Latest / Startup Stories with Fexingo: Conversations About Founders, Funding, and Building Companies from Zero / How Fender Brought Guitar Playing Back From the Dead
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- Lucas: So picture this: it's 2015, and the electric guitar is dying. Sales have been in decline for over a decade. Guitar Center is bleeding money. The conventional wisdom is that kids just don't want to learn guitar anymore — they want to make beats on a laptop. And Fender, the company that put a Stratocaster in Jimi Hendrix's hands, is staring down the barrel of irrelevance. Luna: Right, I remember reading around that time that guitar sales had dropped something like 30 percent from their peak in the late 90s. It felt like the obituaries were being written. Lucas: Exactly. And yet, by 2021, Fender files for an IPO, and their revenue is north of 700 million dollars. They've grown double digits for several years running. How did a company that made electric guitars — a product everyone said was obsolete — pull off a genuine business turnaround? Luna: I'm guessing it wasn't by selling thousand-dollar vintage reissues to aging boomers. Lucas: No, it was the exact opposite. And, you know, before we get into the details, I want to mention something. Fender's story is exactly the kind of business conversation that we love digging into on this show — specific, concrete, and full of lessons you can actually use. And these conversations only exist because listeners like you support the ad-free model. If Fexingo has helped you think differently about a business problem, you can keep it going at buy me a coffee dot com slash fexingo. No pressure at all — just a sincere thanks to everyone who already does. Luna: Absolutely. It's a small gesture that makes a huge difference. So back to Fender — what was the big insight? Lucas: The insight was that the guitar wasn't dying. The market was just ignoring the actual customer. For decades, Fender had focused on serious musicians — the working player, the collector, the person who already knew how to play. But the decline was driven by the fact that they were terrible at getting beginners into the fold. Luna: So they realized that the real growth wasn't in chasing the existing player, but in creating new players entirely. Lucas: Exactly. And they had data to back it up. In 2013, Fender commissioned a study that found that 90 percent of new guitar buyers quit within the first year. The number one reason? They couldn't learn fast enough. The product itself — the guitar — was fine. But the learning experience was broken. So Fender's CEO at the time, Andy Mooney, made a bet: what if Fender became a company that taught people how to play, not just a company that sold them guitars? Luna: That's the moment they launched Fender Play, right? The subscription app? Lucas: Right. Fender Play launched in 2017. It was a mobile app with structured video lessons, built for complete beginners. And it wasn't an afterthought — they invested heavily in it. They hired actual music educators, they shot in real studios, they designed the curriculum to get someone playing their first song in under ten minutes. The price point was ten bucks a month. Luna: And that changed the economics of the customer relationship. Suddenly Fender wasn't just a one-time hardware sale. They had a recurring revenue stream from the same person. Lucas: Exactly. And the data from the app told them something fascinating. The typical Fender Play subscriber wasn't a teenager. It was a 30-to-45-year-old professional, often with disposable income, who had always wanted to learn but never had the time. These were people who'd buy a Squier — Fender's budget brand — because they didn't want to drop two grand on a hobby they might quit. But if they stuck with it, they'd upgrade to a Fender. So Fender started optimizing for that customer. Luna: That's the Squier strategy in a nutshell. Squier was always seen as the cheap starter brand, but Fender realized it was the gateway. If they made Squier guitars actually good — not just cheap — they could hook people early. Lucas: They did exactly that. They invested in Squier's quality control, updated the designs, and started selling Player Series guitars — made in Mexico — for around 600 bucks instead of 1200 for an American-made model. And they pushed the whole ecosystem: you buy a Squier, you subscribe to Fender Play, you learn, you eventually buy a Fender. The lifetime value of a customer who went through that funnel was dramatically higher than someone who walked into a store and bought a single guitar once. Luna: So the app wasn't just a side project. It was the retention engine. Lucas: It was. And the numbers prove it. By 2020, Fender had over a million Fender Play subscribers. Digital revenue — subscriptions and the app — grew by 40 percent year-over-year. Their overall revenue hit 700 million, and they were profitable. The IPO filing in 2021 showed that the company had effectively doubled its addressable market by turning non-players into players. Luna: But wait — didn't the pandemic also give them a massive tailwind? Everyone stuck at home, looking for hobbies. Lucas: Absolutely. Guitar sales spiked during lockdowns. In 2020, Fender sold more units than any year since 2010. But here's the thing — they were set up to capture that demand because of the groundwork they'd already laid. If they hadn't built Fender Play and the Squier pipeline, that surge would have been a one-time blip. Instead, they converted a lot of those pandemic buyers into long-term subscribers. Luna: So the pandemic accelerated a trend that was already in motion. But what about the competitive landscape? Gibson was going through bankruptcy around the same time. Why did Fender succeed where Gibson stumbled? Lucas: Gibson's problem was the opposite. They focused on high-end, high-margin guitars — Les Pauls and SGs that cost two, three thousand dollars. They neglected the