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  Industry Profile

Industry Profile: Rio Caraeff

— By Larry LeBlanc (CelebrityAccess MediaWire)

This week In the Hot Seat with Larry LeBlanc: Rio Caraeff, CEO, Vevo.

Rio Caraeff doesn’t want to hear about the glory days of the music industry or dwell on how the business went to hell in a hand basket.

Instead, Caraeff, CEO of Vevo, wants to ponder the immense opportunities to generate new income streams for visual music content on the web, and through location-aware mobile devices.

The thirtyish Caraeff knows that the music industry can do a lot more than sell a bunch of songs on iTunes.

Vevo, owned by Universal Music Group, Sony Music Entertainment, and Abu Dhabi Media Company, launched in the U.S. in late 2009, and quickly transformed online video.

The music video streaming service has practically cornered the market for music video content. Any web outlet--including Hulu, YouTube, Yahoo, Facebook, and AOL--wanting to stream music videos from Vevo stakeholders Universal Music Group and Sony Music Entertainment, and that of content partner EMI Music Group, has to syndicate through Vevo.

The service, however, has no repertoire from Warner Music Group.

By functioning as a syndication hub around advertising-supported music videos, while providing live coverage of artist performances for a fee, Vevo is slowly turning around the monetization of online music video.

Team Vevo launched the service fully in the U.K. in April, 2011. There are plans for further overseas launches later this year.

Caraeff was named president of Vevo when it launched, and is based in New York. He was previously executive VP of Universal Music Group’s eLabs digital division, as well as GM of Universal Music Mobile--in effect leading, and supervising all digital initiatives at Universal.

Universal Music Mobile, launched by Caraeff in 2005, was notably the first music company to launch a direct-to-consumer mobile sales business, enabling Universal to sell music directly to fans mobile phones via web and WAP channels.

Prior to joining UMG, Caraeff was VP of Wireless Services at Sony Pictures Digital, where he established and operated the worldwide mobile entertainment publishing & licensing division of Sony Pictures Entertainment.

Previously, Caraeff was VP of Business Development and Investments at Sony 550 Digital Media Ventures, having begun his tenure at the company as senior director, New Technology Business Development.

Over the years, Caraeff has held positions at the Capitol Records Group, Propaganda Films/PolyGram Filmed Entertainment, Generator Digital Post, and Crunch Media Group. As well, he was managing partner and co-founder of Fabric, a consultancy firm.

Despite past doldrums, it seems to be a better period for the music industry. It is starting to see signs of recovery.

You are absolutely right. The fundamentals are all very positive. People are consuming, and enjoying music at levels never seen before, and in much greater quantities. There has never been a more efficient means to deliver musical experiences to people in a variety of connected ways. There are inherent ways to monetize (musical content) that didn’t exist before at much more scalable and premium levels.

It is really (now) about the industry adapting and adopting to this new world. But it would be far worse if people didn’t generally care about music anymore, or there was no way to efficiently deliver or experience it. None of those things are true. All of the fundamentals of a huge business are in place or moving into place. I am very optimistic about the future of the music business, otherwise I wouldn’t be here.

Not all entertainment companies have embraced the digital world as fully as they could.

I think you are right. When I ran the digital business at Universal, I fundamentally wanted to help create new businesses to take advantage of what was happening. I was able to spin Vevo out of Universal, and create a stand-alone company to do that, but I think that would have been harder to do 10 years ago. It’s still too hard to do things today, but it’s getting easier. But I don’t think everybody has fully embraced the new (digital) world yet. It is definitely very different now than it was 10 years ago.

Understanding that you are not soliciting new joint venture partners, will certain alignments in the music business—like Warners and EMI being sold— not present Vevo with new opportunities?

I think you are right. I don’t think anybody knows where the dust is going to settle. We are certainly not in charge of that. We will have to adapt accordingly.

Vevo has launched in the U.K. Is North Africa next?

