Know Your Gear Podcast – Episode 431

The End of the Economy Brands
Host: Phillip McKnight
Date: September 26, 2025

Overview

This episode of the Know Your Gear Podcast centers on changes in the guitar industry, focusing on the rise and challenges of YouTuber-led guitar brands, the shifting economics of building a guitar company, and the declining position of traditional economy brands (like Squier and Epiphone) as new direct-to-consumer brands surge in quality and features. Phillip offers a deep dive into the financial realities of starting a guitar line, analyzes industry shakeups (notably with G&L and Fender/Gretsch), and fields listener questions about topics like fretboard wood, capos, and industry shifts.

Key Discussion Points & Insights

1. The Samurai Guitarist “Oterra” Launch: Lessons in YouTuber Guitar Brands

(00:00 – 1:01:30)

• Personal Connection and Brand Launches:

  • Phillip recounts his friendly history with Steve (Samurai Guitarist), sharing inside stories about industry events and offering context for being sent an Oterra prototype for review.
  • Notable anecdote: “Steve told me, ‘Hey, I’m starting a guitar and... I’m having Cortec make it.’ And I said, ‘Oh, funny enough, I’ll be at Cortec in a couple months...’” (04:20)

• YouTuber Leverage:

  • Large followings make selling limited runs (100 units) feasible; even with a small conversion rate, sell-outs are likely.
  • Brand launches by YouTubers rely heavily on reputation, personal relationships, and access to suppliers.

• Start-Up Costs & Process:

  • LLC/Business Formation: ~$500–$5,000 depending on whether you use an attorney (USA numbers; “no clue” about Canada).
  • Design Costs: Range from a “case of beer” up to $10,000 depending on who you hire, often trade favors.
  • Trademarking: Critical for names, logos, headstocks; thousands of dollars, varying if you DIY, use a paralegal, or an attorney.
  • Manufacturer Access: Getting a supplier like Cortec (who builds for major brands like Fender and PRS) is difficult for unknowns; YouTubers use personal connections and platform clout.

    “Cortec… they build for Fender, Ibanez, Squier... they’re not really looking for your 30-piece order or 100-piece order.” (27:40)

• Website/E-commerce: DIY can be cheap; professional setup could run $2,000–$10,000+.

• Prototypes: Expect ~$1,000 each.

• Logistics: Shipping, customs, and tariffs—especially variable post-2020 trade climate.

2. Crunching the Numbers: Is It Worth It?

(01:01:30 – 1:18:30)

• Profit Calculation (Hypothetical for Oterra):

  • Guitar retails at $1,299.
  • After accounting for margins, upfront business costs, taxes, shipping, and marketing, estimated real profit might be ~$28,000 on a 100-piece run.
  • Example: “He would make $57,200 on these guitars minus his attorney…website…design…After taxes, he would net $28,000.” (52:55)

• Industry Comparison:

  • “Anyone in the know…knows lesson programs and stuff you sell digitally are going to make way more money…than any guitar like this.”
  • Passion, not immense profit, motivates most indie guitar brands:

    "I can't imagine in any scenario that I can conjure up that he's not profitable first year...which is very impressive and very unique." (56:28)

• Risks of Scale and Financing:

  • Credit exposes founders to risk if inventory is slow to move; self-funding offers more flexibility but caps growth.

• Why Do It?

  • Brand-building, creative fulfillment, passion for gear/community—money is not the main motivator.

3. Current State of “Economy Brands” & Direct-to-Consumer Disruption

(01:18:30 – 2:15:00)

• Fade of Classic Economy Lines:

  • Squier, Epiphone, and similar brands, traditionally “economy,” have become “premium economy” as new budget brands (Firefly, Jet, Eart, etc.) undercut them on specs.
  • Analogy: “Toyota was an economy brand—now they’re premium. Squier/Epiphone are the Toyotas/Hondas now.”
  • Quote:

    “If you want a comparable or better product from a premium brand like Squier or Epiphone… it's minimum double the price.” (1:49:52)

• No-Name/Direct-to-Consumer Brands:

  • Amazon/e-retail brands offer high spec at exceedingly low prices to “wow” buyers. Better fretwork, woods, and hardware for the money—but support and longevity are uncertain.

• Big Retail Dynamics:

  • Major retailers avoid small brands—reasons range from risk to stability to existing relationships with big names.
  • Harley Benton/Thomann is cited as a rare exception—bucking the trend and successfully bringing affordable quality to mass market.

