By Brad Hamilton
When Kelly Kilrea bought a $78,000 Steinway grand piano in in 2013, she could barely afford it. It was the biggest purchase of her life, and she would have to take on a layaway loan to finalize the deal. Interest and tax pushed the total to $100,000.
Despite the cost, she felt having a new Steinway was worth it. The piano would help her heal.
Kilrea, 43, has struggled to deal with her war experience in Bosnia, where she served in an area riddled with land mines as a public affairs officer in the Canadian armed forces. Part of a NATO mission, she protected journalists covering the conflict, and came to understand that the slightest misstep could end in disaster.
“My job was to take reporters around and make sure they didn’t get hurt or killed,” said Kilrea, a small-town girl from an Ottawa suburb who joined the military assuming she wouldn’t be put in harm’s way. “I had not been in a conflict zone before. It was scary. You regularly would hear land mines going off. There’s nothing like facing the possibility of your own death.”
Kilrea left the service on PTSD disability and began seeing a therapist. She also found comfort in playing the piano, a hobby she loved as a kid but had neglected for years. Buying a Steinway seemed like an investment in her mental health, she said.
“I always intended to one day have a piano and take lessons. In military college, they had pianos in the chapels. I would go there and close the door and play. Time would melt away. I felt transported from life.”
One aspect of the purchase eased her mind. The salesman helping her in Virginia, where she and her husband were living, said the piano “might depreciate a little at first, but then it will go up in value,” she said. “He said it was a sound investment, and I believed him. I believed that if I ever had to sell it I would recoup my investment.”
But the experience Kilrea described — and complaints other Steinway customers made to The Hatch Institute — spurred a months-long investigation into whether the company, based in Astoria, Queens, duped buyers with misleading statements and outright fabrications.
The goal, buyers alleged, was to encourage them to buy a new Steinway, whose latest models range in price from about $70,000 to more than $150,000, with assurances that these instruments, once purchased and taken home, would be worth every penny they’d paid. Customers said they were shown sales figures with ever-rising prices for new pianos, which typically go up between 3 and 4 percent per year, a rate that’s higher than inflation.
Some said they were told that purchasing a Steinway made a better investment than buying stock on Wall Street.
The allegations are surfacing at a time when owner John Paulson, a hedge fund billionaire who bought Steinway for $512 million in 2013, is reportedly negotiating to sell his privately held company to a Chinese concern for $1 billion.
Bloomberg reported in August that Paulson was in talks with China Poly Group Corp., a state-owned conglomerate. “The piano maker has also attracted other potential buyers such as private-equity firms and companies,” said the news site, citing unnamed sources. No deal has been announced.
Paulson is already worth more than $7 billion, according to Forbes, after he made a fortune shorting mortgage stocks prior to the subprime meltdown. If the Steinway sale goes through he stands to bank a profit of more than $80 million per year during his ownership of the company.
Under his tenure, Steinway has steadfastly insisted that buying one of its pianos is a can’t-lose proposition.
Kilrea and half a dozen other customers, who told similar stories to this reporter, made purchases from Steinway stores in New York, Pennsylvania, Maryland and Virginia, paying from $65,000 to $100,000. They said they were told or led to believe that a robust market exists for the instruments, and each took into consideration, and accepted as fact, that buying a Steinway provided more than enjoyment; it also was a sound financial decision.
“I didn’t know if the piano would depreciate,” said Jason Liu, a college music student in Maryland who bought a model M at the Bethesda Steinway Gallery in 2017 for $65,000. “This sales manager told me specifically that the value only goes up.”
Liu, who is proficient in classical concertos and is considering a career as a performer, needed financial assistance from his parents to complete the sale. He wasn’t worried. He was sure he would get many years of use from his Steinway.
“It’s an excellent piano,” he said. “One of the reasons I bought this piano was because it wouldn’t lose value and maybe it would even go up a bit. They said the used piano is not going to decrease. In fact, it might increase by one to two percent.”
Georgiana Rowley, a New York mom on the Upper East Side, bought a model M of Macassar ebony from the Steinway Manhattan showroom in 2008 because she and her husband had two young kids and “one was very talented” as a musician, she said.
