This week In the Hot Seat with Larry LeBlanc: Ian Rogers, CEO of Topspin Media.
Ian Rogers, CEO of Topspin Media, is exhilarated over the notion of closing the gap. Founded in 2007 and headquartered in San Francisco with offices in Santa Monica, Topspin Media provides artists and others with the marketing software and services that can enable them to build--or to better maintain-- successful businesses and brands.
Among its clients have been parties marketing Peter Gabriel, Metric, Lenny Kravitz, David Byrne, Kristin Hersh, the Dandy Warhols, Arcade Fire, the Pixies, Paul McCartney, Josh Rouse, Squirrel Nut Zippers, and Jonsi from Sigur Rós.
A pioneer in building digital media applications since 1992, Rogers was one of the first involved in seeking to define the way artists and labels promote and experience digital media online.
Rogers created one of the first music-related web sites; and built many of the early promotional sites for the music and film industries.
Prior to joining Topspin Media in 2008, Rogers was VP of Video and Media Applications at Yahoo!, overseeing Yahoo! Media Player and the web services which powered Yahoo! Music Video applications on sites.
He also served as director, VP of Product Development, and GM for Yahoo! Music and oversaw the development of Music.Yahoo.com, LAUNCHcast radio, and the Yahoo! Music Unlimited subscription service.
Prior to joining Yahoo! in 2003, Rogers was founder, president and Chief Technology Officer (CTO) of Mediacode, a music software developer acquired by Yahoo!.
From 1995 to 1998, he was CTO at rVision, one of the first web design firms. From 1998-2000, he was part of Nullsoft, makers of Winamp, SHOUTcast, and Gnutella. Rogers then served as president of new media at the Beastie Boys’ Grand Royal label for a year.
The origin of Topspin Media dates back almost a decade to a discussion between its co-founders, Peter Gotcher and Shamal Ranasinghe, on the future of music marketing. The two, however, shelved a marketing concept they developed for several years because they didn't feel the digital market was ready.
As CEO of Digidesign, Gotcher had led the creation of the ProTools computer software that revolutionized how music is recorded and produced. Ranasinghe was chief product officer at MusicMatch and also worked at Real Networks, and Yahoo! Music.
Topspin Media was founded on the principle that with the costs of production and distribution in the music industry dropping, unlimited choice for consumers increases the importance of efficient marketing—including connecting and cultivating relationships with existing fans as well as reaching new fans.
Initially, Topspin Media worked with a few select artists, labels, and managers. It worked, in fact, with less than 10 artists in its first year. That has since expanded to over 600 artists. Eventually, Topspin will be available to anyone seeking to make a living from their music.
Topspin’s main product, the Topspin Manager-- a turnkey suite of technologies and services--uses permission marketing and technology to help artists and marketers generate demand for their content, and deepen engagement with fans.
Topspin Media does not have a consumer-facing brand. It provides content management and customer relationship tools so artists can distribute and market music directly to fans to build their own brand. Artists can incorporate the platform into any web site or social-networking page.
Topspin Media’s software features: A fan management system that collects and organizes fan profiles; a commerce engine that facilitates and fulfills orders; a content management system that hosts and organizes music, photos, videos and other media; and a product creation tool that lets artists develop specific product promotions.
In 2007, while GM of Yahoo! Music, Rogers addressed a number of music executives, warning them that consumers weren’t willing to adopt inferior products.
“I won’t let Yahoo! invest any more money in consumer inconvenience. I will tell Yahoo! to give the money they were going to give me to build awesome media applications to Yahoo! Mail or Answers or some other deserving endeavor. I personally don’t have any more time to give and can’t bear to see any more money spent on pathetic attempts for control instead of building consumer value. Life’s too short. I want to delight consumers, not bum them out.”
Ever the music fan, Rogers also co-manages Get Busy Committee (aka GBC), a Los Angeles hip hop group consisting of underground rapper Apathy, Styles of Beyond's Ryu, and producer Scoop DeVille.
You, a middle-aged man, on a skateboard, on the cover of Billboard in 2008?
My wife (Julie Jacobs) said to me when that came out, “You are on the cover of a music magazine for a technology company with a skateboard. This is your wet dream.” From my perspective, I'm a teen pregnancy, music-loving, skateboarding nerd from Indiana. So I think, “How the hell did that happen?” What a world.
