The Pre-CBS Debate

The sale of Fender to CBS has provoked much retrospective consternation among guitar players and collectors, some of whom consider so-called 'pre-CBS' instruments - in other words those made prior to the beginning of 1965 - as superior to those made after that date. This is a rather meaningless generalization, and it is a pity that such an assumption has become so entrenched. Clearly, it is ludicrous to suggest that a guitar made at the Fender factory on Thursday December 31, 1964 would have a natural superiority over one made the very next day in the same building by the same workers using the same materials and tools. But there can be little doubt that over a period of time after the sale to CBS did introduce changes to the production methods of Fender guitars, a proportion of which were detrimental to the quality of some instruments.

According to some insiders, the problem with CBS at this time was that they seemed to believe that it was enough simply to pour lots of money into Fender. And certainly Fender's sales did increase and profits did go up - Randall remembers income almost doubling in the first year CBS owned Fender. Profit became the number one consideration, says Forrest White, who remained as manager of electric guitar and amplifier production. "Buddy, if you didn't show profit down there so they could have a good report with the stock holders, well look out! That's the only thing they were concerned about."

Dale Hyatt stayed on as a salesman with CBS. He says: "They put an awful lot of money into that company, enough for it to be the biggest success in the world. They gave them everything they needed to do the job, but they put in the wrong people. They took out the existing people because they didn't have enough education, people who had put it where it was, and shipped in their own people with educational background and degrees. They hired a number of people from a glassware company whom we always referred to as 'cup-and-saucer salesmen', they didn't know a headstock from a tailpiece. Their idea was, and I was told this by one of them, a guitar is no different from a loaf of bread: you put it in a package, and ship it. That's all there is to it."

Forrest White recalls: "CBS had a vice president for everything. I think they had a vice president for cleaning the toilets. You name it, whatever it was, it had a vice president." And Don Randall: "Everybody at CBS was climbing the corporate ladder, stepping on everyone else's fingers as they climbed up. There was a tremendous amount of infighting." And George Fullerton: "When the company was sold, there were four people in the research and development lab. Within a year after CBS got in on it, the R&D [research & development] section was moved away from the factory into another building, and I once counted 65 hourly-paid people on the time-clock over there."

Forrest White recalls a specific example of the cavalier attitude of some of the new staff. "They brought some guy into purchasing, didn't know one thing about musical instruments, but he made this boast that we were paying too much for everything and he was gonna save the company all kinds of money. Someone comes in selling a bunch of magnet wire they wanted to clear out. To this CBS guy, magnet wire was magnet wire, the heck with gauge and coating. So he buys all this crap. And when I found out, I told him we couldn't make our pickups with this stuff, it's not the right specification. But I was told we were going to use it. Now if you can imagine what's happening to the sound of the guitar..."

$13 Million Worth of Fender

All in all, Fender were extremely successful. Then, in January 1965, the Fender companies were sold to the mighty Columbia Broadcasting System, Inc., better known as CBS. A musical instrument trade magazine reported in somewhat shocked tones: "The purchase price of $13 million is by far the highest ever offered in the history of the music [i.e. musical instrument] industry for any single manufacturer, and was about two million dollars more than CBS paid recently for the New York Yankees baseball team. The acquisition, a sterling proof of the music industry's growth potential, marks the first time that one of the nation's largest corporations has entered our field. With sales volume in excess of half a billion dollars annually, CBS currently does more business than the entire music industry does at retail. Actual purchase of Fender was made by the Columbia Records Distribution Division of CBS whose outstanding recent feats have included the production of 'My Fair Lady.'"

Economic analysts were advising the big corporations of the time to diversify and acquire companies from a range of different businesses - hence the New York Yankees and, in turn, Fender for CBS. They were doubtless told that all they had to do was finance and expand the new acquisitions, and rich pickings would follow.

Leo Fender was by all accounts a hypochondriac, and the sale was prompted by his acute health worries, principally over the sinus complaint he'd had since the mid-1950s. He told International Musician in 1978: "I thought I was going to have to retire. I had been suffering for years with a virus infection of the sinuses and it made my life a misery. I felt that I wasn't going to be in the health to carry on."

The sale of Fender to CBS was handled by Don Randall, who says that at first Leo had offered him the company for a million-and-a-half dollars. Randall didn't feel he was ready for that kind of career move, so suggested later to Leo that he might see what he could get from a outside buyer. Leo agreed, and Randall's first tentative discussions took place with the Baldwin Piano & Organ Co. of Ohio, probably in early 1964. Randall also contacted an investment banker, who at first suggested that Fender go public, which neither Leo nor Randall wished to pursue. The bankers then came up with CBS as a potential purchaser.

"Now we had two companies up there", Randall remembers, "but Baldwin's attitude to purchasing turned out to be totally unsatisfactory for our purposes. So finally we got down to the nitty gritty with Columbia, and I made about half a dozen trips back and forth to New York, jam sessions with attorneys and financial people. "The guys at CBS came in with a really low price at first, but eventually we came to a fairly agreeable price, and I called Leo and said, how does that suit you ? He said, oh Don, I can't believe it, are you trying to pull my leg? and I said no - does that sound like a satisfactory deal we can close on? 'well anything you say Don, that's fine, you just go ahead and do it', he said. And so the rest is history, we went on and sold it to CBS after a lot of investigation, they did a big study on us, people came in to justify the sale and price paid, and we consummated the deal. Leo wouldn't even go back to New York for the signing, for the payoff or anything. "You get the money and you bring it out to me,' he said."

Fender's Successful Sixties

By this time Fender had become a remarkably successful company. Many buildings had been added to cope with increased manufacturing demands, and by 1964 they employed some 600 people, 500 of whom worked in manufacturing. Forrest White says his guitar production staff was making 1500 instruments a week at the end of 1964, compared to the 40 a week Fender had been making when he'd joined the company ten years earlier. As well as electric guitars, Fender's price list in 1964 offered amplifiers, steel guitars, electric basses, acoustic guitars, electric pianos, effects units and a host of related accessories. Don Randall remembers writing a million dollars' worth of sales during his first year in the 1950s, which rose to some 10 million dollars' worth in the mid-1960s. By that time the beat boom, triggered by the Beatles and the so-called British Invasion of pop groups, was taking the United States by storm. Electric guitars were at their peak of popularity, and Fender were amongst the biggest and most successful producers.

Exporting had also become important to Fender's huge success, and had started back in 1959 when Randall first visited a European trade show at Frankfurt, Germany. "Our products were known over there because of the GIs playing our guitars," he remembers, "and they were very much prized. So we started doing business over there." Britain was especially important market in the 1960s because of the worldwide success of its pop groups.

"We were the biggest musical instrument exporter in the United States," remembers Randall, "in fact I think we exported more American-manufactured musical products than all the other companies combined. We had it all to ourselves for maybe three or four years." Western Europe was the biggest export market, but Fender were also doing well in Scandinavia, South Africa, Rhodesia (now Zimbabwe), Japan, Australia, Canada and many others.