studied Management and Production at the Swiss Federal Institute of Technology (ETHZ) in Zurich, with a focus on Electrical Engineering and Logistics. Andreas gained his doctorate in 2004, four years after graduating before going on to work for Hilti AG before joining Sennheiser in 2010 where he was responsible for the company’s lean management and strategic supply chain design.

It was in 2013 that the two brothers were appointed joint CEOs of Sennheiser and began planning the long-term strategy for the company. During our interview, Daniel and Andreas set out the rationale behind their recent decision to sell the consumer business and license the brand to the giant Swiss hearing-aid and audio company Sonova AG.

The announcement that Sennheiser was selling off its most visible division came as something of a shock to the consumer audio industry when it was announced last year. Why was the company pulling out of a market that has annual sales of $50bn? Would Sennheiser even be able to find a buyer without running the risk that the brand would be taken downmarket, ruining the family’s hard-won reputation for audio excellence?

The deal took around 24 months to complete from the original strategic decision to find a partner for the consumer business to the signing on the dotted line with Sonova. I wondered whether the idea of hiving off the consumer business was an emotional wrench for the two brothers after so many years in the market as a household name under their control.

Andreas was first to answer: “We concluded that we needed to focus on the pro divisions of the company. We reviewed our business strategy 24 months ago and found that there was growth potential for all four, but at the same time they were following different paths in different markets. Increasingly there was less cross-fertilization of technology between the consumer business and pro divisions.

“Our teams were becoming more specialized and the consumer business had different market dynamics. We looked at the opportunities for all four units and concluded that the independent family business was best placed to fund and develop the three pro divisions most effectively. Those are the divisions that have all the differentiation needed to bring on superior technology, deliver remarkable audio experiences and Sennheiser’s reputation for rock-solid reliability.”

The brothers found an interesting hybrid solution to their conundrum by finding a partner that was willing to work with them by licensing the brand for the consumer business rather than buying it outright. The deal required a lot of trust. If Sennheiser had sold out the consumer business to a consumer audio rival, it’s doubtful that such an arrangement would have worked. I wondered if that was because Sennheiser is a family-owned business and that’s what enabled the two brothers to weave such an artful and elegant solution?

Daniel responded first: “Yes. That’s exactly the point. We were not necessarily looking for the highest bidder but the best strategic and cultural match. And we believe that’s what we found with Sonova. In the end, time will tell whether it was the right decision for us. We didn’t take it lightly. We looked at this move very carefully with consideration for the brand, the heritage and our family name. We believe it will be a very successful move and the exciting part is that we can now focus on the pro side of the business which is where we believe we can make a bigger impact with the competencies we have on board.

Andreas added: “We knew the consumer business had high-growth opportunities in a multibillion-euro market. However, we thought it would be better if it were attached to a larger company. It was purely from a business development perspective that we thought our consumer child would be better off under a new roof where it could grow and flourish. We decided that the three remaining pro areas of the business would be better off if we held onto them and put all our efforts into a strong growth strategy for them.”

Daniel then chipped in: “I think the consumer division is in good hands now. It was a risk but a good risk. It’s mostly run by the same team because we transferred more than 600 of our employees to Sonova AG. We trust those people will continue the business successfully, because we have worked with them for many years and know how passionate they are in what they do.

“When we were seeking a partner, we looked at several companies, but with Sonova we believe we chose the perfect company to work with. It’s not only what Sonova can get from us, but also how we can jointly strengthen the brand. Our two companies will jointly discuss the development of the Sennheiser brand while we will still own it. We licensed the name to Sonova and we will work as a true partnership. Both companies can win if we play it right. I believe that we have similar cultures with the same intention of cherishing the Sennheiser brand. Sonova also has a great track record for excellent audio quality and good brand building.”

Daniel and Andreas are now turning their considerable energies and talents to nurturing the remainder of the Sennheiser business which consists of the three divisions. The professional audio division produces equipment for touring, broadcasting and theater use like wireless and wired microphones. Then there’s the business communications division which is increasingly important in the world of hybrid working and teleconferencing. Finally, there’s the Neumann microphones business in Berlin, perhaps the brightest jewel in Sennheiser’s corporate crown.

Sennheiser acquired Neumann back in 1991 when it was probably the most high-profile brand acquisition the company had ever made. Neumann is the last word in high-end studio microphones and its products have a legendary reputation with sound engineers all over the world. Countless platinum-selling albums have been created in some of the world’s best recording studios using Neumann microphones. The brand is the Rolls-Royce of studio microphones and the brothers have now taken the business further by producing specialist instrument microphones and speakers for recording studios. Currently, Neumann makes up around 20% of Sennheiser’s turnover but this should increase with the ambitious plans the brothers have for the brand.

