What do you do when you take over leadership at a company whose very name suggests a business facing decline? When your predecessor was an ideas guy, a guru, a hands-on coder? How do you fill those shoes and encourage growth? You do what many thoughtful CEOs do: focus on the people.
CD Baby faced just such a challenge. Its name shouts its past: The business sprang from a moment when artists no longer had to rely on labels to get out there, and they used a now fading format to do so. What the name won’t tell you is how the company transformed, from a business built around the charisma of its founder, to a company built on a solid team of dedicated and motivated employees, so dedicated that employees rarely leave. CD Baby has seen less than 1% employee turnover this year, a figure down from more than 20% in the past.
And it’s seen continual financial growth, despite the repeated disruptions of the music business’ transition to digital distribution and then streaming. “The number of artists and the growth in our catalog is unprecedented,” notes CD Baby CEO Tracy Maddux. “We’ve seen the annual additions to our digital catalog of more than 750,000 tracks per year for the past 5 years.”
The company had to pivot. Founded by a thought leader in DIY music, Derek Sivers, who had been the face and driving force behind the company for a decade, CD Baby faced a serious transition from a single, central personality to a more horizontal management approach. It had to keep its creative, quirky soul and its devotion to customer service, while completely reimagining its digital offerings and shifting away from selling physical objects, to partnering with artists and platforms around the world.
“We shifted resources away from our .com presence, the online store that sold downloads and physical, both declining businesses,” Maddux explains. “We shifted resources towards digital rights management and monetization, which are both growing businesses and services artists desperately want and need. And growth happened.”
This growth happened because the new CD Baby cultivates talent and encourages employee development. Maddux likes to credit his team for this shift, but deserves some of the credit himself.
Maddux listened carefully to the CD Baby team, methodically addressed bottlenecks and issues, from how inventory was managed in the warehouse to what services needed to expand to best serve artists. CD Baby began offering professional services that finally allowed independent artists and boutique labels access to the full range of royalties, by acting as publishing administrators, helping monetize YouTube videos, and offering sync licensing
In the past several years, CD Baby has become a one-stop platform that educates artists on how to make money from their music and offering monetization of all music rights, from CD sales, to digital distribution, to publishing and sync. “Growth requires a collaborative approach. No one has all the knowledge and understanding. A simple business, like digital distribution, does not require a rocket scientist to re-imagine. Derek launched groundbreaking digital distribution back in 2004 and many others have copied, from Tunecore to Distrokid,” says Maddux. “But to be of real service to artists means investing in people and enlisting the talents of many to broaden and deepen the offerings.”
The stories of CD Baby leaders rising through the ranks feel somewhat atypical for tech-driven companies born during the first dot-com boom. Take Joel Andrew, who started work in CD Baby’s warehouse 13 years ago and who this year was sworn in as a member of the Oregon State Bar. “He now serves as our in-house counsel,” Maddux notes.The senior leaders for Marketing and Finance also rose from entry-level jobs over the course of 11 years.
“Our team has grown by 40% in the past five years,” Maddux explains. “We now have 135 full-time employees and 5 contractors in 7 locations, supporting artists all over the world in three languages--and counting. Along the way we’ve invested in building a culture, powered by a clear mission and vision of working in support of the artist community. We are working to create a place where team members are excited to come to work; where music industry professionals can stay and grow and have a career for a decade or longer.”
Maddux and his leadership team very much view CD Baby as a technology platform company. “Now most of our new people investment is in platform development, meaning people who write code to make our various websites work better for our artists. We’re reinvesting our profitability into our people who then improve the quality and enhance the functionality of our offerings,” says Maddux. “We now employ more than 30 technologists who do everything from writing code to developing our gigantic music database. Many of these folks started somewhere else in the company, including positions in the warehouse and client support.”
And those investments in CD Baby’s digital offerings have helped the artist earn more. “It has been sad to see the decline in physical. Today CD and vinyl sales represent less than 10% of our artists’ gross sales. But the promise and growth in digital sources of revenue are actually growing what our average client takes home each year. This includes publishing and sync sales, which are now more than 10% of artist earnings. We view our role in technology development as enabling this earnings shift to digital sources of artist revenue from physical.”
“I’m having this radical and recurring thought lately,” said Maddux. “If one visionary coder like Derek Sivers can start a platform that does so much good for its artists, and we can build on that start by developing an army of technologists who improve the core idea, why are we not spending all of our time as leaders developing our people?”