STEINWAY: Behind the takeover of the world’s premier maker of high-end pianos

December 06, 2013

The Asahi Shimbun GLOBE

The name Steinway & Sons is music to the ears of many a piano lover. With its 160-year history, the U.S. company is the world’s premier maker of high-end pianos.

At an inner sanctum of Steinway Hall, a showroom in New York, gazing down from the walls were nine portraits from the firm’s founding family. As if on cue, a stately figure then strode into view.

This was John Paulson, a 57-year-old investor and master player of a far more volatile instrument: financial markets. In 2007, Paulson correctly guessed the housing bubble was about to burst. He bet against financial instruments backed by subprime mortgages. When the collapse came, he walked away with over $15 billion (1.5 trillion yen).

In September this year, his investment firm Paulson & Co. struck a discordant note when it acquired the parent company of Steinway for about $500 million. The move was greeted by portentous mutterings about the decline of traditional piano making, while Internet forums wailed that the United States had succumbed once again to the “wolves of Wall Street.”

Piano sales in the United States peaked at around 360,000 in 1909. The industry remained in robust health in the postwar period up to the 1970s, though sales have dropped below 50,000 in recent years. So why did Paulson invest in an industry seemingly in decline?

“While total piano sales have come down, Steinway sales have been relatively stable,” he explains. “Sales around the world are actually growing,” adding for good measure that “the housing market in the U.S. is improving.”

With $500 million to spend, surely there were more lucrative deals to make elsewhere?

For all Paulson’s tremendous personal fortune, estimated at more than $10 billion, he looks to be a man of decency. Is that because he knows full well that he is mortal like everyone else, so he yearns to do something to leave an immortal mark on the world?

He pauses for thought for the first time in our interview.

Then he said, "At this point, my interest is more than just making money, although making a good investment is still the most important part of the decision.”

Steinway & Sons was founded in New York in 1853 by a German immigrant named H.E. Steinway. The company introduced a number of innovations as it sought to stay ahead of its rivals in Europe and Japan. In the process, it created the prototype of the modern piano. Steinway pianos enjoy the loyal patronage of many professional performers. According to the company’s own survey, Steinways were chosen by around 98 percent of the 360 pianists who performed major recitals around the world during the 20011/2012 concert season.

The company’s reputation was built on an adroit marketing strategy. As pianos spread from the palaces of Europe to the homes of the middle class, the music instrument became synonymous with a desire for culture and the rich life. It was Steinway that most ably met this demand. Using comments by composers like Sergei Rachmaninoff, the company launched its “the immortal instrument of the Immortals of Music” campaign.

Things changed in 1972, though. Faced with succession issues and the arrival of Yamaha on U.S. shores, the founders of the company sold it to CBS. The new owners rushed to make the production process more efficient, which eventually led to grumbling that “Steinway pianos are not as good as they used to be.”

John McLaren, 80, was president of CBS's music division from 1981-1984. Before then, he held an executive position at Yamaha’s U.S. division. He says he responded to Steinway’s overtures because “I always love Steinway. I was caught up in that Steinway romance image.”

This admiration put him at odds with the top brass at CBS, who were mainly concerned with results and the bottom line. Eventually, a disillusioned McLaren left the company. In 1985, CBS sold Steinway to a group of investors, who sold it again to another group in 1995. In recent years, these investors tried to cash in by splitting the company up and selling it off.

The end result was Paulson’s acquisition.

Unlike CBS and the previous investors, he was swept up in the “romance” of the brand, just like McLaren.

“I want a company that I am proud to own and that my firm and family will be proud to own, hopefully for a very long time. This investment is not just about financial considerations,” he says.

Paulson was born to a middle-class family in the Queens district of New York, where the Steinway factory is located. Both his sisters were keen pianists and used to practice incessantly on the family’s small upright piano.

When he was 14, a long-cherished grand piano arrived at the house. His father had bought it as a surprise. But one sister, when she saw it, burst into tears.

Paulson asked his mother why she was so upset. His mother told him: “She didn’t get the Steinway. What she wanted was a Steinway” His father couldn’t afford to buy such a high-class piano. “From that point on, I realized the power of the Steinway,” he recalls.

With Paulson’s takeover, Steinway was delisted and became a private company. This meant it could now be run without the need to focus on short-term results.