Well, we are focused on building a global company--a global brand--so we are working on expanding into many parts of the world, including the rest of Europe, Brazil, Australia, and parts of Asia. We have a partnership with the Abu Dhabi Media Company. They are one of our investors. We have announced that we are working with them to create a Vevo Arabia business in that part of the world, but we haven’t launched it yet.

[Eighteen months after launch, Vevo became fully accessible in the UK, with a team headed by former Channel 5 digital MD Jonathan Lewis. According to a report in The Guardian, Caraeff told attendees of the Abu Dhabi Media Summit in March 2011 that additional expansions into the Middle East and Africa would be coming in a matter of months, with additional countries in Europe, Australia and South America coming in the second half of the year.]

Why the slow roll-outs? Are there obstacles in licensing content?

Yeah, I think that is the quickest way to describe it. It is not out of a lack of interest or ambition (by our company) but the way that the licensing landscape works outside of North America is different than it is here (in the U.S.). Outside North America, we have to negotiate with each local (performing rights) society and music publisher directly.

In the U.K. we had to have other rights from the record company, but then we also had to have rights from every one of the major publishers and the local performance society. So it’s an additional five deals on top of the record companies. That takes a long time. The licensing landscape is more complicated (outside North America). It is a little bit slower, and that’s probably been the single source of latency.

You can’t license Europe as a block?

It’s up to the licensor. If the music publisher wants to give you the license for the (European) block they can do so. If they want not to do that, they are within their rights. There is no obligation that they have to do that. It used to be easier. Now it’s a little bit harder.

How much independent product does Vevo have? Do you deal with Merlin, for instance?

Yep, we have a Merlin deal. We have INgrooves, IODA (the Independent Online Distribution Alliance), The Orchard and pretty much every independent distributor and aggregator. We have just under 50,000 videos on our service today, and a fair amount are from independents. It’s a long tail, but it’s a very thin tail. The majority of views are happening on the most popular content but we do have licenses with most of the independent providers out there.

Why has the visual expression of music remained powerful?

My thoughts are that music is really one of the only things that you can experience in an active or a passive manner. Music is something that you can lean forward and listen to intently. It is something that you can have in the background while you are working out, reading a book or doing something else. It is something that can be translated into a visual medium as well.

So, I like to think, sometimes, that video is an efficient vehicle or vessel to deliver music to people; especially, in a multimedia age and, especially, when we (the record companies) have to focus on new ways to generate revenue.

The way we look at this is—what’s the experience for the consumer? What are they looking for, and what can we deliver to them? What’s the benefit to the artist, the songwriter, the content owner; and what is the impact on the brand marketer or the advertiser who is fundamentally underwriting the experience and delivering revenue to everybody? We try to look at the world through those three lenses, and we fall over to—what’s best for the person who loves music? What’s best for the customer who is interested, and cares about music?

You focused on video as opposed to audio as the way to build this music-based business.

We felt that was the most relevant and appropriate medium to launch our business in this day and age.

Video gave you an opportunity to create a point of access?

Yeah. I could have made the business an audio business. I could have made it a radio business, a subscription business or a retail business—any kind of audio-focused business. I could have done that, but I felt that there was a lane and an opportunity in video. Where there was an opportunity to create a distribution company--a new company--that would provide music to everybody, and (have) a better way to monetize it. (We are) essentially taking the philosophy that (people) can drink from whatever faucet they want to, and the water is going to come from our well. A model that is (about content) massively distributed, highly syndicated and not dependent on changing peoples’ behavior or telling them where to go or what to do.

At the same time, a video doesn’t have to be the traditional 3:35 minute clip anymore. A video clip can be many things. Look at Arcade Fire’s HTML5 experiment and the “choose-your-own-adventure” music video shown by Vevo.

That’s exactly right. We launched with a video (“Keep Your Head Up”) for new artist Andy Grammer a few months ago, which was our first interactive video launch.

