General Asylum: Re: Audio Note of Japan (KONDO) by Peter Qvortrup

Of Thieves, Liars & Magpies.
In response to Mr. Kondoâ€™s posting of January 16, 2000, I would like to put his comments into the following perspective.
Mr. Kondo and I worked together for nearly 20 years and during this time we both benefited enormously from each otherâ€™s skills, knowledge and understanding. I have learnt a lot from Kondo-san and I hope that in a quiet moment he also appreciates my love of music, commitment to excellence and unyielding support. Our collaboration worked very well for many years, but as in many relationships, business or otherwise, the parties develop in different directions. I wanted to continue to pursue sound quality through further exploration of the single-ended output stage and all manners transformer coupling.
Mr. Kondo felt in contrast and I believe still feels, as he showed a push-pull 2A3 amplifier at the London High End Show in September 1999. Firstly that the push pull triode output stage can somehow be developed to marshal a return to superiority and secondly that transformers only belong in the output stage of power amplifiers. I always considered this an abandonment of our basic principles and since Kondo-san never presented me with any push pull prototype that proved to be better than any of the SE amplifiers he made, so I have stuck to my views.
The financial crisis in South East Asia in late 1997 polarised these two divergent philosophies, which then became emotionally and commercially incompatible and Mr. Kondo decided to break off our collaboration and we parted our ways.
It is never easy to break up after so many years and especially when it also involves a high profile brand, even more so in an industry infested with rumourmongers, hacks and carpet baggers.
After a brief legal argument Audio Noteâ„¢ UK Ltd. retained the rights to the brand name registration and Mr. Kondo is now selling his amplifiers under the name Kondoâ„¢. The reasons for ANUK retaining the brand name registration are as obvious as they are logical,
1.)The value in the name was created solely and exclusively by Audio Note UKâ€™s and my personal investment. Kondo-san took no part in the financial, strategic or commercial risks involved in building the brand name recognition.
2.)Registering a company under the name Audio Note in Japan does not in itself give the rights to a brand, only the hard work and expense building it is what makes it known and worthwhile, emotional attachment alone accounts for little in the real world. Since the product strategy, investment and most of the concepts were formulated in the UK with Kondo-san co-operating willingly, happily going along for the ride, for as long as the annual rewards were always on the increase. There was no-one crying foul then.
3.)In the end equation is it really so surprising that the brand name stays with the investor, I would have thought that this was normal practice, just ask anyone with money to invest about this and they will tell you the same.
Therefore there is no question of â€œstealingâ€ the brand name, intellectually, morally or otherwise so I think we should leave Rossiniâ€™s masterpiece out of the discussion, attractive as the emotional connections may be.
Now to elaborate with a bit of history.
Since 1990 there were two Audio Note companies, one of which developed and produced its own products under the name Audio Note in the UK and which also specified and distributed Audio Note Japans products and the original company in Japan.
It is important to note here that it was ANUK who decided which products from AN-J should be marketed outside Japan, and the voice you hear in products like the ONGAKU, GAKU-ON, KEGON and M10 is a mixture of Kondo-sanâ€™s and mine. These combination of these two voices are inseparable in these products and was decided upon by myself, and as a result I often deemed many of Mr. Kondoâ€™s products not suitable for wider distribution, much to his considerable chagrin. A fact that undoubtedly contributed to his hostile behaviour during our negotiations in late 1997 and early 1998 and to building his deeply aggrieved attitude later.
The original agreement was that ANUK would develop the more commercial part of the Audio Note product line (Levels Zero to Three). In addition ANUK should develop a product range complimentary to the Japanese products, capable of displaying their qualities and also provide an overall development platform for improving the concept of music reproduction shared by Kondo-san and I at the time.
With an investment over 7 years of well over one million pounds, ANUK went ahead and largely fulfilled its obligations under the agreement (which incidentally ran out in 1995 without being renewed and might I ad without much further discussion about brand name, strategy or new terms of contract).
As a small example, in early 1994 ANUK even paid to send an engineer to Japan to teach and train AN-J staff in quality control procedures, product consistency and layout (amongst other matters showing them how to get the power supply quiet enough to remove the feedback from the ONGAKU). Techniques and concepts that did not at the time exist in any measure at the AN-J factory, one of many such small investments that helped make the AN-J products more saleable.
From late 1993 I kept Kondo-san very busy building NEIROâ€™s, ONGAKUâ€™s, GAKU-ONâ€™s, M10â€™s etc., but by mid-1997 the emerging financial crisis in South East Asia started dramatically slowing sales. So for the first time in our relationship Kondo-san and I had to face the fact that sales were plummeting and orders to Japan would have to be reduced immediately otherwise overstock would kill our joint cash flow very quickly (these products are expensive to build).
Kondo-san absolutely refused to face up to this fact and make the necessary adjustments to his overheads. So instead of dealing with the problem himself and seek our co-operation to minimise the damage, Mr. Kondo pushed the entire responsibility on to ANUKâ€™s shoulders by demanding that we â€œfulfil our obligationâ€. This was in his view that we should buy a minimum of what he could produce to keep staff and turnover regardless of whether we could sell it or not, in other words, ANUK owed him a living regardless of market conditions.
This I in turn refused to do, so stalemate ensued.
Until April 1998 when Kondo-san with complete disregard of all practical facts, our entire history together, all past understandings and with no consultation or prior warning whatsoever gave a UK company, PM Components Ltd., all rights to distributing his products. This in itself was bad enough, considering how the market for these products had been developed, but to add insult to injury and in direct conflict with our common interests (and with ill concealed malicious intent, I now believe). Mr. Kondo also licensed PM to use the Audio Noteâ„¢ brand name whilst renouncing our use of it, completely disregarding the following facts,