Daniel describes the company’s remaining divisions as being like a string of pearls in an audio necklace. The company has a reputation for producing products of the very highest audio standards. I can see why Daniel and Andreas felt the need to concentrate on undertaking advanced research into emerging audio applications. Perhaps the consumer division had become a distraction and was taking up too much of the brothers’ time; time that could be better spent focusing on the company’s core DNA of advanced audio research and development.

Andreas explained: “In our Business Communications division we make microphones for meetings and they are also used widely in higher education. We want to be present in the world’s meeting rooms. For example, our Team Connect Ceiling 2 microphone can be installed in ceilings and will follow a speaker around a room using beamforming. Sennheiser microphones are used in many lecture theaters around the world. With the development of dynamic classrooms and virtual and hybrid teaching, microphones must deliver the clearest possible sound to students studying remotely. We also have microphones that provide assistive listening for people with hearing difficulties in live environments, products such as our Mobile Connect system.

“Our microphones offer a different level of quality compared to the all-in-one teleconferencing products like video bars. That’s the real difference that we bring to the table. We can integrate our products by working with integrators so they can create and design the best meeting rooms possible. This requires a different skillset and we are truly agnostic when it comes to different systems. Sennheiser works with many different manufacturers and we have developed APIs that can connect our equipment to Crestron systems as well as Team and Zoom-certified solutions. We can play with everyone because we only really care about the quality of the audio experience.”

When it comes to Pro Audio, Sennheiser has held on to a few of its classic headphone models like the iconic HD 25 beloved by many DJs. The company also continues to make the very best wired, wireless and instrument microphones for entertainment and broadcasting applications. Sennheiser plans to consolidate its strong position in the global market by continuing to win over customers in the Live and Broadcasting business with reliable audio solutions and first-class sound quality. In addition, the audio specialist aims to develop corresponding software solutions for optimal workflows for these applications.

The company has also invested heavily in AMBEO 3D Audio, a spatial sound technology aimed at VR applications. Sennheiser has been recording 9.1 music since 2010 and has developed an algorithm that can create 9.1 music from conventional stereo recordings. Spatial sound is a rapidly developing market with plenty of competition from the likes of Dolby Atmos which is now available on Apple Music with spatial music mixes. The first AMBEO product, the AMBEO VR Mic for professional VR/AR/XR sound recording was introduced in 2016 and Sennheiser also created the first augmented audio listening accessory for Magic Leap’s AR/VR goggles, the AMBEO AR One.

I began my interview with Daniel and Andreas Sennheiser thinking that I would be talking to two brothers who had been forced to sell off the family silver in what is an incredibly competitive market. It turns out that nothing could be further from the truth. Instead, I encountered two brothers who had put an incredible amount of careful thought into developing a strategy that would deliver their consumer division into the care of a bigger partner that could develop great products for consumers in an incredibly fast-moving and fickle market. And they have done this while still protecting the reputation of the brand going forward.

I’m in no doubt that the brothers made the right decision and now they can direct their energies into the professional side of the business with its greater research needs and its higher financial returns which can fund more advanced research into the cutting-edge audio technologies that Sennheiser has always been known for.

I ended the interview by asking Andreas and Daniel where they thought Sennheiser would be in five years. Their answer was unequivocal: “There are a couple of streams that will matter in the next five years. One is immersive audio experiences, whether for conferencing or live productions. The 3D immersive experience is becoming increasingly important in live performances but it’s also important in hybrid situations using virtual reality. Another stream will be the integration of our meeting-room systems and microphones that we discussed earlier.

“The products that we bring to the market must be the pearls in any system. We want to make the best possible microphones with seamless integration with other systems. We want to focus on offering the best possible ingredients for the overall audio experience. With Neumann, we have a very clear strategy for producing more products for our professional customers. Neumann has already started producing specialist instrument microphones and studio monitors. We will be releasing more microphones for live performances soon.

“In the next five years, we will cover significantly more of the whole production stream for both live and studio productions. Sennheiser and Neumann brands will continue to stand for reliability, innovation and remarkable sound. That’s what Sennheiser stands for and in the next five years that will become even more important. We will do lots more development and continue to ‘over-invest’ in our development.”

I came away from my interview with the impression that these two thoughtful brothers had taken the right and difficult decision for their business. They are no longer bogged down with the short production cycles of the consumer audio market and can now turn their attention to developing the advanced audio technology of the future without the distraction of a consumer marketplace that’s as much about fashion as it is about audio technology. The future is looking bright right now for Sennheiser.