You weren’t really looking at leaving Yahoo! when you did in 2008?
Nahh. At the time, it seemed like a bad move. It was painful for me to leave. We had just bought FoxyTunes [a Firefox-based plug-in that lets users control music players from their browser]. We had a vision for reshaping Yahoo’s main strategy around (this browser extension). They have accomplished some of that vision in my absence. So, it was a really tough decision to leave, but I felt that the time was right. These guys had Topspin up and running before I joined. The opportunity to work with someone like Peter Gotcher, and with Shamal Ranasinghe was too good.
Part of my motivation in leaving Yahoo! to come to Topspin as well was because I had realized that no consumer service that Yahoo! built was going to change the music space. You really had to go back to the creator end of the value chain and start to rebuild the outward facing services if you were really going to make meaningful changes in the industry.
Did you know Peter and Shamal previously?
Shamal I knew. He introduced me to Peter. An opportunity to work with Peter is a one in a lifetime thing.
Topspin is really about presenting more efficient marketing?
Topspin only worked with 10 acts in its first year.
We went out really selective. We have over 600 now. We are basically open to anyone who asks, but, yes, at the beginning we were extraordinarily selective.
We will be broadening our reach this summer. Basically, anyone who asks can come on the platform at this point, but we aren’t doing a lot of outbound marketing. The challenge is that our key customer base are people who are doing the marketing, not average artists. The people that we are working with are labels, distributors, management companies, marketing servicing companies—whoever is doing the marketing on behalf of the artist. But we will be broadening that (base) this summer. Hopefully, people we have never heard of will jump on the platform, and run great campaigns.
You are not a service, you are providing a technology for a fee.
Yeah, and in the way ProTools is available to everybody, Topspin will be as well. Just as you can make a shitty record with ProTools, you can definitely run a shitty marketing campaign with Topspin.
The math, as we have done it is: there are millions of artists out there but only tens of thousands of artists who are earning a living, probably somewhere between 20,000 and 30,000. Maybe there are more, and hopefully with our technology, we can grow those numbers. Let’s say that we did a fantastic job, and we got that number to 100,000 artists plus, there’d still be a gigantic gap between people who want to be successful and who are not successful.
I personally struggle with the fact that when we open this up, the majority of people who use our software may not succeed. But everybody has different expectations. It isn’t,“I’m going to quit my day job” for everybody that has a Pro Tools rig. A lot of the times it’s just aspirational; and it’s just art; and it is just sharing. There are a lot of people out there that just want the validation in the iTunes marketplace. That’s great for them. We certainly would like to open up to everybody but I just want to make sure that everybody’s expectations are set correctly.
Are people more knowledgeable about what their needs and expectations are than five years ago?
Yes and no. Do they know more than 5 years ago? Absolutely. I think we still have a lot of work to do to get people (to understand). Just because we build good marketing tools doesn’t mean that people are going to be good at using them. It’s a new skill set. It is going to take some time for everybody to build up their chops. At the same time, we will be building up our software chops. Our marketing tools are not yet as great as they will be. We are a young company.
You aren’t the answer. You are a technology company.
That is hard to get across. There’s no question that the hype of Topspin was early. I would like to say that we hired a killer PR team but we didn’t. First, I have a big mouth, and secondly (Topspin) is an answer people are looking for. But we need to be careful in setting expectations. We need to say, “here’s what the technology is good at and here are the ingredients that need to be added to it to make it successful.”
Even major label and major artist’s sites aren’t what they could be.
It’s true, but when you think of the level of investment it takes to build (a site) relative to the opportunity, I think that’s why people need low cost tools. They can’t build everything from scratch. No music company can be a technology company. Unfortunately, there haven’t been a lot of technology companies to serve the vertical. I do ultimately hope that we can be of use to a lot of companies.
An important aspect of the Topspin Manager is its reporting component.
It shows how well you are doing and what is working. When I talk to people who are running marketing at labels—what used to be digital marketing or new media (departments)—in a lot of cases they are still flying blind. They don’t know what works. They are trying everything and hoping that, in aggregate, all of the activities that they are doing work.
