The first things you notice are the guitars. Guitars on the walls, guitars on the couches, guitars behind glass and in front of desks. Acoustic, electric, in red, white, and blue. Some have polka dots. Others have paisley patterns. On at least one is a hand-painted, half-naked woman. (It was a gift.) This is the sleek new Hollywood office of Fender, the West Coast–based musical instruments company. As you’d expect, it is bursting with guitars.
But the office is also surprisingly quiet. Fender executives say it’s usually not like this, that many employees love to noodle on their instruments in spare moments the way the rest of us toy with our smartphones. But when Fortune visits on a warm day in October, most people’s fingers are working keyboards, not fretboards. This is the new, more digital Fender: a 71-year-old American icon built on products made of wood and metal but betting its future growth on those made from zeros and ones.
With megawatt customers like Eric Clapton, Sheryl Crow, and U2’s the Edge, Fender’s reputation far outpaces its revenue, about half-a-billion dollars last year. The company spent the better part of the past decade struggling with debt and a lack of growth, and in 2012 abandoned an IPO, citing unfavorable market conditions. In 2015 its owners, private equity firms TPG Growth and Servco Pacific, installed Andy Mooney, a veteran of Disney and Nike, as CEO. His marching orders: Turn a trade-facing analog company into a consumer brand with a digital future.
“They were looking for someone who would nurture the core business but be excited to take the brand to digital products and services,” Mooney tells me from a glass conference room named Chrissie Hynde, after the Pretenders’ front woman. “So I was just excited, period.”
Mooney’s early enthusiasm was tempered when he, general manager for digital Ethan Kaplan, and chief marketing officer Evan Jones set out to collect data on the company’s customers. “There was a dearth of data to gather,” Mooney says. “So we conducted what might have been the only comprehensive consumer study in the industry.”
The team emerged with several insights that bucked long-held industry beliefs. Among them: Half of new guitar players are women—and they prefer acoustic instruments to electric. Nearly half of Fender guitars are purchased by people new to the instrument—and 90% of them abandon it within the first year. And crucially, new players spend four times as much on lessons as they do on the instrument.
“If we reduce the abandonment rate by just 10% and get more of the salmon through the dam, the whole industry will grow,” Mooney says. “So that set us on the path to do digital online lessons.”
Fast-forward to 2017 and Fender’s digital strategy has gone, as Spinal Tap’s Nigel Tufnel would say, to 11. Fender Tune is a free mobile application that enables you to tune your guitar using your smartphone’s microphone. Riffstation, which Fender acquired in 2015, listens to your favorite songs and spits out musical notation. And Fender Play, which Mooney calls the company’s “keystone” digital product, is a $20 per month video-lesson service.
“We sell guitars and amps, that’s the physical part of it. But there’s a tool belt you need to become a player: a tuner, tabs, tuition, and tracks—stuff to play along to,” Kaplan says. “Why would you enter into an online space as a guitar company? It’s to know more about players: understand who they are, talk to them, and guide them along the way.”
It’s still too early to tell whether the digital investments are reinforcing Fender’s bottom line, Mooney says, but they’re already transforming the way Fender thinks and works.
“Two years ago it was me in a conference room provisioning the first server of what is now three dozen,” Kaplan says, gesturing to the office around him. “Everything we’ve done since has been for the first time: every line of code, every video we’ve shot, every image, every design, every hire. You find the holes by falling into them. It’s a new thing for the company to do.”
A version of this article appears in the Dec. 1, 2017 issue of Fortune with the headline “Amped and Revamped.”