[“Keep Your Head Up” won MTV's "O Music Awards" for most innovative video in April, 2011. A Los Angeles native, Andy Grammer is the son of children's music artist Red Grammer. Raised in Chester, New York, he returned to the west coast after high school and earned a bachelor's degree in Music Industry Studies at California State University, Northridge. After being discovered while performing at the Third Street Promenade by manager Ben Singer, Grammer signed with Steve Greenberg's S-Curve Records, and released his self-titled debut in June, 2011.]

Even the term “Vevo” we like to think means video evolved—that there is an opportunity to reinvent what it means to be a music video.

It’s a Renaissance period of experimentation going on out there where the video is ripe for creative re-invention, and re-interpretation. I believe that the music video should know that it’s on the internet. It should know that it is raining in Toronto or whether the stock market is up or down. It should know what my likes and dislikes are, or whether it is daytime or nighttime. And it should allow the artist, or even the fan, to have a different experience as a result of that information. A video should be native to the medium and not be re-purposed from the medium that came before.

Using a location, geography and presence template for Vevo is akin to being able to take a transistor radio onto the beach in the ‘50s. Consumers can watch a video virtually anywhere today, and get it from anywhere.

Yeah I think you are right. The way that we look at location and geography is (that it is) fundamentally a great way to discover music. People love maps. People are fascinated with location and presence. If I can find out what people are watching and listening to around me, that’s interesting. If I can find out what people are watching and listening to somewhere else—say I live in L.A., but I like the music scene in Portland, Oregon or Stockholm, Sweden and I want to see what happening right now in that market, I can zoom over there and discover music (there) through that lens.

I can also say, “I would like to share my playlist, and my viewing history with my friends and that, I would like to share my location with my friends. So I can see where my friends are at any moment in time; see what they are watching; and what they are listening to." That’s interesting to me, if I opt into it.

It might not work for everybody but for some people, and their small circle of friends, that’s interesting. You can also go a level deeper and say, “I live in L.A. but I like The Continental Club in Austin, and I want to see who is playing live there tonight. So I want to zoom in on South Congress (Avenue) and see who is playing there.

One can discover live music through geography.

I can see who is playing tonight in my neighborhood in the East Village (in New York) and watch it live or buy tickets or tell my friends I’m going. There’s a whole level of depth that’s untapped with maps and geography and music and, if you introduce them to people in the right way, it adds another dimension to the (viewing) experience.

[Vevo has launched mobile and iPad apps with “music maps,” a feature with which users can see what videos are being played by folks nearby. Vevo has also injected Facebook Connect into the feature, so users can see friends’ viewing habits.]

Facebook Connect is obviously part of that experience as well.

That’s right. That’s the most efficient method to basically manage your social graph. We’re integrating Facebook Connect—we have it integrated now to our apps--and we are integrating it into the music maps feature on our iPad app. So if I opt in, I can share what I am watching, everything I’ve watched and my location with friends who I allow to see that information.

Right now on our iPad app, it finds you your location; it shows you what the top videos are in your location; and it shows you in real time with a bunch of red pins that drop out of the air. It shows you in the last five minutes what people are watching in this geography.

Those are just a bunch of anonymous red pins. I don’t know who those people are. It’s interesting to see that someone in Long Island is watching Britney Spears, but that doesn’t add a whole lot of value to me. If my friend Ralph, who (I can see) is in Malibu watching the Beastie Boys, then I feel that somehow I am closer to Ralph as a result of (seeing) that.

Music is part of a cultural community for listeners and viewers. It is about people seeing and hearing music and sharing those experiences with their friends.

I think that you are right. Ultimately, discovering music through word of mouth and through what your friends are doing, and what your friends think is interesting is as old as time. It is just being applied into a new medium.

Your co-owners Universal Music Group and Sony Music Entertainment continue to sell physical music at retail outlets. What future do you foresee in the world of music retail?