I just saw a report of ads that were spent on a digital campaign. There were banner ads, Facebook ads etc.; it was all interesting but I don’t think that it was positive from a return on investment perspective. The report contained a lot of information that had nothing to do with conversion. They had absolutely no idea how many dollars this campaign--which had cost more than $20,000--drove. My guess is it probably drove less than $5,000 in actual sales.
To make smart marketing decisions, you have to have the conversion data. That’s what we are really trying hard to provide.
This is an exciting period for music.
I agree. I am 38 this year, and I am excited as ever about music. Jason Foster who manages Yeasayer, sent me an email a few weeks ago after we had dinner saying, “I have never been more excited about the future of music as I am right now.” I pulled this quote from his email because I wanted to send it to everybody in the music industry to pay attention to how Jason is doing. For folks who are really embracing the new wave.
I do have a ton of optimism about the business. I do think that we are on the other side of that (pessimism about music’s future) now. Everybody that I talk to--at management, labels, distributors, artists at all levels--the denial is over. People see generally, what the direction is where things are going, and everybody is trying to work really hard to get there quickly.
I know people at major labels who think this way and are doing a great job. There are great people in all levels at UMG (Universal Music Group) who are all over us. Warners, as well, are doing a fantastic job on a lot of these accounts. But there are a slew of people like Jason; young managers with exciting bands as well as independent labels, marketing service companies and even distributors who are looking at the (music industry) and going, “Wow. Yeah, we have to change our expectations and we might have to change our cost structure, but there is a new and exciting business on the other side of this.”
There are certainly challenges.
The music business definitely has a classic Innovator’s Dilemma. It is very hard to want to build a business that replaces your old revenue stream when you are still benefiting from the old revenue stream. But, I think that the music industry is being disrupted on a number of vectors all at the same time. Usually, in a business, it is disrupted on one vector. But the music industry is being disrupted on both marketing as well as the product changing itself at the same time.
There is something intrinsically difficult about being a big company in the internet age.
You have to be able to move quickly. You have to be nimble and to adapt. The Secretly Canadians--the label--of the world are advantaged relative to the larger labels because they have a lower cost structure, talk directly to a core audience and really take advantage of the physics of the new space.
Indie labels have always had that strength. The majors had distribution as their strength. Having distribution channels with the internet puts indies on a more even footing.
I think that is exactly the dynamic that is happening right now. That is sort of where we can come in. We can be a tool that can really help all of the above.
You are very pro-label, however.
Artists need help, and I am pro whoever is going to help them. But whoever helps them needs to have a cost structure that doesn’t rely on broadcast media. It has to rely on real connections to fans. That is going to take technology. That is why I believe in what we are doing. I also believe that what we are doing is helpful to a major label as well as to a small label. At a reasonable cost, you can create real fan connections so you can deliver products that are of real value. I believe that is the future of the industry.
It’s going to take a revolution in the music business to bring in more people who understand that.
I think that you will see a revolution akin to when digital recording came in. In the beginning, there was a lot of people saying, “You will never make records on computers.” If you had done the market analysis back then you would never have created the company (Digidesign that developed Pro Tools). You would have said, “There are 7,000 studios in the U.S. if we are lucky, we are going to sell 5,000 of these units. But a whole new market emerged. They have sold well over 500,000 copies of Pro Tools at this point. Each of the Beastie Boys had Pro Tools, and they never had a studio before.
I think that something similar will go on (in the music business) where a lot of people will change their skill set. Some people won’t make the jump. But (innovation) opens a new market to a new set of people. I work every day with incumbents who are very pro-active in making the jump. Labels, management companies etc. There are people inside of all of those companies who are working to make this happen. Everybody is beyond denial. People are really trying to be part of the new reality.
So have we reached the bottom of the curve? Have people stopped worrying about technology and are now adapting?
I think that’s the case. I think that it’s starting. People are over the hump in wanting to get there. In fact, I think we are all getting there together. We are all learning and trying to share what we are learning and are just trying to get better at it.
It is kind of crazy to think that all of this started 15 years ago in terms of the web. That is a really short period of time for a lot of changes. But, I also think that for too long we have been kind of talking about the same problem of how we get access to music. Essentially this fight, and this denial over the fact that things are changing. When you think about it, the music industry only really woke up to the web in 1999. Then it took another 10 years to get rid of this ridiculous DRM (digital rights management) etc.