“When we purchased the piano, we were thinking it was going to be in our family for a long time. It’s beautiful and has a very beautiful sound,” she said.
“I remember being told that if we ever wanted to sell it, we could bring it back to Steinway and they would buy it back from us, and that it holds its value. We were persuaded it’s a good investment. That was the tipping point. Because, you know, $66,000 is a lot of money for a kid to take piano lessons.”
Phillip Hoang, a consultant, said he got that exact pitch when he bought a black model O in 2011 from the same store in Virginia where Kilrea shopped, paying $67,000. “They said it was an investment for me and the value will go up,” he said.
“Later I was thinking to sell it. I wanted to get a different one, a smaller one, to save some cash for my kid’s college. So a few months ago, I asked our tuner. He’s a Steinway employee. I said, `Hey, do you know anyone who wants a Steinway? How much could I sell it to him or her?’”
Informed by his technician that a new model O was going for between $105,000 and $115,000, Hoang wondered if $80,000 was a reasonable asking price for his piano.
“He said,`Oh, definitely. You could sell it immediately.’”
Another buyer, homemaker Lisa Mancuso, said she made a common assumption when she and her family bought a new Steinway four years ago.
“Many people believe that Steinways are a smart investment,” said Mancuso, who plunked down $69,317 for a model M after a burst pipe in her house outside Philadelphia totaled a Steinway her family had owned since 1982.
An insurance check covered most of the cost of the new piano, which she purchased at Jacobs Music store in the city’s Rittenhouse Square downtown. A salesman assisted her, she says, and he talked up both the beauty and enduring value of the instrument.
But after it was delivered no one touched the Steinway. Her 12-year-old daughter “had pretty much given up piano,” she said. Mancuso and her husband didn’t play. So she called and asked the Jacobs sales rep, Bob Renaldi, if the store would buy it back.
“They weren’t interested,” she said. “They had enough pianos for sale.” She looked into the secondary market, confident that she would recover most of the purchase price. “Almost like a new car loses some value when you drive it off the lot, I thought it was worth at least $55,000.”
In an effort to verify buyers’ accounts, this reporter visited Steinway Hall, the company’s showroom in midtown Manhattan, where salesman Eddie Strauss offered a tour, showing an array of new models on the store’s street level at 43rd Street and Sixth Avenue and additional pianos down one flight.
Strauss, 70, the longest tenured salesmen at Steinway, is well-known in New York’s classical music community, having developed relationships with customers, performers and others within the company. He attends concerts by Steinway-affiliated artists and can be seen mingling at Steinway social functions. He’s been there for 43 years, he said.
“When Steinway builds a piano, they do it the best,” he said. “Their sound boards typically last between 50, 60, 70 years.”
He handed the reporter a glossy sales brochure that showed rising prices over time for its model B “Classic Grand” piano. Under a header, “Steinway & Sons Pianos Increase in Value Over Time,” the chart tracks prices for new model Bs from 1975 to 2017. In 2010, it indicated, the price was $81,200. In 2017, it was $101,800.
“The best time to buy a Steinway is always right now,” Strauss said. He mentioned that he recently had been assisting a couple who’d purchased a model A in 2009 for $65,000. “That piano today costs $92,000,” he said.
“So it goes up in value?” he was asked.
“Every year,” he said.
He said the level of retained value depends on many factors, including how well an instrument was cared for and if any work was done on it by someone not employed by Steinway. “The piano does appreciate in value to a certain point,” he said.
According to Strauss, many sell for 85 percent of their original asking price, though ones from the 1970s or 1980s might go for much more than was paid. “They say it’s a better investment than Wall street,” he said.
Another factor: Steinway offers a “100 percent trade-up deal,” he said, meaning if an existing customer wants to buy a different piano, the company offers full credit for the original price, as long as the new instrument costs more and the old one wasn’t damaged.
“Nobody else does that,” he said.
“What if you buy one, then have financial problems and want to sell it?” he was asked.
“If we sold a piano to you,” he said, “and you default on it, we could probably sell it for what you paid for it. Most other pianos decline. Not with Steinway.” He added that a competitor’s product would plummet in price immediately. “It goes down by half the minute it comes home,” he said.
