|Hal Leonard's Keith Mardak, pictured at the Milwaukee Boys & Girls Club, one of his longtime charitable interests.|
Accidental Music Publisher
How a one-time accordion teacher built the world’s largest print publisher and transformed the print music business in the process.
“I WAS NEVER GOOD ENOUGH as a musician to really make it as a performer,” admits Keith Mardak, retiring CEO of Hal Leonard Corporation. Reflecting on his five decades in the music products industry, he adds that that realization was “probably the best thing that ever happened to me.” With a performing career beyond reach, he channeled his energy and intellect into music publishing, and in the process authored one of the industry’s most remarkable growth stories. When he joined Hal Leonard in 1970, the publisher was struggling with sales of $965,000. As he steps down as CEO this year, sales are on track to top $250 million. Mardak’s skills as a dealmaker, financier, and personnel manager have contributed to this enviable record. However, he insists the real key to Hal Leonard’s success has always been a superior product, saying “We’ve always offered a better widget.”
Mardak says his career has been built on “a love of songs.” He has 24,000 on his iTunes account, knows most by heart, and has had an uncanny knack for matching a song to a print product. His affection has been more than reciprocated by songwriters. In 2010, he received the Abe Olman Publisher Award from the Songwriters Hall of Fame, which he says “is like an umpire being elected to the Baseball Hall of Fame.”
Larry Morton, who succeeds Mardak as CEO, adds, “I have never met anyone more creative, more driven, more relentless, or more optimistic about the future than Keith. I’m extremely grateful for what I’ve learned from him, and I’m painfully aware that I have a lot to live up to.”
|Ensuring management continuity, Larry Morton takes over as CEO after nearly three decades at Hal Leonard.|
Growing up in Milwaukee, Mardak never planned on a career in publishing. Following in the steps of his older brother Don, he took up accordion, like legions of others in the Midwest. “It was the thing to do,” he says. After graduating high school and serving a brief stint in the Coast Guard, he joined his brother’s newly launched Accordion Studio of Champions as a teacher. He spent a semester at the University of Wisconsin-Milwaukee, but then dropped out to become a mechanical draftsman and for the next few years alternated between working as a draftsman and teaching accordion and later home organ. By 1965, though, he came to the conclusion that he “absolutely hated” drafting and applied for a job as a home organ salesman at Zeb Billings’ fast-growing Milwaukee music store. Billings turned him down, saying he lacked “sales experience,” but as a consolation offered him a job in his newly formed two-person publishing company.
A skilled promoter, Billings had built one of the country’s top piano and organ stores, selling more than 1,000 units annually out of a single Milwaukee location. One of his most successful promotional concepts was to include a free “bench pack” of music and lessons valued at $100 with every organ sold. Initially, the pack consisted of music purchased from other publishers, including Hal Leonard. Later, as a way to improve margins, he began producing music in-house. When he showed the bench pack to a group of Thomas Organ dealers at a sales meeting in the Bahamas, he was flooded with orders, which encouraged him to launch Sight & Sound Publishing.
Mardak’s first job in publishing was to dash off instruction materials for the 100 songs in the bench pack. Time was tight because the material had to be completed for the fast-approaching 1965 NAMM show in Chicago. After success at NAMM, he progressed to making sales calls, showing retailers how the Sight & Sound bench pack could increase their organ sales. Sight & Sound initially relied entirely on public domain music to avoid paying song royalties. However, as incoming orders surged, Billings decided to add copyrighted songs, and Mardak was dispatched to New York City to secure the publishing rights. With no experience in publishing or copyright law, he began knocking on the doors of major publishers—Chappell, Mills Music, Irving Berlin Music, and MCA—rarely getting past the receptionist’s desk. After several days of rejection, Frank Music Corp. General Manager Arnold Broido gave him an audience and offered him rights to a dozen songs at a royalty, reasoning that organ bench packs posed no competition to pop sheet music.
“The organ business taught us how to sell.
Pop publishers just took orders.
