tangled

Some in the industry media expressed surprise at the “abrupt” resignation of Mike Pratt from the CEO position at Guitar Center, having been replaced by Darrell Webb, former CEO and Chairman of Sports Authority (and, earlier, CEO and Chairman of its sister company, Jo-Ann Fabric & Craft Stores).

When you think about it, though, it isn’t much of a surprise. Ares Capital, the new majority owner of Guitar Center, didn’t invest $500 million for a 60-percent stake in a limping boutique. It had a vision for financial return (and a need for a way to retire what is still more than $1 billion in GC debt)…and venture capital companies are not known for their patience. Some industry insiders suggest Pratt came up with a plan and Ares said, “Not good enough.” If so, the firm didn’t give him much time to come up with it, and virtually no time even to attempt its execution.

Ares took over this past April, and the shuffling of the game pieces took place in mid-November. Replacing a CEO isn’t as simple as sending in another quarterback from the bench. It takes time to recruit, vet and politically massage decision makers onto the same page behind a new candidate. Although people talk about a disappointing third quarter for GC (and it certainly was), it’s conceivable that Ares began its search the day it closed the deal with Bain Capital. After all, if my money’s at stake, I want my people managing it—not some guy placed there by the company I just bailed out. If that firm couldn’t solve the problems, why should I expect its hiring decisions to be good?

And so, Darrell Webb comes out of retirement (he retired from Sports Authority in 2013) to head GC. But what can we expect from the man now leading one of the biggest companies in the industry? He certainly has many years’ experience in specialty retail. Did he retire willingly? And what coaxed him out of retirement? The challenge? The compensation? Could it have been boredom? What I want to know is this: does he play an instrument? He’s not the Darrell Webb bluegrass mandolinist guy who fronts the Darrell Webb Band. That would have been cool. But does he know what we do here in MI on a deep, personal level?

I ask the question because the music products channel has a spotty record when it comes to “outsiders” understanding this industry. The difficulties go back generations…at least to the abortive CBS/Fender association and similar pairings. But we’re also in an era where enough has changed that I think someone from outside our industry can bring a much-needed vision and focus to the table: something our inbred industry has had its difficulties with, as well.

I don’t think you have to have been raised in MI to be successful here. But, at some point, you have to love what we do. You have to have a passion for music. If you do, then you will understand our customers in a way that no algorithm can. If you understand our customers AND you can run a big company efficiently and on point, then you will succeed. But I believe you need both skills.

In my opinion, the ideal person to head up GC would be someone with the experience Webb has in large specialty retail, but someone who is also an avid guitar hobbyist. (For the record, no one from Ares has called for my opinion on this or any other topic.) I don’t know if you could name 10 people in this industry with the skill set and experience to run a company as large as Guitar Center, but I don’t think any of them would want to work for the suits at Ares. They actually need Tom Bedell, but I suspect his company name, Two Old Hippies, sends the necessary message. The Man ain’t bringin’ him down.

I’m really interested in the way this plays out. Industry-wide, we need to break out of the self-congratulatory provincialism that still exists in many areas. We’re not big. PepsiCo alone is about 10 times the size of our entire industry. We can’t continue to do things “old school,” just because they’ve worked for years.

But we also are evolving into a service industry in many respects, providing the experience of making music as much as—or even more than—the tools. A significant chunk of the music products industry is sold by companies like Amazon…companies that have (inaccurately, I think) fostered the view of music products as commodities. Although that’s a discussion for another column, it’s obvious that we need to do something more than just sell to remain viable. Perhaps lessons learned at Jo-Ann and Sports Authority will help Webb to reimagine the GC chain in this light.

But I’m getting ahead of the game here. Nothing says that Ares wants Webb to do any such thing. The firm wants him to make numbers happen—and the sooner, the better. He could have a brilliant plan that could propel the entire industry forward, only to have it quashed as too slow or capital intensive.

Because, in reality, Darrell Webb only runs Guitar Center at the pleasure of the Ares Board. If its members don’t see the results they want—results perhaps completely unrealistic and totally disconnected from the long-term health of either GC or our industry—then he will dutifully present a well-crafted letter of resignation on the eve of the next CEO appointment.

Time will tell, and he is only one of the game pieces in motion. Set your alarms for the fourth-quarter results for 2015 and we’ll see what’s happening then. In the meantime, welcome to MI, Darrell Webb. If you enjoy the NAMM show, you might do well here.

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