So CD Baby has finally been sold. no longer "independent" as the company's bio reads:

[In•de•pen•dent: (adj.) Not having sold one's life, career, and creative works over to a corporation.]

That corporation is called Discmakers. You may know them as the massive paperwaste of a catalog which shows up monthly in your mailbox. They've taken over the little CD/DVD manufacturers and even disguise themselves under competitor's names (they own Oasis).

Discmakers paid Derek Sivers about $20+ million dollars. That's over $20,000,000. To date, CD Baby has paid out $80,000,000 to artists. 1/4 of that amount went to Sivers this week, in exchange for him doing something he's claimed he'd never do. Read here from a fall 07 interview Sivers did with Berklee Today (of which I'm actually in one of the photographs, perfect!):

"You've had people offer to buy your company but you've never taken the deal. How come?
I didn't get into this for the money, so I'm not going to get out of it for the money. That was never the point for me. In the dot-com boom, you saw people start a business with good intentions, but the investors wanted bigger returns, so owners began to compromise their original intentions and started mildly screwing people. Once that happens, they have to shut down because people know they are getting screwed, or the owner sells the business and becomes miserable because what started as a golden egg turned into a rotten egg. To me it's failure when what you set out to create becomes corrupted-even if you are making a lot of money."

Even at the time of the interview, Sivers was entertaining the idea of selling CD Baby to Amazon.com. Rumors were circulating and he was actively denying each and every one of them. He continued to deny the rumors, even during the due dilligence process when Discmakers were in the building. When finally admitting to key employees that he was trying to sell the company, he excused his behavior by citing trust issues - the richest excuse for him to use (some pun intended)

I left CD Baby after spending a few days with Tony Van Veen and his cohorts at Discmakers. They were in Portland in April during the original due dilligence period. I was less than impressed with their vision for the new company post change-in-control. Tony talked a lot about "low hanging fruit" in the workplace; easy means of getting some of the $20+ million dollars back right off the bat. A lot of talk involved fees which were never a part of the CD Baby culture. Stretching past the $35 sign-up fee, the company would then start to mimick the layout of chief competitor Tunecore. He took a very monopolistic approach to things, saying artists would have to pay these extra fees, cause where else could they go? He wanted to aggressively go after competitors, not just let CD Baby stand alone as the successful (but not perfect) model it's been over the many years. This may make sense as a business tactic, but it wasn't something I wanted to lend my energies to.

VanVeen was also personally insulting our employees. He was overheard joking about how our tattooed warehouse crew would have to be checked for hepatitis. He also made some disparaging comments about other employees as well. His frathouse approach to welcoming himself to the company left a bad taste in my mouth, along with several other employees. After I announced my leaving the company, several other employees quit as well, key department managers and folks who'd worked there for years.

Derek at this point told the entire company that the deal was killed by him, and that he wouldn't be selling the company, all was back to "normal". Any employee who'd been there long enough to experience his less-than-honest communication with the crew was skeptical at best. Sivers then kept it a secret for the next 3 months that the deal was still going on. Lying to all his dedicated and loyal employees. At least he was consistent; he went out in the same manner as he'd been over the last several years - avoiding conflict, outright lying, and manipulating and using the employees who made him so wealthy and kept his business so successful.

Sivers treated his employees as if they were a burden. This was in direct conflict with my job duties and personal ethical beliefs. As I worked towards socializing the workplace, which was an idea briefly accepted by Sivers, it would inevitably be reversed back to a standard capitalistic US business, despite it improving morale and the cohesiveness of the crew. While Sivers read business book after business book, seeking out newer directions to take his company, the 80+ employees suffered his whims yet kept the place running smoothly. We had a profit-sharing program set up for 6 months which was received with great enthusiasm by the entire company, only to be ripped out of our hands once Sivers bought the company from his father (a lesser known fact about CD Baby!). The internal drama of the workplace was far more traumatizing than anything the shaky music industry could put us through. We were dealing with essentially a child, with narcissistic tendencies and a cold disconnect from humanity. That may sound extreme, but it really was the case. Derek is deceptive at best, a marketing agent now, a social chameleon who thrives on presenting himself as an innovator and experimenter... yet in reality, he was lucky in his timing of starting the company (plus born independently wealthy helped a great deal).

