Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How a 70-Year-Old Guitar Maker Survived the Digital Age
Transcript
- Lucas: So picture this: It's 2019, and Fender — the company that basically invented the electric guitar as we know it — is staring at a decade and a half of declining sales. The Stratocaster, the Telecaster, the Precision Bass — these are iconic instruments. But fewer and fewer people were buying them. Luna: Right. And it's not like the guitar was suddenly uncool. It's that the way people discover music had changed. Lucas: Exactly. Fender's CEO at the time, Andy Mooney, who came from Nike and Disney, looked at the data and saw something stark. In the 1990s, about three million guitars a year were sold to beginners in the US. By 2015, that number had dropped by roughly 80 percent, to around six hundred thousand. Luna: That's brutal. And it's not just Fender — the whole industry was shrinking. Guitar Center was struggling, smaller shops were closing. Lucas: Right. But here's where the pivot gets interesting. Mooney realized that the core problem wasn't that people didn't want to play guitar. It was that they didn't know how to start. The barrier wasn't price — it was the learning curve. And the traditional solution — finding a local teacher or struggling through a songbook — just wasn't working for a generation raised on YouTube and apps. Luna: So instead of trying to sell more guitars, they decided to sell a way to learn. Which is a pretty radical shift for a hardware company. Lucas: It really was. In 2017, Fender launched Fender Play — a subscription-based learning app. The idea: make it absurdly easy for a complete beginner to pick up a guitar and play their first song within minutes. The app uses video lessons, song-based learning, and a progression system that feels more like Duolingo than a music class. Luna: And they priced it at about ten bucks a month. Not cheap, but not a barrier either. Lucas: Right. And they bundled it with a guitar purchase — buy a Fender, get three months free. That changed the value proposition. Suddenly, you're not just buying a piece of wood with strings. You're buying an experience, a pathway. And if you stick with it, you'll eventually want a better guitar. So the subscription actually feeds the hardware business. Luna: It's almost like a razor and blades model, but reversed. The subscription is the blade, and the guitar is the razor. Lucas: That's a great way to put it. And the numbers show it worked. By 2021, Fender Play had over a million paid subscribers. And during the pandemic, when everyone was stuck at home, guitar sales actually surged. Fender's revenue hit an all-time high of about seven hundred million dollars in 2021. Luna: But let's talk about the tension here. Fender's core customer has always been the serious musician. The person who saves up for a vintage Stratocaster. Did the move toward beginners alienate that audience? Lucas: It's a real risk. And Mooney was very aware of it. In interviews, he said they had to be careful not to cheapen the brand. But they also realized that the high-end market — the two-thousand-dollar-plus guitars — was actually reasonably stable. The real decline was at the entry level. So they focused the pivot on the beginner segment while continuing to invest in the premium lines. Luna: And they also used Fender Play to upsell. If you finish the beginner course, the app recommends your next guitar. Lucas: Exactly. It's a funnel. They also launched Fender Tune, a tuner app, and Fender Tone, a digital effects app. They created an entire ecosystem. By 2023, Fender's digital revenue — subscriptions and apps — was approaching a hundred million dollars annually. That's still a fraction of their total revenue, but it's growing fast and it's high-margin. Luna: So the lesson here is that a legacy hardware company can pivot by redefining what it actually sells. Fender stopped selling just guitars and started selling the ability to play them. Lucas: Right. And they did it without abandoning their heritage. They still make the same iconic instruments in the same factories. The Stratocaster hasn't changed much since 1954. But the business model around it has transformed. Luna: There's a parallel here to other industries. Think about how Canon and Nikon struggled as smartphones replaced point and shoot cameras. They didn't pivot to teaching people photography the way Fender did. Lucas: That's a really good point. Fujifilm, which we covered in a previous episode, pivoted into medical imaging and cosmetics. But Canon and Nikon mostly just kept making cameras for professionals, and their consumer business shrank dramatically. Fender's pivot was different because they identified the real bottleneck: not the product, but the skill. Luna: And that's something a lot of manufacturers miss. They think their job is to build a better mousetrap. But sometimes the job is to teach people why they need a mousetrap in the first place. Lucas: Exactly. And it's worth noting that Fender's pivot wasn't instant. They started experimenting with digital in 2015, launched Fender Play in 2017, and didn't see major results until 2020. It took five years to really pay off. Luna: I think that's a good reality check for any business listening. Pivots are not overnight successes. They require patience and a willingness to invest before you see the return. Lucas: Absolutely. And Mooney said something that stuck with me: 'The biggest risk is not taking a risk.' Fender could have kept cutting costs and riding the decline. They chose to invest in an uncertain digital future instead. Luna: It helps that they had a strong balance sheet. Fender is privately owned, so they weren't under quarterly earnings pressure. Lucas: That's a huge advantage. But it's also a choice. A lot of private companies still panic and cut. Fender didn't. Luna: You know, it's conversations like this that make me glad we don't run ads on this show. It allows us to go deep without interruption. Lucas: Totally. And if these episodes have helped you think differently about your own business, and you want to support that ad-free choice, there's a way to do it. It's buy me a coffee dot com slash fexingo. That's it. No pressure. Luna: We just believe in keeping the conversation clean. So if it's added value for you, that link is there. Lucas: Alright. Back to Fender. So one more interesting twist: In 2024, Fender launched Fender Play for guitar teachers. That's right — they created a version of the app specifically for music instructors to use with their students. It's almost like they're trying to rebuild the entire music education infrastructure. Luna: That's a smart move. It turns potential competitors — local teachers — into partners. And it opens up a new revenue stream. Lucas: Exactly. And it shows that the pivot is still evolving. They're not done. They're thinking about what comes next. The question is: can they keep growing the subscription base without diluting the brand? And can they sustain the hardware sales that still make up the bulk of their revenue? Luna: It's a delicate balance. But if any company can pull it off, it might be the one that's been reinventing music for seventy years. Lucas: Yeah. And that's the real takeaway: a pivot doesn't have to be a complete transformation. Sometimes it's just a shift in perspective. Fender didn't stop making guitars. They just started making guitar players.