I am always reluctant to make blanket (statements), or what I call binary statements, that say that everybody will do this or everybody will do that or won’t do this. It is human nature to think sometimes in those absolutes, right? Where the CD is going away, and everybody will do this or everybody will do that.

I tend to think that there, ultimately, is a natural rhythm which gets established, and sometimes the pendulum swings in an extreme direction, but it always tends to balance out. What that means, effectively, is that there is no one thing that meets the needs of every person. There’s really just different people with needs at different times.

At this time in my life, I may want to have music on my phone so I can listen to it on the plane when I am traveling. Other times, I may want to be at my computer at work, streaming on internet radio from France. Other times, I may have a dinner party, and want to hear a specific song at a specific moment, and I want an on-demand experience. Everybody’s life is different at different times, and that evolves continually.

Sometimes internet radio service may be the best service; sometimes iTunes or Amazon may be the best service; and sometimes a subscription or a cloud model may be the best model. Or sometimes Vevo or YouTube may be the right approach. There is a spectrum of services that will meet the needs of people at different times.

How does that specifically relate to physical retail?

I don’t really know what the future of that is. I think that ultimately those businesses are evolving and adapting, based on consumer behavior. If consumers are interested in buying music en masse at physical retail then that would be their business. And, clearly the consumer behavior is shifting and they have to shift along with it.

I do think though, right now, that we are in a world where everything is moving rapidly to digital; and everything is moving rapidly to access over possession. But I do think that at some point in the future—and this could be five, 10 years or even 50 years—that there will be a time when you will see a new experience that marries the best of physical with the best of digital. That gives you a tactile experience of owning, and collecting and (you will) experience unique attributes of a physical product that cannot be replicated in a digital sphere. But it also will afford you all of the benefits of non-linear access; and all of the benefits of a connected digital world. There will be a new product experience for music that hasn’t been invented yet that will marry physical and that will marry digital. I don’t think physical goes away completely, I just think that it evolves to take on being the best of what it could be, married with the best of digital that will emerge at some time in the future.

People say that if they can get music on demand, they don’t need to own music products.

I grew up in the music business where my father was a photographer, art director and designer. He created over 500 album covers. So I grew up in that era with all of the benefits of the gatefold LPs, and glories of the album cover. I understand the tactile, physical experiential elements of what music can be, and the rituals that accompany that. But I also understand the way the world is going, and where consumer behavior is evolving. I firmly believe that generationally we are moving into a world where owning and collecting things—whether books or movies or music or games—is becoming something that the kids of today are increasingly less interested in.

They are more interested in consuming and accessing media in a rapid and ravenous fashion.

The concept of building libraries and seeing value in ownership is somewhat fleeting. You can still buy libraries of music and playlists that reference music that streams virtually. You can have a library on your hard drive and a library on your phone and have them stream from a remote location.

I think back to 1997 or 1998 when I was touring the MIT Media Lab in Massachusetts. I met a guy there, and he was showing me his research. He had a bunch of records on his shelf in his office. One of them was (Bob Dylan’s 1965 album) “Highway 61 Revisited.” He showed me that it was a real album with a (vinyl) record in there. Then he tossed it on his desk. The instant the record (cover) hit the desk, music started playing through the speakers in his office. I was blown away. “How is this happening? The record hasn’t even left the sleeve, and I am hearing the record play a millisecond after the record landed on your desk.”

Then he lifted the record off the desk, and the music stopped playing. He then opened up the record, and it skipped to the next song.

The way it was working was that he was doing research on a new technology called NFC--or Near Field Communications--which is a technology you may see in something called E-Z Pass that allows your car to drive through tolls and pay the toll without stopping. He had a small radio chip embedded in the album cover and a receiver embedded in the table. When the two touched, or came within a certain proximity, it sent a signal to a server to play the album.