Once he left CD Baby, he really wasn't involved in the day-to-day operations for the past several years, the employees took over and made the place what it's become. Unfortunately, they were always unable to reach their true vision for the company due to Derek's inability to let the programming go (this is important when you're a .com business). The employees kept hard at work and tried many times over to both keep the company fresh and competitive while aiding artists all along the way. Derek's whimsical visions changed weekly at times, with nothing ever materializing. We'd meet and hear about a rewrite of the entire system, visions of an going international were presented (and at the cost of one key-employee, were absurdly pursued until it was realized that it wasn't going to be as easy as getting money from your folks and starting a company in your garage).

After being repeatedly confronted on his erratic behavior by a crew of managers and executives, he began to call for an open dialogue with all employees. This quickly soured once it was realized that the problem was him, his lack of professionalism, his lack of respect for his employees, and the way in which his ego effected the day-to-day operations of his company. He then went into hiding, never to return to Portland. He fired two manager out of the blue for comments said in meeting which were "unrestricted in content." 2 weeks later we found ourselves dealing with 2 old businessmen, strangers to the music industry, strangers to CD Baby entirely. They were hired as COOs to "clean up the place" - it was a $100,000 disaster which fortunately only lasted 3 months.

From there things didn't get better, Derek would dip into the company business at the strangest moments, micromanaging which offices were being used, who's salary was what (after publicly releasing those responsibilities to us), and other random things. He found a book which he fell in love with which stressed outsourcing all aspects of the business, so he cut the workload of our customer service crew and sent work to India. (This too was a disaster which backfired.)

Rumors circulated for months about the company being sold, but he would deny it each and every time. As the actual sale did approach, he still kept it quiet and was furious to find out that we'd learned otherwise, saying he couldn't trust us. Most employees welcomed a change in control-anything had to be better than a spoiled, isolated paranoid who happened to make millions off the hard work of his employees, while ignoring their ideas and publicly dismissing the hard work they did by acting as if he'd creating a smooth running business that didn't need him. In reality it didn't need him, things were under control and were heading in the right direction-but that wasn't enough. Getting out of the company was essential for Derek, and getting the most money he could was key. Derek talked about offers of hundreds of millions of dollars being turned down in the past from huge media conglomerates trying to buy CD Baby, but the company was no longer that valuable (questionable if ever really was of course). So the $20 million or so he was able to get from Discmakers' investment firm was the most money possible.

At one point we honestly did try to present the notion of an employee-owned company to Derek, but he never liked the idea. Even as the pending sale of the sister company Hostbaby was occurring the employees approached him with the idea of buying it, but he wanted more money than they could afford. The employees were the people who make the place work, who would be the best caretakers of the company, and who knew Hostbaby would need more than anyone. Instead it's now owned by folks who want to turn their investment into the black as quickly as possible. All the elements which kept the culture at CD Baby alive and thriving are now being strangled by pure business culture. Make no illusions, the fun is over.
So now Sivers is free from the burden of owning a successful business with a crew of people who actually care about their work and want to help the artists. He's starting a slew of vague ideas which will take advantage of independent artists and use their work to further the image of him being a musician's friend and guru. After years of dealing directly with his narcissism and ego, I do wish him the best in coming to terms with what a selfish and dangerous person he is. Even employees who had never met him but worked long enough at CD Baby to understand his behavior have spoken out.

Since the official sale was announced, 2 key employees have left the company thus far. Time will tell how long things will last there.

So what can be learned by all this? For me it was a lesson in business ethics, as well as the value of every employee in a company. The one "boss-with-total-control" situation is something I don't ever want to work with again. Co-operatives, employee-owned businesses, and socialized workplaces offer the most potential and rewards for the most amount of people. I never intended to be a Human Resources manager when I first applied for a warehouse job in 2004, but that's how things came to be. I'm proud of my hard work at CD Baby and love all the great people I worked alongside while dealing with the ego of a lone owner, but I couldn't do it again like that. I value the term "be your own boss" more than ever now. Also, there is music available at CD Baby which is some of the greatest, most unique, and original sounds you'll ever come across. This in no way is a knock against the hardworking artists of CD Baby, just my experience concerning the people behind the curtain.



Originally posted here