Over the past two years, the Covid-19 crisis produced well-documented boons for companies like the at-home fitness firm Peloton and Zoom Video Communications. But another company — this one based in Hawaii — also thrived amidst the pandemic for an unexpected reason.
Servco Pacific, which is best known for selling Toyotas and Lexuses, was perfectly positioned to catch a wave of interest from people locked up at home looking for creative, artistic and emotional outlets. The reason: Servco is also the majority owner of Fender Musical Instruments Corp. — the iconic maker of guitars like the Stratocaster and Telecaster. And millions of people started playing guitar and other fretted instruments, like ukuleles and basses, in the past two years.
“Our estimate is that 16 million new beginners started during Covid in the U.S.,” said Mark Fukunaga, Servco’s chairman and chief executive. “That’s huge.”
The boom has been so big that the editor of a music trade magazine likened Covid’s impact on entry-level six string purchases to that of Beatlemania. Rolling Stone asked, “Did Everyone Buy a Guitar in Quarantine or What?”
And Fender — and by extension Servco’s music division — saw sales increase 30% in 2020 and the same in 2021, Fukunaga said.
In dollar terms, the increases were in the $100 million per year range, Fender’s chief executive Andy Mooney recently told CNBC.
Fukunaga said he expects 2022 to remain strong, although he said much depends on Covid-19 and the new omicron variant. Sales are solid compared to pre-pandemic levels, Fukunaga said, although he said growth has slowed somewhat as governments have eased restrictions.
“Whenever we start to normalize — and a lot of that depends on how omicron develops — we still see growth,” he said. “We’re still quite optimistic.”
Although Servco is best known for selling cars – in addition to dominating Hawaii, it’s Australia’s largest Toyota dealer – the company’s music roots run deep. In fact, its music DNA dates back to the 1930s, when Fukunaga’s grandfather, Peter Fukunaga, started Easy Music as an offshoot of his appliance business, Easy Appliances.
By the 1950s, Easy Music connected with Clarence Leonidas “Leo” Fender, who was creating archetypal guitars like the Stratocaster and guitar amps. At the time, Fender’s ties to Hawaiian music were more than superficial. Before Fender made modern electric guitars, his dominant product was the lap steel guitar often used in Hawaiian music, Fukunaga said.
In fact, Fukunaga says: “Leo was not a regular guitar player; he was a lap steel player.”
The Hawaii connections also involved equipment. Leo Fender saw a Maui guitar player and self-taught amplifier engineer named Freddie Tavares playing a gig in California, Fukunaga said, and hired Tavares to help make Fender’s amplifiers. Tavares is also credited with helping design a component of the Stratocaster.
By the 1980s, according to Servco’s website, the company was part of the small investor group that backed Bill Schultz in the buyout of Fender from CBS. Some 25 years later, Servco increased its ownership by acquiring a big stake in Fender from Weston Presidio, a private equity firm.
In 2005, Servco sold Easy Music to Peter Dods, a former Wall Street analyst and son of the longtime chief executive of First Hawaiian Bank, Walter Dods Jr. The younger Dods says he initially wanted to start a small business selling sound equipment used by hip-hop artists, but his father, who was on the Servco board, convinced him to pursue the bigger business.
Peter Dods says he knew people would think that his parents were buying a business for him, but he said, “Really it was more of my dad pushing me off the edge.”
In any case, the pandemic has also been a boon for Easy Music. Home and mobile recording equipment flew off shelves during the early days of the pandemic, as locked-down musicians sought to get their music out when live gigs were verboten.
Since then, sales across the board picked up: guitars, keyboards and recording gear are all popular, Dods said. Now that things are opening up, DJ equipment is regaining popularity.
None of this just happened, Dods says.
Initially caught flat-footed by the pandemic in terms of its online presence, Easy Music quickly enhanced its e-commerce business. The company is now adding about 100 new products a month. And, like many retailers, there were times when Easy Music had to shut down under government orders and needed help from the federal Paycheck Protection Program.
“Without that we might have had to throw in the towel,” he said.
Among those picking up a guitar as the world shut down was Murti Hower. A 62-year-old yoga instructor, Hower hadn’t played since he quit trying at 14. Out of work and mostly stuck at home in March 2020, Hower thought, “I’ve just got to do something; I’m going to go crazy.”
So he ordered a Fender acoustic guitar online. Since then, the guitar has become a friend for Hower and his wife, Larina Hawkins. They named the guitar Joni after the singer Joni Mitchell, and now Hower has a band including friends on tambourine and harmonica. They get together in Kapiolani Park for full-moon jam sessions.
“We sound terrible,” he says. “We’re not ready to do any shows. But we have fun.”
Of course, not all new players bought Fenders — or new instruments at all. Rose Wright is a case in point. A massage therapist and personal assistant who lives in Hawaii Kai, Wright picked up a second-hand ukulele from a client she was helping get rid of clutter.
Wright took the instrument to a friend who refurbishes instruments, and before long Wright had joined an informal hui practicing ukulele outdoors in a park once a week.
Wright says she tried playing guitar 20 years ago but quit in frustration. One difference now, she says, is there are many online tools to help her learn, especially YouTube videos. After forcing herself to practice 15 minutes a day, Wright says she’s now up to 35 minutes.
“When you play with YouTube, you get sound that you’re jumping into,” which makes practicing more enjoyable, she said.
Her advice to beginners: “If you play a little bit every day, even 15 minutes, you get better, and who doesn’t have 15 minutes?”
Wright and Hower embody what Fender’s market research shows, Fukunaga said.
For example, he said, online tools have become an enormously popular way for people to learn. When Fender offered 1 million free subscriptions to its Fender Play lesson site during the early days of the pandemic, Fukunaga said the company expected maybe tens of thousands of new subscribers. Instead, 1 million joined within days.
Research also shows that people tend to stick with playing as long as they can make it through what Fukunaga calls the “Death Valley” of the initial days when practicing is no fun.
“If you can get people over that one-year hump, they tend to become lifetime players,” he said.
Finally, Fukunaga said, there’s the milestone of playing for an audience, which he calls an “inflection point” that can solidify a budding player’s engagement with the art. Such performances include posting videos on social media platforms like YouTube and Instagram, where no one expects a novice performer to be stellar.
“Social media is really about showing up and putting yourself out there,” he said.
Servco’s extraordinary place in the world of music isn’t lost on Fukunaga. He knows few other brands are so beloved that they inspire people, some of whom don’t play guitar, to wear T-shirts and or get tattoos bearing the company logo.
But that doesn’t mean sitting still. In October, Fender announced a merger with the recording technology company PreSonus, which makes a range of sound products, including recording software, microphones, mixing systems and speakers. The announcement acknowledged that times are changing, as guitar players these days don’t simply want to plug into a warm, humming Fender vacuum tube amplifier.
“Many also plug their instruments into interfaces, using virtual amps and effects to create their sounds,” Fender said in a statement announcing the deal. “Players of all levels are spending more time online than ever before and using a variety of products and technologies to learn, practice, jam and perform, record and share. This modern workflow has expanded the traditional signal chain to include capturing and distributing creative content to the world.”
Helping position Fender for the future while staying true to its roots is vital for Servco, which started as a two-car auto garage in Waialua in 1919, Fukunaga said. That includes giving back by donating 2,750 ukuleles and acoustic guitars to Hawaii public schools and helping found a group supporting a California ballot measure that provide more funding for arts education.
“Fender is now a core business for us for the long term,” he said. “Were looking at ourselves as custodians of this amazing legacy.”
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