Did bandcamp raise a lot of money from venture capital? The last round listed on crunchbase was a series A in 2010. It looks like management were fine running it more like a lifestyle business.
If you look at their staff growth, it's been very slow and very steady. At the time of acquisition they were sitting in the 100-150 headcount range, which is modest for a company that's almost 15 years old. Given their claim of 207M to artists last year and their touted 18% average rev share, we can guess they were generating around 50M per year gross, which is a very healthy cashflow for a company that size.
Their strategy was clearly not to take over the world, but to carve out a niche and not bother to directly compete with the streaming platforms (which helps to explain, for instance, the incredibly rudimentary mobile player app).
As for the senior management, Diamond had already previously started and sold a company. I'm sure he was doing fine. The same is true of Mark Hall, their VP of Product (who started 5-ish years ago, if I recall). The technical founders I'm less sure about, though apparently at least one of them had already moved on.
I'd absolutely describe it as a sustainable lifestyle business that had a good long-term trajectory. It was never going to be a unicorn, but who cares?
A company with 100 employee isn't a lifestyle business. The term we used to use for that before VC swallowed the world and decided that anything less than a billion is chump change was simply "business". A 100-person company with millions in revenue is a successful medium-sized business.
The only reason it doesn't feel successful and stable today is because we live in a unprotected corporate environment where any of the giant behemoths may anti-competitively crush a smaller business if they so choose to and there won't be any repercussions.
I wouldn't be surprised if the main motivation for Bandcamp selling was simply the fear of being either bought out by someone worse, or crushed by them. (Likely Spotify, which is two orders of magnitude larger than them.)
Notably, Bandcamp absolutely encourages purchasing individual tracks, so for folks who, unlike me, tend to build mixed playlists, it's even more annoying that this feature doesn't exist.
In fact, they only very recently (as in last month!) added basic queuing support:
https://blog.bandcamp.com/2022/02/10/the-bandcamp-app-now-su...
Which is pretty incredible as I view that as a core feature of any music player.
Bandcamp is 100% a bonafide operating business. I don't want to put words in your mouth, but perhaps you're seeing that they were just trying to run "Business as usual" and equating that to a lifestyle business as they weren't chasing growth.