Heinz Lichtenegger - Pro-Ject

These questions are certainly important, but a conversation with Heinz Lichtenegger is also an opportunity to look at the audio market from a wider perspective. He is one of the few people in the industry who began as a normal client, then started working as a retailer, distributor, and finally - manufacturer. Heinz understands the connections between the various elements of this puzzle and skillfully uses this knowledge to build the business. But that's not all - he still seems to evaluate everything correctly, and can even predict the direction in which things will be heading, providing audiophiles with the equipment they need. Even in our short conversation, a number of threads showed up that certainly should be developed. One thing is certain - this is a man worth listening to.

When did you start working in hi-fi and what was the market like back then?

In the 80's I sold turntables and other audio in Austria because I had my own shop. People always wanted one thing - best sound for reasonable money. At the time our economy was in a kind of recession, so something like 300-400 euros in today's money was really a lot for many people. First CD players were very expensive - for that price you could buy a really nice turntable. And you have to remember that vinyl records were virtually free. With the CD era everything was changing. CD players were getting less and less expensive, and prices of turntables started to go up. I was looking for nice products to sell in my shop and I found them in the Tesla factory in Czech Republic, which was closing at the time because they thought that turntables will never start selling again. Things I saw there made me think... I could easily modify some of those old turntables and sell them. They had very good plinths and platters, so with new tonearms, cartridges and details these machines would be very competitive. That was how the idea of Pro-Ject was born.

How did you get this factory going again?

When I saw a factory that was about to get closed, I wanted to give it a new life. But the biggest problem back then was to make it happen. Today you could just buy the factory, but back then it was still the late communist era and it was really not simple to convince some influential people that this company should be running again. Luckily I was able to contact some people that helped me with this, including private owners of the factory, and things slowly got moving forwards. Then I made some business plans. The factory was big, so we only bought a part of it, the best part in our opinion. For a start we employed about 50 people. Of course there were some other problems, like the fact that people didn't believe in the analog records, but for me it was always the best way to listen to music and I knew there were more people like me in the world. For me, the real audio means sitting in front of the speakers and just listening to the music - and that's what turntables are best for.

Do you remember the first turntable that left the production line under your management?

The first model was called Pro-Ject One. It was pretty ugly, but in terms of mechanics and sound it was really worth the price. Since then, every new product we launch is designed with the same principles - it has to be simple, but made from the best possible ingredients. This was the magic of the first turntables we made - plain in terms of technology, rough-and-ready, but sounding great. I always thought that the sound is the most special thing you can have in a hi-fi product.

Presumably it caught on, but what happened next?

From the start the sales were going up. The only problem I had was that we always sold more turntables than we could manufacture. During the last three years for example, we've doubled the production volume and it's still not enough. Today we make like 120,000 turntables per year. And we are expanding the factory constantly. Please note that from the beginning it was all professional production. The factory was never located in the basement or kitchen, it was always high quality manufacturing with ISO 9001 certifications and so on. Today any good product is not only the sound quality - it's about reliability, customer care, spare parts etc. That's why I can supply everything for our customers - belts, motors, tonearms, screws... Because we make it ourselves. All of it. Many other companies just order every part of the product, put all the elements together and that's it. When one part comes out of production, for example one type of transistor or capacitor, they have to improvise. Sometimes you see a new product, a new version of it, most likely even more expensive than the original one, but the production is being continued. But what does it mean for the customer? You wouldn't believe how many good hi-fi components are sold, replaced or simply trashed because of something like missing screws or broken remote control.

What do you think was the reason for your success?

Well, at the beginning we had very little competition, so I guess we were a bit lucky. But in the 90's I made a very big investment. Things like turntables were always sold in specialist shops, which are not very visible from the outside. My idea was to make some cheap, attractive turntables and sell them in all electronic stores in the world. I know it sounds like a mad plan, but that's what we wanted to do. To make the product at an attractive price, we could go to China because as you can imagine, manufacturing in Czech Republic was getting more and more expensive. So I contacted my dealers and told them that we want to try something new - a cheap turntable to sell not only in hi-fi stores, but also in electronic supermarkets. This was the Debut line, and you can probably imagine what happened. It was a huge success for us, not only in terms of sales, but also as a marketing investment. The Debut was shown in many shops where analog didn't exist. Many people actually remembered that they have some vinyl records, and because the turntable was so cheap, they could buy it straight from the shelf. 80% of people who now buy an expensive hi-end turntable, started some 10 years ago with our Debut. This was the biggest investment in analog ever.

That must have been seen as a bold idea, but I'm sure many companies wanted to do it, and perhaps some of them did. So what made you different?