That DRM restrictive mentality still exists within some labels.
The DRM mentality is still there but at least we are able to sell DRM-free products in the world, and people realize there is not a business in rights-managed products. That didn’t happen until when EMI decided to drop the DRM from the iTunes store (in 2007). There was a lot of time wasted in the denial—hanging onto the CD as bundled product.
That change also came with the implosion of the physical music market. If business was booming, labels would still be hanging on to DRM.
Of course. What the Internet did is that it empowered consumers with unlimited choice. When that happens, you suddenly don’t control the marketing channels. The marketing choices opened up. You didn’t have to drive an hour to get a fanzine to get something that was off the mainstream. You could just type in an address or get it referred to you by a friend. At the same time, the product changed. The CD was this great and really efficient way of bundling tracks. But with Napster and iTunes, what we refer to as the great unbundling, suddenly you could get just the track that you wanted; the way you wanted it; and, frankly, at the price that you wanted it.
While the music industry has tried to build up its web business, the consumer has showed either limited interest or shown they have diverse interests.
I think that’s exactly right. I think that it is a key problem which has caused this industry to grow so slowly. What you had all through the 2000s, starting in 1999 with Napster, you had one member trying to own the entire value chain. With Napster, it was the fans trying to own the whole value chain. With Pressplay and MusicNet, it was the labels and technology companies trying to own the whole value chain.
Our premise at (music software developer) Mediacode, which I still believe today, is that what the internet enables is this loosely coupled value chain. What the labels should have been providing from day one is a set of services that people can plug into. I think we would have seen a different scenario if that had happened.
The public is so confused that Apple wins by default. Because it’s there.
I think that’s 100% correct. The innovator’s dilemma and innovator’s solution are covered in books by Clayton Christensen. The premise of those books is that when the technology is not yet good enough, the integrated solution always wins. Exactly to your point, what has happened is that by insuring that the technology can’t possibly be good enough, we have ceded the market to Apple.
Imagine, that when all hell started to break loose, instead of trying to extract as much value as possible out of every start up (company) that came to the table wanting to build a consumer service, the (music) industry had gotten together and effectively built a clearing-house for digital rights that anyone could plug into? That really enabled the ecosystem to build interesting applications on top of it instead. Now that doesn’t mean that (the record labels would) lose control of the economics. I think it’d be the opposite. You set the economics and people could choose to build on applications on top of those economics or not.
[Clayton Christensen, professor of Business Administration at the Harvard Business School, is best known for his study of innovation in commercial enterprises. Among his books are: “The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail”; “The Innovator's Solution: Creating and Sustaining Successful Growth”; and “Seeing What's Next: Using the Theories of Innovation to Predict Industry Change.”]
That way the labels and publishers would have control of the economics, really.
Absolutely. They don’t get control over the application. They get control over the content and the economics which is what has really been important to them from the get-go. But I think that people were so focused on extracting large amounts of dollars from new entrants into the web space. Frankly, that might have been an okay strategy because people were overpaying for those rights relative to what the consumers were paying. But it has hurt us from the innovation perspective, and ultimately it has cheapened the value of the music overall.
Topspin offers a bundling of products.
We are seeing that you can offer products of value and have people pay a considerable amount of money for them. We are selling Peter Gabriel experiences, which include going to sound check; the album; and the T-shirt for $540. I challenge anybody that says that nobody will pay for music. Nobody is going to pay for the same thing that they can get for free somewhere else. But with all of the fan-centric format things increasing, people are figuring out how to reach fans efficiently and build businesses on that connection.
The recording industry has been rooted in selling recorded music. Few people figured out that other things could be up for sale. Or what is being sold could be unlimited—not just 12 tracks.
I think that’s right. But I don’t think that was the wrong thing to do 20 years ago based on the distribution channels that were available. If you think about it, Trent Reznor blew things open (in 2008) when he sold 2,500 of those $300 box sets (the Ultra-Deluxe Limited Edition NIN Ghosts box) in 48 hours, and put three-quarters of a million dollars in the bank before he manufactured a single one. But that product wouldn’t have made any sense (in the old system). Can you imagine trying to sell those 2,500 units at Tower’s (Tower Records) 10 years earlier? It wouldn’t have been efficient.
