Harmony

The book Manufacturing and Wholesale Industries of Chicago, published in 1918 states:
“In the manufacturing of musical instruments, the Harmony Company is especially notable as conducting the largest exclusive manufacturing business in the production of mandolins and guitars in the world, and this prestige has been won through progressive, legitimate and well-ordered directing policies, while the products of the great factory are recognized as being of the highest standard.”

This was high praise but based in truth at the time. (The choice of the word ‘legitimate’ may raise questions about other businesses listed in the book…)

The Harmony Company was incorporated in Illinois in 1892 with outstanding capitol stock of $25,000 and the following officers:

• William J. F. Schultz – President
• Charles Richter – Vice-President
• Fredrich Retschlag – Secretary
• Frederick H. Blank – Treasurer

This group of officers worked well and stayed together for many years. By 1918 Paul Schultz had become Secretary and they added Carl H. Richter. The stability and good judgment of this group helped the young company grow quickly.

William Schultz was born near Hamburg Germany and entered the carpentry guild in his teens. He focused his attentions on ornate staircase work and fine cabinetry. At the age of 25, he set off to America to find greater opportunity and found his way to Chicago in 1882. He started working at the Knapp Drum Company which held a patent on a particular drum design. The Knapp Drum Company factory and patent were bought by Lyon and Healy in 1884. They promoted Schultz to shop foreman of the drum, banjo and tambourine department. William Schultz stayed with Lyon & Healy until 1892 at age 35, when he decided to take the talents he had developed and start his own company.

Like many other executives of musical instrument companies, Schultz was musically inclined. He was an active member of the Teutonia Mannerchor – a traditional German vocal gathering and he was the treasurer and an active member of the United Singing Society of Chicago for more than 17 years.

The business started in January of 1892 in 2 rooms on the top floor of the Edison Building at the corner of Washington and Market streets. By spring of 1892 they moved to more reasonable quarters in a rented building at the corner of Green Street and Chicago Avenue. This lasted until 1895 when more space was needed and Harmony moved to a larger building at the corner of Ann and Lake streets. The business continued to grow and the moved again to an even larger building at the corner of Homer and Campbell streets, and, as you may have guessed, quickly outgrew that facility. They moved to new quarters at 639 Clybourn Avenue and lasted until 1904 when they purchased 1744 through 1754 North Lawndale Avenue and built a proper factory. The first addition was in 1906 extending through to Ridgeway Street. The new buildings were three stories and equipped with the latest manufacturing equipment.

In 1892 there were four employees. In 1893 there were 40. The economic panic of that year reduced that number to 8 and then rapidly grew again to 135. Despite a further economic downturn in 1907, cutting back the workforce to 30 at three day a week, they began to grow again. By 1917 they employed 125.

The annual output of 1907 was $100,000. By 1917 it averaged $250,000. The products of the age included violins, mandolins, guitars, Hawaiian ukuleles, drums and other stringed instruments. The careful object of all goods manufactured by Harmony was to be the best they could be and to remain affordable for the greater portion of the buying public. Harmony was not trying to be the very best quality manufacturer, but rather the best value for the dollar. The company directors had established a broad distribution system throughout the United States, Canada and South America. Being centrally located in Chicago, Harmony made good use of the Mail Order hub of the Americas and the Central Railway access to all parts of the two continents.

The mandolin orchestra craze that held the Americas between 1880 and the start of World War I around 1914 had served the Harmony Company very well. It assured nationwide demand for standard mandolins as well as octave mandolins, mandocellos and basses. Harmony had provided affordable mandolins at many price points and carefully followed the public trends. When the buying public shifted away from the traditional bowl-back (bug style) mandolins shortly after the turn of the century to the carved or flat back versions; Harmony simply responded with whatever the public desired.

At the Grand Exposition held in Seattle of 1909, Harmony received the Grand Prize for its exhibit of guitars and mandolins. This, of course, helped the business reputation and growth. By 1917 the output of instruments was about 70,000 per year. To help put this in perspective, the dollar volume of sheet music being produced by Tin Pan Alley publishers (combined) was about $2 billion per year. Most Americans were trained in reading music and most houses had a music room. Making music was a primary American form of socializing.

On January 8th, 1912 ‘The Bird of Paradise’ opened on Broadway where it ran for over 100 performances. It was one of the most profitable plays of the time and it was a musical. The story was surrounded by Hawaiian music: ukuleles, slide guitar, slack-key guitar, mandolin and exotic vocal harmonies. It was joyous, sad, emotional and, at times, ominous. The new music was able to express it all.

On February 20th, 1915 The Panama Pacific International Exposition opened in San Francisco. Hawaii had been annexed as a United States Territory on July 6th, 1898 (Hawaii become a State in 1959). The exposition featured a grand Hawaiian exhibit that captured the imagination of the nation. Aspects of this exotic Pacific culture were on display including young women in grass skirts swaying to the exotic foreign music.

The new music caught on and Hawaiian music swept across the nation. The demand for ukuleles, slide guitars and flat top guitars played Hawaiian style was overwhelming but the Harmony Company was well positioned to take advantage of the new craze. Business was very good. Harmony responded with a broad range of ukuleles, flat top guitars and lap steel guitars. They had the manufacturing horsepower to churn out as many instruments as the public could absorb.