a.)Turnover wise AN-J was very much the junior partner in the relationship, despite its longer history, and ANUK represented at least 80% of AN-Jâ€™s turnover.
b.)His ill-considered, irresponsible and callously one-sided action put the 30 or so jobs at ANUK in jeopardy by creating great uncertainty about the brandâ€™s long term future. In addition to that putting 1000â€™s of our customersâ€™ investments in our products in question through a potential loss of warranty and service back-up should ANUK fail as a result of his actions. ANUKâ€™s turnover at its peak in 1997 was well over Â£ 4,000,000.00 and that represents a lot of customersâ€™ investments in the future. How can he single-handedly decide to attempt to scrap that?
c.)The reality was and is that whilst the brand name originated in Japan, the ownership of the brand name had long since passed to ANUK through the way the original agreement was structured and the fact that the brand name recognition was paid for and created solely through ANUK efforts.
d.)PM Components had no experience in this sector of the market, a sector solely created by ANUK.
Interestingly and surprisingly, it appears that the terms granted PM were substantially less severe than what Kondo-san had demanded of ANUK in order to renew our agreement. One can only wonder why?
When you add the above up, I did what anyone else in my position would do, in order to protect our employees jobs, our customers and our own investment and ANUKâ€™s future, I sued AN-J and PM. We soon won the first round, an injunction preventing AN-J from giving a licence to the name to PM effectively blocking its use.
So since it was Kondo-san who broke our co-operation and made the decision to venture out on his own, what is he so aggrieved and resentful about? Let me give you a brief analysis for your consideration.
1.) Without ANUKâ€™s involvement in 1990, he would still have a small company in Japan, making high quality audio products. He still has, what happened from 1990 to 1997 were in the most part due to my efforts not his, so any profits or experience he has gained as a result should be considered a benefit, not a disadvantage.
2.) He is not longer travelling to shows that I pay for, showing demonstration amplifiers that I also finance. True, because to do this he needs to work within the framework of my strategy and concepts, using my money and my contacts built up over 20 years of selling quality music reproduction equipment. But this was his own choice, so why am I being blamed?
3.) He would have been unknown to most audiophiles because contrary to his own internal beliefs, Kondo-san became famous through my staffâ€™s, our distributorsâ€™ and my efforts to put him in the limelight and explain our joint philosophy to the world. In this regard we gave Kondo-san a head start not many in the audio industry have had the benefit of, how can he be unhappy with that? His decision to leave the partnership has done all the damage necessary and nowhere has this been more clearly demonstrated than what has happened to our joint reputation, as a result, our time has been spent on damage limitation and thinking up new products.
4.) So now all he is having to do is what I did when we started seriously promoting Audio Note in the late 1980â€™s, start with an unknown brand name (Kondo) and build it to fame and fortune himself. Still without the drawback of complete obscurity (testament to our success putting Kondo-san in the limelight is the fact that you read his posting and that you are reading this now). The clock has been turned back to 1989, due in no small part to Kondo-sans own inability to act responsibly, logically and with respect for other peoples efforts, commitment, time and money.
All in all, misplaced anger and aggression rarely gets you anywhere, hard work generally does. So do what I did with the ONGAKU and our other products, go out, demonstrate your products successfully enough to be able to convince people to part with their money and show people that your products are as good as you believe they are.
Regardless of what anyone may think, I would like Kondo-san to do well, partly because I genuinely believe he deserves to, but partly also for more selfish reasons, who else is there out there to compete with at the very leading edge of audio technology?
Nothing drives you better forward than the hot breath of a benign, likeminded, but pursuing competitor!
I truly cherish the prospect of a genuine intellectual and practical competition with Kondo-san over whose creativity, ideas and skills result in the products with the best sound quality. In my opinion such a competition is in everybodyâ€™s interest and should benefit the knowledge base and debate generally. As a starting shot I am gratified to see that Mr. Kondo has adopted my suggestion of 1993, in his new d/a converter, of removing the over sampling and digital filters and replacing them with a simple analogue filter. I regard this new Kondo product a great recognition of the idea, so thank you for that Kondo-san!
There will always be some of you who prefer a different dynamic balance to the voice that my products speak with, so there is room for us all and if you are in the market for the best, both Kondo-sans and my products should definitely be on your shortlist.

This requires Mr. Kondo to stop wasting his time slandering and back stabbing ANUK and strictly concentrate on spending his time promoting his new products instead, which is more fun, more profitable and more positive anyway!

At the end of the day it is worth remembering that the treasure does not belong to the one who says he knows where it is buried, but to the one who invests in looking for it and as a result eventually finds it.

A simple truth, this particularly applies to anyone who claims that I usurped their â€œideaâ€ of the over sampling free digital filter less DAC, as Justin Benn claims in his follow-up to Kondo-sans posting. This practice has, for your information, been around since the very first CD-players in 1982, so anyone who thinks this was their idea will have had to have been up mighty early, another severe case of sour grapes if you pardon my saying so.

The first Sony 16Bit machines used no over sampling or digital filters with a brick wall analogue filter, it sounded terrible. The novelty of our idea is to configure the analogue filter such that it does as little damage to the signal as possible.

I welcome debate on this and other matters.

Peter Qvortrup
Audio Note UK Ltd
18.01.2000