Labels hung onto that single product template too long. They didn’t get into bundling and merchandising until more recently.
They definitely hung on past it’s due date, right. It would have definitely been smart to invest in the alternative marketing and distribution channels sooner.
John Rudolph, CEO of Bug Music, recently told me that he felt that the rhetoric about artists working with labels is less heated today.
I read that interview with John and I couldn’t agree more. It’s ironic. We get pitched all of the time as this sort of label killer company, but nobody knows the value of the label as much as we do because we have seen so many people try to do it themselves and have a really hard time with it.
Frankly, labels do a lot of work. It’s a lot of work to market and promote a record, so, if you are not going to have a label to do that, somebody has to do it. You better have a big infrastructure at your management company or have a good marketing servicing company or your distributor better be doing that work. Or you know what? Choose a good label. Have a great deal with the right partner. And that’s a great way to go. There is definitely no such thing as total DIY for anybody who is of note.
We work closely with Metric, and yes, they are doing it themselves, but Metric’s manager, Mathieu Drouin, is down as saying that they probably have a bigger team working their record than if they were at a label. They pick and choose in each territory. They have companies like Topspin helping them out and they have companies like Redeye (Distribution). They have multiple digital marketing and PR companies on the job. They have radio promoters on the job. They have coverage in each and every territory, and their manager is an absolute mad man. He works as hard as any manager in the planet.
DIY is not “do it yourself.” It should mean choose the right partners.
In the past, it was, “I gotta get signed. I gotta get signed.” Because artists didn’t have any cash flow. Those old days, from an artist perspective, was like playing a lottery. “I’m going to play this game on the off-chance that I am going to have out-of-control success. If I’m not a success, I’m going to have a few good years of being an artist and follow my dream.” Nowadays, artists look more like entrepreneurs running small businesses. They can actually scale (their businesses) to make sense.
Artists who are eking out a good living by themselves can then graduate to a manager who has support staff.
Who comes to mind is Jason Foster, who manages Yeasayer and Beach House. My understanding is that Jason’s company (Baltimore-based We Are Free Records) is him and, maybe, two people. But with Yeasayer and Beach House, he has built a pretty good business over the past few years. They did the first Yeasayer album (“All Hour Cymbals” in 2007) entirely themselves. For the second album (“Odd Blood,” in Feb. 2010) he partnered with Secretly Canadian He has just done smart deals. With Beach House, he partnered with Sub Pop. He has done intelligent deals that are appropriate for his artists. Those bands are going to earn good livings this year.
I love the availability of all of those live tracks by the Dandy Warhols.
They have done a great job. I’m sure you’ve seen (the 2004 film documentary) “DIG!” and saw what they went through on the Capitol (Record) side. My wife worked closely with them at Capitol as Perry Watts-Russell's assistant. (As Sr. VP of A&R at Capitol Records, Watts-Russell signed or helped develop Radiohead, Everclear, the Dandy Warhols, Meredith Brooks, and Amy Correia). So it’s been a ringside seat for us. They were surrounded by great people who loved their music at Capitol. Perry’s a fantastic A&R guy but still it was a hit-driven, into-the-radio target game (there) which, obviously, didn’t fit their artistic inclination.
They have been so good at addressing their core fan base outside of that (hit-driven radio) model. And continue to be. They have done a great job embracing the model and the scene and building a business directly to their fans.
[DiG! is a 2004 documentary film directed by Ondi Timoner. Compiled from seven years of footage, it contrasts the developing careers of the bands the Dandy Warhols and the Brian Jonestown Massacre. The Dandy Warhols’ “The Capitol Years 1995-2007, featuring 14 of their most popular tracks from their years with Capitol Records” and a previously unreleased track “This is the Tide,” is set for international release on July 19, followed by a U.S. release on August 24.]
Where are you from originally?
I’m from Goshen, Indiana.
How did you get into the music industry?
Just by being a music fan. I have been a record collector since I was 5 years old. I was into heavy metal in grade school; punk rock in high school; and hip hop after that. I grew up in a town with no record store. I would have my mom drive me an hour to Track’s Records in South Bend near Notre Dame (the University of Notre Dame) so I could buy a copy of (the punk fanzine) Maximumrocknroll. Seven inches and vinyl (releases) I would have to get mail ordered. I was just a gigantic music fan.
