A Conversation With ... Steve Stepp

From 2015 to 2022, cassette tape sales have seen growth of over 440%, according to entertainment data firm Luminate. Talk about some of the drivers of that growth.
The demographic group driving it is the under-35 age group. That might be kind of counterintuitive – to them, music was played from an MP3 over earbuds, and the earbuds aren’t great speakers and an MP3 isn’t a great unit to play music back on. After a while it came to them that not only is it nice to own something you hold in your hand and can trade with your friends or collect; it also sounds better. And then we discovered the awful truth that our ears are analog, the world around us is analog and analog sounds more natural to us. There was a test made by the University of Indiana to several hundred students where they played a piece of music digitally or with an analog source. And they asked which sounds better. And about 90% picked analog. Vinyl records and audio cassettes are the only two formats growing in the commercial music industry.

Is the music industry your biggest customer today?
Yes, National Audio does the audio cassette releases for all of the major labels. Besides all the major labels, like Sony and Disney, we are also doing the duplication and distribution for about 5,000 independent labels worldwide. The indie labels are the people who really put us in the audio cassette business, back about 2001. The vinyl record industry was so far behind as far as deliveries, demand outstripped the supply. And back in those days, when you made CDs you had to make a gold master, and that was expensive and you had to wait. So, the logical place to go was to go back to the cassettes for the indie labels. After that, the majors started saying something’s going on here. There was a band called Pearl Jam and they were having their 20th anniversary and they decided they would put out a gift set for their fans with an audio cassette, a vinyl record, a CD and a scrapbook. They ordered 15,000 audio cassettes. We made them, shipped them. By the time they got there, they were all sold on presale. The next was Smashing Pumpkins and the same thing happened. From that time on, the major labels came back to audio cassettes.

You produce right here in Springfield nearly all of the audio cassettes in the U.S. and beyond. Tell me about your market share, and what are some of the other mediums you are producing?
We manufacture about 95% of all audio cassettes sold in the Western Hemisphere. We do sell some tape and some other products to our competitors. For years we have planned to put in vinyl pressing. Vinyl presses are probably $125,000 to $150,000 apiece. If you bought a brand-new one today, you would be 14 months before you have it delivered, and you need several to have a good-sized operation. Recently, we had a major record pressing plant approach us with the idea: Why don’t we make vinyl records for you to deliver to your customers and you make cassettes for us to deliver to our customers? Now we are not only delivering audio cassettes but vinyl records to those 5,000 indie bands. That’s a big deal because the big record labels can always get the big pressing houses to run hundreds of thousands of records for them. The little guys who want 50 to 200 to 300 vinyl records have to wait six to nine months to a year. Our turn time on audio cassettes is 30 business days. So, now we are beginning to pick up a lot of business from our existing customer base with a second product. We began shipping out vinyl about a month ago. Another thing coming up now is what we call the return of the T. rex of the analog world. Back in the day when audio tape ruled the world, everything was on quarter-inch or half-inch or one-inch or two-inch tape, and the quality was unsurpassed. The expense was higher than cassettes or vinyl, and a lot of people didn’t have good-quality reel-to-reel decks to play it back on. Well, now we have a situation where there is a whole group of people worldwide who are buying expensive reel-to-reel decks. These run in the neighborhood of $6,000 to $14,000. For those folks, an audio cassette or a vinyl record isn’t going to cut the mustard. They’ve got to have their new music on a quarter-inch mastering tape. When satellites came in in 1994, we retired that equipment, covered it with plastic, kept it clean and dry and put it away. It turns out with a return of quarter-inch tape, that is the equipment you need to do it with. It was an easy matter to replace capacitors that had aged out, and we are back in business.

As you say, the equipment you are using is very old, and I imagine companies are not creating new parts. How do you keep your equipment up and running?
The equipment that we’re restoring to do the vinyl work, this is as analog as it gets. All of the amplifiers and electronics are still tube amplifiers. The best that 1968 had to offer. The quality is unsurpassed, and it is very durable equipment. As far as keeping all the equipment in our building running, all of our equipment is orphaned. Not only is it not built anymore, but the companies that built it are gone. We were very fortunate at the time that we went back into this duplication early in the 2000s, we were able to go to the company that built the cassette duplicating record units; these are gigantic reel-to-reel recorders that run very fast, and when they went out of business, we contacted them and said, “What would you take for all of your spare parts?” We were able to buy that, and we were able to actually talk to their production manager, and he’s helped us along over the years. Same thing happened with our cassette-loading machines. These are big machines the size of your home refrigerator, and they’ll load a 90-minute cassette in seven seconds. And then we have two gentlemen who helped very much in the process. One fellow has two degrees in physics and one in broadcast engineering. He’s come over and restored all the tape manufacturing equipment that we have in the building. And we have a gentleman who is just a mechanical genius. We repair our own circuit boards in-house. We never use the last brand-new metal part for our machines. We have an in-house machine shop and we replace or replicate that metal part as we need them, and we hold the originals just like masters for tapes.

How many cassette tapes are you producing a year, and what’s your estimate on vinyl, reel-to-reel and CDs?
We’re making about 4.5 million audio cassettes a year. The vinyl, I really don’t have a feel for it yet except to say it’s starting out very well. Reel is going to be a different matter. If some record label buys 10,000 copies of a movie soundtrack on cassette and maybe 5,000 or 10,000 vinyl records of it, I think you may sell 200 or 300 of the reels. The price is much higher. It’s a special clientele.