entry-level market. And when the market shifted, they had no way to bring new players in. Fender's strategy was to cast a wide net at the low end and build loyalty over time. Luna: It's almost like a SaaS model applied to hardware. Acquire the customer cheap, monetize through subscriptions, and upsell them later. Lucas: Exactly. And it required a cultural shift inside Fender. The company was founded in 1946 — it's a 70-year-old manufacturer. Getting the engineering and marketing teams to think about software and subscriptions was not easy. Andy Mooney, who came from Nike, pushed hard on direct to consumer. He said, 'We need to own the relationship with the player, not just the factory.' Luna: That's a big bet for a company that had always sold through dealers. Did they alienate their retail partners? Lucas: Some, yes. But they were careful. Fender Play was positioned as a tool that drives people into stores — because if you learn a few songs, you want to try a better guitar. And they kept selling through Guitar Center and independent shops. The twist was that Fender Play also collected data on what songs people wanted to learn, which helped them design marketing campaigns that drove demand for specific products. Luna: So the app became a market research tool as well. They could see that 'Smoke on the Water' was the most requested song, and then they could run ads for a Stratocaster alongside that lesson. Lucas: Precisely. And they even started partnering with artists to release exclusive lesson content. You could learn a Taylor Swift song directly from her guitar teacher. That's a powerful endorsement. It made Fender Play feel like the authoritative place to learn, not just a random YouTube channel. Luna: I want to go back to the pricing strategy. Selling Squiers for 199 bucks — that's almost a loss leader if you factor in manufacturing and shipping. How did they make the math work? Lucas: They didn't lose money on Squiers, but the margins were thin. The profit came from the ecosystem. A Fender Play subscriber who stayed for a year generated 120 dollars in revenue. If they bought a Squier, that was another 200. If they later upgraded to a Player Series, that was 600. And the average customer who went through the funnel spent about 900 dollars over two years. That's almost three times the lifetime value of a traditional one-time buyer. Luna: So the low price point was actually an investment in acquisition. And the subscription was the retention mechanism. Lucas: Right. And they kept iterating on the product. In 2019, they launched Fender Play for Kids, which was a simplified version for younger players. They added guitar tuners, metronomes, and song libraries. The app itself got better at personalization — it would recommend lessons based on what you struggled with. It felt less like a library and more like a coach. Luna: Did they ever consider acquiring a competitor like Yousician, which was already big in the guitar-learning space? Lucas: They didn't need to. Fender Play grew organically to over a million subscribers. And they had a moat that Yousician didn't: the hardware. If you buy a Fender guitar, you're much more likely to use Fender Play. And if you use Fender Play, you're much more likely to buy a Fender. It's a virtuous cycle. Luna: It's interesting that this worked for guitars but hasn't really worked for other instruments. Why do you think that is? Lucas: Good question. I think guitars have a cultural cachet that pianos or drums don't. The guitar is tied to rock and roll, to pop stardom, to a certain kind of identity. People want to learn guitar because they want to be the person who plays guitar. That emotional motivation is strong. For Fender, the brand itself is part of the product — it's not just a tool, it's an aspiration. Luna: So the turnaround was really about reframing the company from a manufacturer of instruments to a company that enables a lifestyle. And that required a completely different set of capabilities. Lucas: Exactly. And it paid off. Fender's IPO in 2021 valued the company at over 4 billion dollars. That's almost double what it was worth five years earlier. The lesson for any legacy business is: don't assume your customer base is fixed. Sometimes the biggest growth opportunity is the person who hasn't bought from you yet, because they don't know how to use your product. Luna: It's a reminder that the product isn't just the physical thing. It's the entire experience of becoming a user. If you can make that journey easy and rewarding, you can create customers where none existed. Lucas: And Fender did it without abandoning their core. They still make the same Stratocasters and Telecasters that legends played. They just added a front door that invites people in. That's the hard part — most companies either become too focused on the past or too eager to pivot into something unrecognizable. Fender managed to do both: honor the heritage while building a bridge to the future. Luna: It makes you wonder what other legacy industries could use the same playbook. Imagine if a camera company like Nikon did this for photography learning, or if a bike manufacturer did it for cycling. Lucas: Some are trying. But Fender's success came from being patient. They didn't expect the app to turn a profit in year one. They treated it as a long-term investment in customer acquisition. And that's the hardest thing for public companies to do — invest for the long term when the market is demanding quarterly results. Luna: Right. Fender was private when they built Fender Play, so they had the luxury of time. Once they went public, the pressure changed. We'll have to see if they can maintain the momentum. Lucas: Absolutely. But for now, the story stands as one of the most elegant turnarounds in consumer hardware. A company that was written off as a relic found new life by asking a simple question: what does our customer actually need to succeed? And then building a business around the answer.