Give the public what it wants. It was a clear and simple business strategy. By mid 1915, Harmony was the world’s largest ukulele manufacturer.

Chicago based Sears, Roebuck Company also had a clear, simple business plan  control the manufacturing and distribution of everything that the American public might want. In 1916, in order to capitalize on the Hawaiian music craze and corner the wildly popular ukulele market; Sears, Roebuck Company purchased the world ukulele leader – The Harmony Company. They kept William Schultz on for one year and appointed Jay Kraus as vice-president. In 1917, Jay Kraus succeeded William Schultz as president.

In 1920, the Harmony Company made the decision to stop producing violins. They were not as popular as they had been and the violins being imported from European manufacturers were less expensive and equal or better quality to those made at Harmony. There was a lesson to be learned from this business move – they abdicated a portion of the marketplace to others. It seemed to be a good idea at the time.

Kraus was a good businessman and understood the demands of the parent company, Sears, Roebuck. By 1923, Harmony’s annual sales reached 250,000 units, in part thanks to the well established catalog sales of Sears, Roebuck. The Harmony Company settled into a business structure that allowed ‘jobbing’ for other brand names. They would produce just about any instrument another company might want as long as the minimum order of 100 pieces was met.

The Harmony Company continued to produce instruments under their own name as well. In February of 1928, they introduced the first of many Roy Smeck models. Smeck was a popular performer of the day. The artist endorsement worked and the instruments sold well. By 1930, the output of the Chicago Harmony plant exceeded 500,000 units annually. They were clearly the largest manufacturer of musical instruments in the world.

In 1939, after a 19 year hiatus, Harmony began to produce violins again. They were no longer willing to cede any portion of the stringed instrument market to other competitors. By this time, however, Harmony had clarified its niche of the world’s stringed instrument marketplace. They were not interested in competing with Gibson, Martin or Epiphone, fighting for the top end of the market. That portion of the marketplace was too small and the margins too tight. Harmony chose to define itself by cornering the ‘affordable’ (value for the dollar) instrument market. It needed to succeed in volume manufacturing.

Harmony bought several brand names from the Oscar Schmidt Company (which  had recently gone bankrupt). The brand names included ‘La Scala’, ‘Stella’ and ‘Sovereign’. These would serve Harmony well in the years to come.

In February of 1940 Jay Kraus made a play to acquire the company from Sears, Roebuck. He resigned from Harmony as president and turned the reigns over to John T. Higgins. By December of 1940, however, Kraus had acquired a controlling stock position, basically completing a hostile takeover. Firmly in control, he moved the company to 3633 Racine Avenue. Kraus remained the head of Harmony until his death in 1968.

The early 1940’s were rough on Harmony and every other manufacturer as material shortages during World War II made instrument manufacturing difficult. America focused its manufacturing might torwards the war effort and set aside extravagances and items of discretionary expenditure. Musical instruments would have to wait until after the war.

The returning soldiers and prosperity of the late ’40s and 1950s allowed another burst of economic success for Harmony who acted quickly to supply instruments for the rapidly changing American musical tastes. Harmony moved to fill the demand for electric guitars as Rock ‘n Roll swept the nation. Harmony was also there to respond to the desire for affordable acoustic guitars, mandolins and banjos for the folk boom of the early 1960s. Harmony built instruments for Fender, Kay and Regal, Silvertone for Sears, and under such other names as Valencia, Vogue, Johnny Marvin, Airline, and, of course, Harmony.

Following the death of Jay Kraus, Charles Rubovits took over as president. He had been with the company since 1935. Rubovits primary experience was sales. The company output was actually quite high under his leadership, but profits fell – something had changed.

Basically, Harmony did quite well through Kraus’ leadership – until around 1968. The nature of their competition had changed. Japanese manufacturers began to copy the traditional American icons: Martins and Gibsons. They made acoustic and electric instruments at the same low price points as Harmony, and their copies of American instruments were quite good. The quality, fit and finish made them look very much like the real things. Harmony had diluted their base by allowing the quality to slip in order to maintain low prices. A tipping point was reached in the late 1960s where music stores were choosing to carry the Japanese imports over the American made Harmony instruments. The prices were the same, but the imports looked better and felt better. They were easier to sell. Despite sufficient marketplace demand for the instruments, Harmony went into a steep decline. For the first time in their corporate history, they were not able to respond to market forces fast enough. They slipped out of business in 1975.

The Harmony Company held a giant three-day auction at their Chicago factory. The lot sizes were so large that there were few offers to buy. Stan Werbin of Elderly Instruments assembled a bidding cartel of small time builders including Tut Taylor and Greg Lake of Great Lake Banjos. They were able to get some of the equipment and parts.

In the late 1970s the Harmony name was sold to be used on some Asian built instruments. Then, during the 1980s, the name changed hands several times. Some instruments were still being manufactured and sold under different names and through stores like J.C. Penny.

There is talk of a revival of the name under new ownership. Time will tell.

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ⓒ 2010 Leonard Wyeth