4. Small Dealer Challenges & Fender/Gretsch Inventory Frustrations

(2:15:00 – 2:44:00)

• Dealer Discontent:

  • Multiple small shops report inventory (e.g., the new Gretsch Synchromatic Falcon) being routed to Sweetwater, not available for them.
  • Phillip’s advice:

    “If you're a small dealer, you should stay the hell away from Fender. Same with Gibson. They're too big to care about you.” (2:27:41)

• Brand Power and the Wall Space Reality:

  • “Go into Guitar Center…figure out, those 10 brands you see—it’s really just two companies.”
  • Small dealers may fare better with used gear, repairs, or carrying unique/niche brands, not mainstream lines dominated by big box stores.

• The Shift in Value Proposition:

  • Today’s musicial instrument shop: success comes from unique experience, expertise, and value—not simply having “the big brands.”

5. Industry News and Financial Struggles

• G&L Furloughs:

  • Reports (unconfirmed but multi-sourced) that G&L has furloughed its entire staff.

    “G&L is a small company. I want them to survive…not be acquired.” (1:28:35)

  • Discussion of financial pressures industry-wide in 2025; warnings not to amplify rumors that could spook dealers and worsen struggles.

• Price Inflation & New Norms:

  • Chinese and Indonesian guitars now routinely breaking $1,500/$2,000 pricing.
  • “You’re going to see multiple guitar launches from multiple companies…with guitars made in China or Indonesia at $1,500, $2,000...That’s the new normal.” (2:21:06)

Listener Q&A: Notable Segments & Quick Hits

Capos & Fret Damage

(2:44:00)

• Occasional fret damage from heavy capo use, especially for singers/gigging players; tips include using appropriate tension, polishing frets, and coated strings.

  “Don’t leave it on all the time…Polish your frets when you re-string.” (2:45:38)

Fretboard Preferences

(2:42:00)

• Phillip’s favorite fretboard wood: rosewood, mostly for aesthetics and feel—“not for sonic reasons.”

Amp Reverb (Spring vs. Digital)

(2:59:00)

• Many amp makers now opt for digital reverb (parallel in the circuit, not affecting core tone).

  “I think digital reverb is a way to fix that...I would love it if Friedman came up with a digital reverb in the Small Box.” (3:04:23)

Notable Quotes & Moments

• On Passion vs. Profit in Guitar Companies:

  “This is not how you decide how you get your most money back…In fact, anyone in the know…knows lesson programs and stuff you sell digitally make way more money than any guitar like this.” (55:41)

• On the Community’s Appetite for Bold Designs:

  “This is the first YouTuber guitar brand that isn’t metal…kind of cool to see something not so metal, that appeals to a different demographic.” (1:02:45)

• On Small Dealers’ Survival:

  “If you’re not doing service, if you’re not doing used, I just don’t know how you combat that.” (2:38:32)

• On Changing Brand Roles:

  “There used to be a sign that said ‘brands make the store’—I don’t believe that’s true anymore…it’s really about the experience and information.” (2:41:14)

Timestamps by Topic

• 0:00 – 14:00: Oterra/Samurai Guitarist Backstory and Context
• 14:01 – 40:00: How to Start a Guitar Brand Step-by-Step and Common Misconceptions
• 40:01 – 1:18:00: Deep Dive: Guitar Brand Startup Cost/Detailed Profit Analysis/Realities of Manufacturing and Retail Margins
• 1:18:01 – 1:37:30: Broader Industry Lessons: Passion Over Profit; Risks; The Power (and Pitfalls) of Favors
• 1:37:31 – 2:15:00: State of “Economy” and Direct Brands; Firefly/Jet/Eart vs. Squier/Epiphone; Market Shifts
• 2:15:01 – 2:44:00: Fender/Gretsch Inventory Frustrations for Small Dealers; Advice for Surviving in a Market Dominated by Chain Stores
• 2:44:01 – 3:12:00: Q&A: Capos & Fret Damage, Fretboard Preferences, Amp Reverb, and general closing thoughts

Closing Thoughts

Phillip offered a combination of industry insider perspective and practical advice, providing valuable transparency about the economics of launching both a YouTube-based and traditional guitar brand. He underscores the challenges faced by small dealers, reaffirms his support for passion-driven projects, and neatly frames the current era as one of transition—where the lines between “economy,” “premium,” and “brand loyalty” are increasingly blurred.

For further discussion or specific questions on these topics, tune in to the full episode or check the channel for detailed deep-dive videos and reviews.

This summary skips advertisements, intros, and outros; all content and quotes above are attributed to Phillip McKnight unless otherwise specified.