“You have to keep moving or else you become irrelevant. I think the most important thing is to rebuild the brand and expand globally. That is our focus,” says Paulson.

Steinway has come a long way from the European homelands of its founders to the fertile grounds of the United States, where it bloomed into a modern piano manufacturer. Now Paulson is charged with expanding the brand beyond these wide horizons. Perhaps the success of Steinway comes down to something that transcends physical form--the desire for the rich and prosperous life the Steinway piano symbolizes so well.


When it comes to the market for high-end pianos, “[Steinway] has raised prices almost every year for over a hundred years. That’s a pretty good indication of a lack of competition,” said 63-year-old Arnold Ursaner, an analyst at CJS Securities and an expert on the piano industry. However, there are signs of changes in its dominance.

At New York’s venerable Julliard School, which specializes in the musical arts, it was believed only Steinway pianos could withstand the school’s fierce practice regime. That explains why the institution owns 266 Steinways.

“Julliard has more Steinways than any school in the world,” says Steve Carver, the 64-year-old director of piano maintenance.

In 2010-2011, though, the school purchased two new pianos: a Yamaha and one made by the Italian maker Fazioli. This was the first time the school had purchased a non-Steinway since its founding in 1905. Yoheved Kaplinsky, 65, is chair of the school’s piano department. She traveled to the Fazioli factory and was impressed by the strict quality control on display.

“Our students should have freedom of choice,” she says. A bit of competition is also likely to have a positive effect on the quality of Steinway pianos.

Catherine Moore, 58, lectures on the music business at the Steinhardt School of Culture, Education, and Human Development at New York University. She has her own views on what makes a great piano.

“You can build something, but it’s adding that extra spirit or art which really separates the top echelon.”

(The first two parts of this story were written by Naoatsu Aoyama, GLOBE staff writer.)


The U.S. company Steinway, Austria’s Bosendorfer and Germany’s Bechstein have earned the right to be called the “world’s Big Three piano makers.”

Each one of these venerable firms has been in business since the mid-19th century.

Steinway pianos have built a solid reputation on the back of their sturdy frames that can take more than 20 tons of tension from the tightly-stretched strings. This is what creates the rich sound that fills even the largest concert halls.

By the same token, Bosendorfer pianos are very much the product of Austria. They reflect the temperament of the Viennese people, who regard music as part of everyday life. As such, they are popular not just for big events but also for chamber music recitals or as accompaniments to vocal performances. This versatility can be put down to the thinness of the piano’s body.

The bodies of the other two manufacturers are sturdier and composed of 15 or so separate layers. A Bosendorfer body, though, is one centimeter thick at most. The idea is to produce a sound infused with the “physicality” of the instrument rather than one that reverberates over a wider area. This philosophy engenders a unique sense of intimacy that draws people to the instrument to sing or play along with.

As demand for pianos dropped in developing nations, Bosendorfer struggled and eventually became a subsidiary of Yamaha in 2008.

Bechsteins are known for their wide, orchestral range of sounds they produce, from the low tones that rumble like a contrabass to the high notes that resemble a flute. The Bechstein was once called “the piano of the Third Reich.” After the war, it temporarily fell under U.S. ownership, but it returned to German management later on. The company has no contracted artists, nor does it involve itself in competitions.

It is not involved in the digital piano market, either. This principle of not following the trends of the day is the result of a pride that continuously seeks to produce pianos infused with the spirit of the company’s forefathers.

“In the digital world, even if you develop a new model, it will be out of date in 10 years or so,” says the firm’s chief technical officer, Leonardo Duricic. “I want to focus on producing the best piano without being swayed by short-term tussles.”

(The last part was written by Junko Yoshida, The Asahi Shimbun staff writer.)

The Asahi Shimbun GLOBE
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John Paulson is founder and president of Paulson & Co., the hedge fund that acquired the U.S. company Steinway & Sons, the world’s premier maker of high-end pianos. (Mari Sakamoto)

John Paulson is founder and president of Paulson & Co., the hedge fund that acquired the U.S. company Steinway & Sons, the world’s premier maker of high-end pianos. (Mari Sakamoto)

  • John Paulson is founder and president of Paulson & Co., the hedge fund that acquired the U.S. company Steinway & Sons, the world’s premier maker of high-end pianos. (Mari Sakamoto)
  • Michael Sweeney, president & CEO of Steinway Musical Instruments, Inc. (Mari Sakamoto)

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