If they had a hit, sales happened.
If they didn’t, there were no sales.”
With a selection of pop hits, attractive packaging, and innovative cassette tape instructional supplements, the Sight & Sound bench packs rapidly won the endorsement of most of the leading organ manufacturers and became dealer favorites. The growth came directly at the expense of Hal Leonard, the company that had virtually invented easy-to-play music for the organ market. Hal Leonard had been founded in 1948 by brothers Harold and Everett Edstrom and Roger Busdicker after the trio had fronted a popular dance band. (The name was derived from Harold’s nickname, Hal, and Everett’s middle name, Leonard, because their strict Lutheran father didn’t want the Edstrom name associated with music.) The company’s breakthrough came a year later with a band arrangement of the pop hit “I Wonder Who’s Kissing Her Now.” A string of successful band arrangements were followed by the Pointer System, the first teaching method specifically designed for the home organ market.
While Sight & Sound had eclipsed Hal Leonard’s Pointer System by 1969, Mardak began to question Billings’ judgment. In 1970, Billings had hired Art Jensen to develop instrumental methods using the same cassette tape supplements that had been so successful in the home organ market. Mardak objected strenuously. “I told him we were broke, and that Art’s project would hurt our organ business,” he recalls. His concerns were ignored. Months later, Mardak and Jensen jointly concluded that Sight & Sound was overextended and headed for trouble. They resigned and teamed up with Keith’s brother Don to start their own publishing company.
Financing for the new venture, dubbed Learning Unlimited, came from an unlikely source: former arch-rival Hal Leonard. After getting over the initial discomfort of sitting down with the man who had devastated their organ music business, the Edstroms and Busdicker agreed to a joint venture. Mardak was given the mandate to recapture the bench pack business and Jensen was tasked with revitalizing Hal Leonard’s band and orchestral business. Their efforts were wildly successful, and by 1980, when Learning Unlimited and Hal Leonard were merged, combined revenues had topped $10 million.
|Everett “Leonard” Edstrom, Harold “Hal” Edstrom, Keith Mardak, and Roger Busdicker at a meeting in 1983.|
New York-based publishers who controlled popular song rights had paid little attention to Hal Leonard. It was off the beaten path in Milwaukee, and its portfolio of organ books and band methods were seen as incidental to the larger sheet music and popular folio business. However, as Hal Leonard’s scale approached that of industry leader Belwin-Mills, it became too big to overlook. One of the publishers to take note was Chappell, which controlled a vast catalog of songs, including the works of George Gershwin and Cole Porter.
New York based Chappell had exited the print business in 1976, a decision management came to regret. To get back into print, in 1979 they approached Mardak with an offer to acquire Hal Leonard. Over the next five years, that initial offer led to a complex series of transactions that transformed the ownership and structure of Hal Leonard. First, Chappell acquired a 50% interest in Hal Leonard, paying $1.5 million upfront, with another $3.5 million to be paid out over the next five years. The investment came with a 30-year license to the Chappell song catalog, immediately making Hal Leonard one of the top pop print publishers. Four years later, when Chappell was put up for sale, Mardak raised $104 million to buy it in an effort to keep control of Hal Leonard. His bid was unsuccessful, but in 1985, he and a group of five employees were able to acquire Hal Leonard from Chappell’s new owners, and he invited seven of his management team to participate.
“We’ve never hired top-level people
from the outside. Our senior management
have worked their way up.”
Throughout the 1960s and ’70s, the home organ business was the industry’s single largest product segment, generating twice the revenue of the guitar industry. However, by 1985, when Mardak and his team took control of Hal Leonard, organ sales began to decline precipitously. Bench pack sales trended down as well, yet they continued to exert an outsized influence at Hal Leonard. Mardak explains, “The organ business taught us how to sell. We had to explain the benefits of our products and promote aggressively to get orders. Pop publishers just took orders. If they had a hit, sales happened. If they didn’t, there were no sales.”