He was showing that you could enjoy all of the benefits of physical with all of the benefits of digital by using mirroring enabled technologies. That was a long time ago but it always sticks (in my mind) and I remember what that was like and what’s possible as a result.

Your father is the famous music photographer Ed Caraeff.

Ed Caraeff, yeah. From 1967 to 1980, he was in the (music graphic arts) business, from (the photo of) Jimi Hendrix burning his guitar at the Monterey Pop Festival, all the way to (providing photo artwork for) Elton John, Van Morrison, and Steely Dan records. He’s a chef now, and has a restaurant in Santa Monica. He kind of burned out on the music business.

When you were growing up, you probably met a lot of artists.

Yeah I did. My first haircut was (from) Olivia Newton-John in 1975, and my baby photos were with Carly Simon, Cheech & Chong and all of that.

Did your father give you any career advice? Like, “Don’t go into the music business.”

No, it was basically, "Do whatever you want to do." There was not a lot of structure.

It is ironic you ended up in the music business.

It is. I think it is because I have always been passionate and excited about music and I have always been fortunate enough to be able to find careers and opportunities in the things that I care about. But, if it wasn’t for him, I may not be in the business. I may not have felt the same way about it. I don’t really know.

Your background likely gives you more of an understanding of the creative process that many technology people don’t possess.

Yeah, I think that’s correct. I think of my father, and he’s an artist—he’s not a business person—and artists can apply themselves in different mediums. He was a photographer, and now he’s a chef. They may seem like different careers, but they are very similar in that it is just an artist applied in a different way.

After a launch of any new venture or product, companies then re-evaluate what their customers and brands are looking for. What have you learned that your customers and brands wanted since you launched that you didn’t know previously?

In the 18 months that we have been in the marketplace, we have learned so many things, but just a few of them off the top of my head. At the very beginning, I was very focused on bringing Vevo to every internet connected television that was coming to the market—like Netflix, and Pandora in the U.S.—bringing it to every internet connected TV. I was a little less focused on mobile and tablet platforms, even though that was always in our initial plans. I wanted to get (Vevo) to the big TVs faster. What we saw was that consumers generally were less interested in buying and adapting internet TV platforms; and they were much more interested in mobile and tablet platforms.

Mobile now being the fastest growing platform.

Yeah, and it’s the fastest growing part of our business. So we shifted resources away from creating Vevo apps for Samsung TVs, Vizio, and a lot of different TV environments. Also what happened, about three or four months after we launched, was that the iPad came out. We didn’t know that the iPad was coming out. All of sudden, we said, “Wouldn’t it be great if we created an optimized experience for that.” So we basically refocused around mobile and tablet and less on internet-connected TVs.

We are still bullish on TV platforms, but it’s not something that we see happening this year at a large scale. It is something we think that will emerge over time.

The other thing that we learned from our customers--both from our advertising customers, and from everybody on the planet who loves music--was that we needed to do more live events, and more original programming. If you would have asked me at the very beginning of Vevo, “How many live events are you going to produce and distribute?” and “How many episodes of Vevo original programming are you going to create?”--if you would have asked me that in December, 2009 when we launched--I would have said “None. We are just getting started. I don’t have a budget or a resource for that. I am not even sure that it is necessary, and (with) live events, it’s an on-demand world."

While an engaged viewer is a valuable viewer, brands are increasingly seeking out more custom opportunities. They want to be integrated in a much more custom way into the music experience.

I think that is partially right, yes. In our first year of business, we partnered with a range of companies, and we produced and distributed over 25 live events. We produced over 100 episodes of original programming. A lot of that was due to what we learned basically from the marketplace--that we have to build on top of music videos, and not rest on them.

You could say, “Hey, I’m going to aggregate all of this content, and then people will want to watch it,” and call it a day. But that not particularly innovative, and that’s not showing a real investment in your business. We think that music videos are popular and that they certainly form the basis of the programming, but that doesn’t define or limit us. So we said, “We have to create. We are in a privileged position. We’ve got access to artists. We’ve got access to brands. We have a powerful distribution platform.”