My philosophy is to make intelligent product, which means you think how you can get the best out of existing technology, to make the product good and still cheap. If you succeed, you can manufacture your products in Europe and still make enough money. I think that making hi-fi for tens of thousands of euros is easy. Come on, everyone can make it! You and me, we could set up a factory right now and make hugely expensive speakers. We would sell some because there will always be a small group of people willing to buy something unusual. Just take some top-shelf components, connect all the dots and you can make business, but it's not developing the market. You have to think about all the people who just want to start listening to good music. That's the philosophy behind products like Debut or MaiA. You have everything you need in this little amplifier, you can connect nice speakers to it and have a descent stereo for little money. But do you know what happens when you enjoy your hi-fi? You want more. So in a way we are working for our own future.

How do you know that these customers will come to you for a better amplifier five years later, and not to other companies?

I don't have a problem with that. Everybody wins when the customer base is growing. And we have a lot of work to do. Today most households in Europe have about two flat TV's. Do you know how many have a hi-fi system? According to my research, it's about 2%. But we're talking about hi-fi system, and please keep in mind that small computer speakers or soundbar is not hi-fi. We're talking about a real stereo or home cinema, and this is still not popular. Think about how many customers you can have in a regular store like this one we're sitting in. The best operating shop can handle about 3000-4000 customers. So in a city like Warsaw you should have about 10 good hi-fi shops. Some people in our business still don't understand that selling in electronic supermarkets is not really about selling, but about advertising. These places actually don't make money on selling stuff to customers, but for showing these devices in popular places. After we put our turntables there, we had an instant growth of sales in all the specialized dealer's stores. This was the best advertisement for us. We have to work together and I believe that specialist stores and mass markets can exist together. We want to reach as many customers as possible, to expand our hobby.

What about the boxes? This was another thing you predicted. You started with a couple of devices for turntables and headphones, but now you make thousands different boxes. Does it affect the reliability?

The way we listen to music is changing. We want everything to be small and functional, but the main thing with the Box Design line was the manufacturing costs. Can you guess how much of the total cost of making an amplifier is down to the box? About 60-70%. All that's inside is really cheap compared with the case. So by making an intelligent, small solution in terms of electronics, you can also save money on the box. It's all about choosing the best compromise, and for me making a small amplifier like MaiA in a small case, but with power at about 30 watts, is a better compromise than a big amplifier which has a big power supply and big housing, but costs three times as much. In the Box Design line we have only 4 different types of cases - all of them are pretty easy to manufacture, which makes them cheap. The second thing are the power supplies. If you take the power supply out of the box, you save space, money, and you also get less distortion in the area which matters most. For sure the power supply is important, but there is always room for improvement. You can start with something like Stereo Box RS, later you add the DAC Box RS, and then you can buy the power supply for the amplifier, getting more power. Than you can buy another power amplifier, and the power supply for it. You can also buy one power supply which will serve up to 4 source units. And you don't need to sell anything - you only add boxes to have better sound and flexibility.

Why do you have so many different products? Isn't it a bit too much?

Because we want to make sure that our customers buy exactly what they need. For example, many of our clients still want to have an analogue tuner. You wouldn't normally add this function to an integrated amplifier, but you can buy a separate box which looks the same and does what you want. We don't equip our amplifiers with docking stations because in 2-3 years the socket for your phone is going to be outdated. So you can have a separate docking station, and if you change the phone, you just throw away the docking station and buy a Bluetooth receiver - that's it. You don't have to sell the amplifier. You can still play music from a CD for example. And when you don't want to use the CD player, you just sell one box, and the rest of the system remains the same. Other way round - with the Box Design you can start with one or two components, and then expand your system, for example buy another source or turntable. Most people interested in hi-fi are dreaming of expensive McIntosh, Accuphase or Audio Research amplifiers, but they don't have the money to buy them. They want something that will do the job for a reasonable amount of money.

Your wife also makes turntables - that's called EAT. Some say they are better and prettier than your turntables. Would you agree?

They're made in the same factory, but yes - it's an interesting story. At EAT we do everything at the hi-end level. It's a bit like Toyota and Lexus. These designs take a lot of hard work - it's the separate part of the factory where we incorporate a selected group of employees who are able to make everything different. That's why these turntables look different and they also sound different. In EAT you have expensive components, great design, no compromises. It's a bit like the part we're doing for our own satisfaction. And if customers can also buy such an interesting turntable - that's for their fun as well.

Some time ago you told me that you're thinking of introducing a system where all the turntables and boxes you sell will have a kind of log book with all the info about this particular unit, like service history or the number of its previous owners - just like when you're buying a car. The idea being it would make buying a second-hand turntable easier. Do you still want to do it?

The car industry is one of the most successful on the planet. Everything comes together there - technology, service, customer care and so on. So why not learn from this industry? I think we should make something similar, when the customer will have the whole record of things which happened with their turntable or amplifier. We have a lot of ideas like that and plans for the future.