By applying sales and promotional tactics from the organ market to pop music, Hal Leonard dramatically increased sales of the Chappell catalog. The gains attracted the attention of other publishers, and over a relatively short time frame Mardak was able to secure print rights for titles from Disney, the Beatles, Michael Jackson, Elton John, and countless others. “We produced great product, we had a good reputation with dealers, and we paid our royalties on time,” he says. “The publishers looked at us as honest Midwesterners and liked doing business with us.”
The expanded catalog of song rights fueled sales growth in every market segment: band and orchestra, fretted instruments, choral, keyboard, and even percussion. “It was transformative,” says Mardak. “Any book of Beatles songs will sell.” Not content to rely on artist power alone, he built a powerful organization to support each title. Hal Leonard views each segment of the print business as a separate enterprise, staffed by a team of skilled arrangers and product specialists. “I’m not a choral guy or a guitar guy, but when we entered those markets, we searched out the most talented product people we could find,” he explains. This talent pool, he says, accounts for the fact that Hal Leonard has the top-selling guitar method and market leadership in just about every other product segment as well.
|Mardak and his wife Mary Vandenberg (Mardak) (third and fourth from left) with Herman Knoll, Jack Schechinger, and Steve Rauch at the time of the 1985 buyout led by Mardak.|
A high-powered sales team shares credit as well. The staff in Milwaukee receives regular training on the roughly 13 new products introduced daily. In addition, every salesperson has access to a database with a detailed “pitch” on all of Hal Leonard’s 200,000 + titles, outlining features, benefits, and a competitive analysis. “If a salesperson is on the phone with a dealer, they can access all the reasons to explain why our guitar method is the best out there,” he says. A 400,000-square-foot printing and distribution facility in Winona, Minnesota provides additional support, ensuring the timely production of pop hits and seamless order fulfillment.
The Hal Leonard sales team has also been the source of practically all of the company’s top management. “We’ve never hired top-level sales and marketing people from the outside,” Mardak explains. “Our senior management have worked their way up.” The “promote from within” approach has produced a cohesive corporate culture marked by little management turnover. Mardak has also managed to infuse this culture in acquired companies, both into the U.S. and abroad. Classical publisher Schirmer, acquired in 1985, the Rubank Method and Jensen Publications, acquired in 1988, Netherlands-based DeHaske, acquired in 2008, and Music Sales in the U.K., acquired last year, have all benefited from the Hal Leonard approach to print. In addition to acquisitions, the company has expanded its catalog with distribution agreements with publishers Novello, Chester, Leduc, Ricordi, Schott, Boosey & Hawkes, Willis Music, and others.
“Print will be here forever.
A music book on a stand, a method book
where a teacher can write in the margins,
or an attractive cover
are still a big draw.”
The print music category has been pressed by online competition and digital downloads in recent years. However, Mardak remains confident that “print will be here forever.” He says, “A music book on a stand, a method book where a teacher can write in the margins, or an attractive cover are still a big draw.” Supporting the case for traditional print, he says a prominent song publisher recently told him, “I thought print would have died years ago, but every year you keep sending us a bigger royalty check. I guess I was wrong.”
Preparing for retirement, three years ago Mardak sold his interest in Hal Leonard to private equity firm Seidler Equity Partners after vetting dozens of other buyers. Although Hal Leonard’s growth and profitability generated considerable interest, he says “most were buyers who just wanted to flip the company in three years. Whenever a potential buyer said they wanted to sell our Winona plant, the conversation was over because they just didn’t understand the business.” He settled on Seidler because “they were patient and had a long-term perspective.”
Mardak is passing the CEO responsibilities to Morton, who has served as company president for two decades, but will remain as board chairman and “will do whatever the new owners ask.” Selling the company he built has been bittersweet, but he sees it as the best way to ensure its future. “When we hit $50 million, I was confident we could do $100 million,” he says. “When we passed the $100 million mark, I said let’s do $200 million. Now that we’re at $250 million, with the current team in place, I know we can go to $300 million and beyond.”