It also doesn’t hurt if a brand like an American Express says to you, “I want to create the best live music experience on the web. How do I do that with you and pay you millions of dollars?”

So when brands are clamoring for live events, and there’s a relative scarcity of them in the marketplace, it shows that there’s an opportunity to take advantage of that. So we saw a demand from brand marketers. We saw a demand from consumers, and we pivoted in that direction. Now, we think that live events and original programming are key tenets of our strategy.

Doesn’t that strategy put Vevo on a collision course with Google’s YouTube, which is also vying for event programming?

I think that any company, and any industry on the planet, is in a similar dynamic with Google. They are partners with every industry and, at a certain level they will do whatever they want to do for their business. Yes, they are great partners of ours, but we also have similar objectives when it comes to building audiences around things that people are passionate about. So in some areas we compete for access to live events, and in other areas we partner, and try to do them together.

[The competition over live-streaming rights is heating up as so many different platforms are looking for associations with premium brands, artists, and events. Due to its massive user base and global presence, YouTube has a clear advantage. Vevo is only available in the U.S., Canada, and the U.K. with only a fraction of YouTube's global audience. But Vevo has greater and more direct access to labels and artist managers.

Despite a growing rivalry, Vevo and YouTube remain equal partners in the live series "Unstaged," sponsored by American Express, that has aired live concerts by Arcade Fire, Duran Duran, Sugarland, John Legend, and My Morning Jacket.]

Some of these events have drawn audiences of five to 10 million viewers.

In some cases, you are looking at five to 10 million people for big events. Then, there’s the audience that you gather afterwards for the on-demand programming. Not everybody can drop what they are doing and be available for a live event. It’s an on-demand world so you should always make everything available afterwards. Your combined audience in a two to four week period could even get as high as 15 to 25 million (viewers) for the right content.

Online news, video, and music providers are becoming increasingly open to charging for at least part of their content. Even though Vevo will have some content that it will charge for, you have indicated that the service will always have free content.

Yeah, I can’t give you too much detail on future plans, but I can talk about our philosophy. I believe that if you go back a thousand years and you ask, “What’s the origin of music? What is the root of music as it relates to our society, our genetic code, and our tribal culture?” Well, music has always been a performance. It has always been an experience in the broadest definition of the word for the benefit of every person; or for the benefit of a small amount of people in a private setting. But, music has only been a proper unit to be packaged to be sold in the last 100 or 120 years.

So, the future of music, I believe, is pretty much like the dawn of music, which is that the product concept will go away, and music becomes an experience-- something to be accessed, and enjoyed by everybody.

Who are the customers for the music business in the future?

The customers are everybody on the planet who loves music. The customer is not everybody who buys music. As you know better than most, not everybody on the planet is interested in buying music, and increasingly fewer people are interested in buying music. So we’re trying to position our business on not being dependent on selling music because I don’t want to be dependent on a customer behavior that is shifting. I’d rather say that my customer is everybody that is on the planet. My business is in delivering them the experiences. How I derive value from that relationship will vary. Sometimes, it will be with the time and attention of these people and my ability to aggregate those audiences and target advertising to them. Sometimes, it will be in the form of commerce. Somebody may decide that they want to pay to watch a concert or do something. Other times, it might be in the form of subscription. Sometimes, it may be the consumer paying, and sometimes, it may be a third party paying.

If I live in Dubai and I want to get Vevo on my phone, it may be the phone company paying Vevo to provide an ad-free experience on their phone in that country. It’s not always the consumer that is paying for (the service). But the idea, at a high level, is that (it be) a free service that appeals to everybody on the planet who loves music that can connect with billions of people. That is really what we are trying to do.