Strauss appeared to be quoting directly from Steinway’s promotional materials, which include company statements and references to published stories.
One brochure, titled “Your Steinway Investment,” states that after 10 years of ownership a used Steinway usually sells for 75 percent of that model’s current price, a claim based on a Reuters story in 2003. By that formula, a model B bought for $54,900 in 2000 would be worth $60,900 a decade later.
The pamphlet cites one customer who claimed, “It’s a heck of a lot better investment than the stock market.” It also features an excerpt from a German newspaper that asserted the pianos are “an extraordinary investment that pays off in the long term.”
“Times change,” says the brochure. “Markets rise and fall. But for more than a century and a half, every handmade Steinway piano has increased in value.” It claims that a “Steinway piano is not only an incomparable musical instrument, but also an investment instrument unique in all the world.”
“The best time to invest in a Steinway piano is always the same: today,” it states. “That’s because, when factory prices of new Steinway pianos increase, the value of existing Steinway pianos also rise.”
David R. Kirkland, a customer service administrator at the company who doubles as a sort of unofficial historian of all things Steinway, endorsed that assessment.
“People call in all the time and ask if the piano appreciates,” he said. “Very often, after five or 10 years worth of ownership, it’s more. If it does depreciate, it’s because of damage — sometimes catastrophic damage. When people have run statistics, they’ve found it’s an excellent investment.”
But is it really?
The answer took customers by surprise.
A few months after buying his piano, Liu, the college student, decided to transfer to a different school. Worried about the cost of transporting it and whether there would be sufficient space at his new housing, he looked into selling the instrument he bought for $67,000 — and learned it was worth no more than $30,000.
“I was OK with losing $5,000, but I got offers between $20,000 and $30,000,” he said. “Even cars don’t depreciate that much. My family, we are all upset. It’s definitely a big loss. My mother was with me when I purchased the piano. She is very angry.”
He kept the instrument instead, and said there was no recourse to recoup the reduced value.
“You trust them when you walk into the store. Even though they lied to me, they didn’t put it into writing. So there’s nothing you can do about it. I learned a lesson. I will never go again to Steinway for a piano.”
Now that her children are grown and out of the house, Rowley wants to be free of her Steinway as well. She had hoped to get back a good portion of the $66,000 she paid a decade ago.
“The piano is in pretty much perfect condition. It’s pristine. We took very good care of it.”
But the secondary market disagreed with her appraisal.
The piano would sell “for less than half what we paid for it. We would get 20 to 23 for it today,” she said. “That was surprising and it made me angry.”
Deceptive marketing, she believes, is not worthy of a company of Steinway’s standing.
“From a marketing and business point, I think what they’re doing is really foolish,” she said. “It was really disappointing.”
Hoang, in addition to wanting help with his son’s college tuition, began to see his piano as too big for the library room in his house. “I never thought I would sell it,” he said.
And he still hasn’t.
After his Steinway piano tuner assured him he could “easily” get $80,000 for the instrument, a dealer he contacted quoted a price in the $30,000 to $40,000 range, he said.
“That’s the reason I did not sell.”
Mancuso, who hoped to get $55,000 after having paid more than $69,000, sold her nearly new and virtually untouched piano for $39,000. “It was just a surprise how much it did depreciate,” she said.
There was a consensus among people working in the piano business that Steinways, after one day of ownership, lose about half their value — and don’t get it back for decades, if at all.
“If you call the dealer, they will offer you maybe 50 percent or less,” said Yuriy Kosachevich, a restorer who worked on the Steinway assembly line for nine years. “Even within five years, the price will drop that much.”
Kosachevich, now a piano service technician for the Peabody Conservatory at Johns Hopkins University, said he purchased a yellow, satin finish model B Steinway for himself for $36,000 in 2010. It had sold originally for $105,000 in 2005, he said.
“In general, that’s what we see, that they’re worth half the purchase price right away,” said Ronen Segev, who owns Park Avenue Pianos, which buys and sells used Steinways, and criticized the company for marketing its pianos as good investments.
