Sub Pop rocks on
Seattle's Sub Pop, Nirvana's original label, has stayed independent for two decades.
(Fortune Small Business) -- By any reasonable standard, Sub Pop should no longer be in business.
The iconic label, which celebrated its 20th anniversary in 2008, made its name nearly two decades ago with such classic albums as Nirvana's Bleach and Mudhoney's Superfuzz Bigmuff, but its brand of off-kilter, rib cagerattling independent rock eventually fell out of vogue.
Yet despite self-destructive impulses and changing trends in the music scene, Sub Pop survives. The company declines to disclose revenues but says 2008 was a good year, with a surge in digital sales (which now account for 37% of its business) and strong releases from both the Seattle band Fleet Foxes and the HBO-connected Flight of the Conchords.
In 1988, Jonathan Poneman and Bruce Pavitt quit their day jobs (Poneman at Kinko's, Pavitt at Muzak) and joined forces to parlay Pavitt's underground music compilations into a real record company. Thanks to local bands like Mudhoney and Nirvana, Sub Pop had an auspicious launch. Within two years, annual sales volume grew from a few hundred records to tens of thousands.
But as Megan Jasper, a Sub Pop receptionist at the time, recalls, "The problem was that you didn't have businesspeople working there. It was all music lovers. And people who love music aren't necessarily great at running a business."
Mudhoney singer Mark Arm adds, "We were all just making stuff up on the spot."
The label nearly tanked, but it survived with some unexpected help from Cobain and Co. When Nirvana left for big-league Geffen Records in 1991, Sub Pop was awarded points, or a percentage of sales, on the group's Geffen albums, resulting in millions of dollars in new revenue. Sales of Bleach, Nirvana's only Sub Pop album, skyrocketed; to date the company has moved 1.7 million CDs, a massive number for any indie release. In 1995, at the height of the grunge era, the Warner Music Group (WMG) paid $20 million for a 49% stake in Sub Pop.
Now playing in the big leagues, Poneman overspent on recording budgets and videos, squandering Sub Pop's good fortune. Early this decade, however, business began to improve. Sub Pop released buzz-worthy debut albums by The Shins and The Postal Service, while Poneman built a leaner, meaner organization.
"We try to make our money go as far as it possibly can," says Jasper, who returned to Sub Pop in 1998 and is now executive vice president. There are 27 employees, down from as many as 60 in past years, and the label makes a profit of about $5 a CD.
"It sounds obvious," Poneman reflects, "but it took some tricky navigation to get us back to our original mission: putting out great records by great artists. We felt like we'd become music impresarios, when in fact we were just dirtbags from Seattle."click here.