In the future, we may have premium services, and there’s nothing wrong with having a diverse business that is not dependent on one particular revenue stream. But we are not interested in saying, “Well, you used to get this for free, now you have to pay.” I think that is a much harder thing to do. I think that it is better to say, “What you are used to getting for free, you will continue to get for free, and in the future, there will be new experiences that you could never get before, and now you have to pay for those.

Imagine a big tent that everybody can get into for free, and you have got some ancillary tents that are connected to it that you can go into at your option.

Vevo has been cautious about bombarding listeners with ads. Advertising obviously has to be balanced to peoples’ tolerance.

It is always a major consideration. If you imagine a dial that you can turn. On one end you have no ads, and the other end you have too many ads. You are always trying to turn the dial to find the right ratio of revenue to customer experience.

We take a specific approach which is minimizing clutter, and having a very light ad load. We have the lightest ad load among any premium video service on the internet. Compare it to Hulu or any major broadcast TV network, or compare it with any other service that has premium film, television or music content.

We only have one 30 second ad for every 6 1/2 minutes of content consumed. That ultimately allows us to charge more (for ads), and have a higher price for the ads because there’s a better recollection rate (because) there’s less clutter.

If there are too many ads, people have a bad experience.

Fundamentally, that’s some of the criticisms leveled at terrestrial radio or broadcast television—that an hour long television show has 20 minutes of advertising.

You have to balance that ad strategy with providing universally-distributed content.

That’s right. We don’t believe in scarcity of content for the consumer. We don’t believe in restricting its availability to one place. If I believed that, I wouldn’t be syndicating videos to YouTube and to other places. We believe that the web is about choice and options for the consumer. That if they like YouTube, they should go to YouTube. If they like Facebook, they should go to Facebook. If they like, they should go there. They are going to go there whether you like it or not anyway. Instead of telling people what to do, and were to go—instead of forcing them to go somewhere where the content is—what we believe in is putting the content where the people are. At any moment in time, there are going to be more people who never come to your business than people who do. So putting your content where the people are and not forcing them to change their behavior is a strategy that is more compatible with the physics of the web. That’s the approach that we take.

Did going DRM free take the shackles off the music industry in terms of changing their mindset?

I think that it helped in that it allowed services to be compatible with the devices that consumers cared about which was, fundamentally, the iPod. Basically, if a service couldn’t sell music that worked on an iPod, it wasn’t interesting to people. Everybody has iPods, and there was no incentive to use another service that was incompatible with an iPod. So it was really a factor in enabling compatibility and interoperability by removing DRM (Digital Rights Management technology).

But in a parallel universe--in another way--DRM is a tool. If you think about the Amazon Kindle ecosystem or you think about Netflix, those are models that have DRM built into them, but the experience on an end-to-end basis is seamless and good for the consumer. DRM is not necessarily a bad thing; it is just in the manner that it is implemented. But, it is a pendulum that swings both ways. If I create a book store on the web, Rio’s Books, and I want to sell books on the Kindle, I can’t. If I want to create a service that works with Netflix, I can’t.

In a vertical ecosystem, DRM can work well, whether it’s iTunes, Netflix or Amazon, but without interoperability for third party devices or third party services, it does create challenges for the consumer.

Did the music industry use DRM clumsily or prematurely?

I think the record industry was not wrong in implementing DRM, but I think that where they could have done a better job is mandating interoperability. So when iTunes was licensed for the first time, if they had mandated that Apple make that standard interoperable with third party devices or services, then that would have made a good consumer experience if Apple would have licensed that to other people. Now Apple may not have wanted to do that, but if the record companies had understood and mandated interoperability, that would have been better for the consumer.

Larry LeBlanc is widely recognized as one of the leading music industry journalists in the world. Before joining CelebrityAccess in 2008 as senior editor, he was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-89. He was also a co-founder of the late Canadian music trade, The Record. He has been quoted on music industry issues in hundreds of publications including Time, Forbes, and the London Times. He is co-author of the book “Music From Far And Wide.”

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