“This is something I hear from a lot of people, that Steinway keeps saying appreciation, appreciation, appreciation,” he said. “They use the word investment. So these people who are buying, they think well, if they’re stretching the truth, it’s a reference point. Steinways go up in value. It’s part of the expectation. Then you look at the secondary market and you see what prices are. It really shocks people.”
David Charvonia, the salesman who handled Kilrea’s purchase, has since left Steinway and works for a competitor store that doesn’t sell their pianos. Told that others in the business claim Steinways drop in value by 50 percent immediately, he said, “That’s true.” He placed blame with customers for accepting what salespeople might tell them.
“Shame on the buyer who’s spending that kind of money on a piano and doesn’t do at least a little bit of research,” he said.
On the other hand, he claimed he himself never lied to customers and was bothered by colleagues who did.
“Personally, I’ve criticized salespeople who use it as a sales pitch, that their piano is going to appreciate in value, because it’s not.” One rep, he said, “told everyone who came in that the Steinway would double in value in 10 years. And it used to set my teeth on edge. I always try to not mislead the buyer. It can come back to bite you.”
Segev said steep depreciations don’t affect the wealthy as much as others customers since they are less likely to seek to sell their pianos, and if they do are more capable of absorbing any financial loss. Many deal only with Steinway and never test the secondary market.
“It hurts less for a select group,” he said. “That’s why Steinway keeps doing it. It’s just a shame that they resort to these tactics. If they just went back to telling people that their pianos depreciate less than other brands, that would be honest. Don’t say it goes up. Say it goes down less.”
“They’re big on saying this is a good investment,” said Larry Fine, publisher and editor of Piano Buyer magazine. “They shouldn’t be saying that. Most of the value is from inflation.”
He gave an example from his own life.
“My parents bought me a Steinway M in 1967 for $3,500. I sold it a few years ago for $10,000. That looks good on paper, but it took 45 years to get there. If I had put the same money in a bank, I would have come out better.”
A company spokesman did not dispute these findings.
Anthony Gilroy, the director of marketing and communications at Steinway, acknowledged that a Steinway piano “is going to go down in value significantly right off the bat.”
But he said he’s personally instructed his sales staff not to state otherwise, adding that he believed any claim of rising value made by a Steinway employee would be “a very rare occurrence.”
“They shouldn’t be saying that, obviously. And they’re not instructed to say that.”
He was asked about the sales brochure on the Steinway website that says “every handmade Steinway piano has increased in value.”
“That’s a statement that I myself phased out,” he said. “I agree with you that’s not a good statement. We pulled it four months ago from the website. I didn’t like it.”
But the guide, which Gilroy said has “probably been around for decades,” remains in wide use, this reporter found, including among authorized Steinway stores in California and Texas.
“The reason for the investment angle is because these pianos endure,” Gilroy said.
“It’s a lot of money to buy a Steinway but because a Steinway lasts so long, the piano will reach its purchase price over decades. For most people, it’s an aspirational purchase. They save for many years. And they’re not looking to sell it right away.”
One possible explanation for the company’s misinformation involves a peculiarity of the market: Steinway competes mainly against Steinway.
Because new models are more expensive than what’s available through second-hand brokers, buyers might be tempted to choose the economical option. So retail salespeople, while emphasizing the lasting value of a new piano, also tell customers to guard against the potential shoddiness of a used instrument.
They’ve even coined a term for the pre-owned piano. They call it a “Steinwas.”
Any instrument that has undergone repairs or has replacement parts — particularly if the work was not done by a Steinway technician — could easily become almost worthless, they say.
“You need a certified technician, who could say this is an authentic Steinway and is in good condition, that it’s not a counterfeit and has only original parts,” said Gilroy. “Otherwise, it’s a Steinwas.”
That view is all the more important now, with Steinway’s salesforce facing a glut of second-hand pianos, and Paulson angling to sell the company, according to those in the industry.
“They’re hurting from competition from rebuilt Steinways because people can’t afford a new one — and it’s a buyer’s market like crazy,” said Fine. “There are used Steinways everywhere. So they claim they’re poorly rebuilt pianos. But the rebuilding is better than ever. There’s some really good work out there.”
Segev said he was baffled by Steinway’s stance.
“It’s inherently hypocritical,” he said.
“These are supposed to be hundred-year pianos. They’re built like a tank. They never lose their value, says Steinway. Then they trash the secondary market. They tell people not to buy a gently used piano because it’s a ‘Steinwas.’ It makes no sense.”
Perhaps no buyer got a worse result than Kilrea. “I’ve never heard of anything like that,” said Fine, when told of the details. “It’s really sad,” said Charvonia. “I really liked her.”
Her case was unusual in that Kilrea needed creative financing to make the numbers work. And Charvonia wanted to help after she pulled up a bench and launched into Beethoven’s “Moonlight Sonata” on a splendid salon grand in santos rosewood.
“It’s part of their crown jewel collection,” she said, referring to models that are not black. “Handmade of beautiful rare wood.” Though played on occasion by concert pianists, “It looked like a new piano,” Kilrea said. “It sounded better than the others. I played it a few times and I loved it. I got to thinking, `I don’t do things for myself…Let’s see if I can bring this beautiful instrument into my world.’”
So Charvonia walked her through the details of an offer to finance the $78,000 purchase.
Kilrea would have to make a $20,000 down payment and agree to a layaway loan from the store, the Steinway Piano Gallery in Tyson’s Corner, Virginia, and another from a third-party lender that works with buyers.
“It was a seven-year loan for a total of $1,600 per month: $1,000 to the store for the layaway portion, and $600 to the financing company,” she said. “That’s obviously a big chunk. But my disability pension covered it.” Her total cost with interest and taxes would hit an even $100,000.
In the meantime, she would have to make due with an inexpensive Essex upright — a loaner from the store until Kilrea’s final payment cleared on the salon grand. So the piano she loved and was financing would remain in Steinway’s climate-controlled showroom. Kilrea was free to visit the instrument and play it any time she liked. She just couldn’t take it home.
The trouble started about five months later when Kilrea’s husband changed jobs the couple moved back to Canada. Then she got pregnant and they bought a house. Her military disability became less valuable because of the plunging Canadian exchange rate. She could no longer afford the payments. “I just couldn’t keep up,” she said.
That’s when she discovered a harsh reality. She was nearly underwater on her Steinway.
By that time, early 2017, she’d paid $67,000 and still owed $33,000. The store didn’t really want to buy it back from her. But they made an offer. They would pay off the $18,000 she owed to the finance company and write off her $15,000 store loan — and then take possession of the piano.
“I said, ‘Are you kidding me? How is that possible when it’s supposed to appreciate?’ It was in showroom condition.”
So Kilrea decided to try the second-hand market. “I started looking up blogs, and calling dealers. That was my first clue that something was up.” One broker offered her $20,000 cash. “Other people said they might sell it for 35. I said, wow that’s not what I was expecting.”
She says the store gave her a three-month reprieve to try to work out a deal, then abruptly paid off the finance loan and repossessed the piano after she missed two payments. An account rep, Lynn Butler, told her there was “nothing we can do,” Kilrea said.
“I said, ‘What do you mean there’s nothing we can do? Do you think it’s right that you would keep the piano and all the money that I’ve paid?’ And she said, ‘Yes. That’s business.’”
After she fired off an angry email to David Slan, one of the owners of the Steinway Gallery, the store agreed to reopen discussions with Kilrea. She says she’s been told she can get the piano if she comes up with $33,000, which she says she would have to borrow.
But even if she succeeds in finding the money, there’s no denying her loss.
The $78,000 piano she said she was told would go up in value, a grand salon in mint condition played only by concert pianists and that never left Steinway, is worth $45,000 less than she paid six years ago.
“The end of the story isn’t written,” Kilrea said. “I love the piano but I can’t undo what happened. The original disappointment remains, discovering that something I thought would retain its value is worth dramatically less than I was told.”
She added: “If I am not able to get the piano, if they keep it, I assume they would try to sell it again. And I wonder what the price would be. I suspect it would be something similar to what it was when I bought it.”