You earned a BA in computer science at the Indiana University in Bloomington.
I have been a computer nerd from the time I was 10. Bloomington had a lot going on from a computer science perspective so I signed up for a computer science degree. As a sophomore I ended up getting a work study job at the Indiana University Music Library working with this visionary head librarian Dr. David Fenske. He had this vision in 1991 to move all of the reserved listening material from behind the desk to play stations throughout the library. I was this work study kid who said, “Sounds good to me. If you’re paying $6.25 an hour, I will build whatever you want me to build.”
I ended up building for him what I believe was the first search and stream system that I had ever heard of. It was a great project. There were IBM commercials that featured the research project. We ended up building the second-ever music related web site for Indiana University’s music library. I built it to this new thing called the World Wide Web, which really didn’t exist then for Windows or MAC.
Then you started doing web work.
I graduated in 1994 but I had built a Beastie Boys website in 1993. Then, I got a called from (Gold Mountain Management executive) John Silva in late 1993 or 1994. I thought he wanted to shut me down for copyright infringement. Instead, John said, “Are you crazy? I want you to do this for all of my artists.” I ended up charging him $8 an hour to build websites for everybody at Gold Mountain, including Bonnie Raitt, Redd Kross, and the Breeders. I just started getting more work.
There weren’t many people doing music sites on the web back then.
There were very few of us. There was Internet Underground Music Archive (IUMA) and Underground Network. That was about it in 1994.
What were the expectations in the digital field when you worked at Grand Royal? Was it to sell product through the new media, to provide great exposure, or building a brand?
What the Beastie Boys did with Grand Royal in the early ‘90s was very much in line with what we are trying to do with Topspin. But I had nothing to do with it in the early days at all.
In 1992—the Beastie Boys had said, “For lyrics send a dollar to this address,” and they ended up with garbage bags full of dollar bills. Mike D, being ever the opportunist, looked at those garbage bags full of dollar bills and said, “Man, if we just send these people (just) lyrics, we are idiots. We have a bunch of direct fan connections staring at us here. We have to do something with it.” They started a mail order company and a magazine around it and it turned into a label.
I had started working with the band in 1993 and helped peripherally with Grand Royal until 2000, when I joined the company full-time. I was only with the company for a year. (By then,) the cat was out of the bag on Napster; and the cat was out of the bag on dot.coms being this gigantic valuation where everybody was going to get rich. I had also just come out of AOL where we had released Gnutella, (a decentralized file sharing network) which was the first file sharing thing. So I literally went from one side of the coin to the other.
At Grand Royal, I was looking at everything that wasn’t selling records. (Co-founder) Gary Gersh was in the business of selling records and driving up the sales of records. Adam Nathanson and I did all of this other stuff. We started the merch company, which was very successful. We were on our site selling merch to Urban Outfitters, which was very lucrative. We did a bunch of stuff on the web and managed to cover our costs, but not make a tremendous amount of money. We did a deal for a radio program with Westwood One that was sponsored by Sprite. We did a book deal with Harper-Collins. So the idea was that there was a lot more with the lifestyle of music and a lifestyle of Grand Royal than just selling records. That informs a lot of our thinking at Topspin today.
[Grand Royal was the Los Angeles-based record label set up in 1992 by the Beastie Boys in conjunction with Capitol Records, after the band left Def Jam Records. Among the acts on the roster were the Beastie Boys, Bran Van 3000, and Luscious Jackson. Due to mounting debts, Grand Royal closed down in 2001.]
You had been part of Nullsoft, an early leader in the digital music revolution.
We had Winamp and SHOUTcast (technology that allows you to be the programmer of your very own internet radio station). We were sold to AOL in May, 1999. Then we made Gnutella which was not a very popular thing to make when AOL was trying to merge with Time Warner.
So I went from the Gnutella release to sitting with a bunch of copyrights in my lap at Grand Royal saying, “What can I do creatively in marketing?” I realized that even while I could do some creative things from a marketing perspective, at the end of the day it was still to just sell CDs.
What was the focus of Mediacode, which you founded afterwards?
One of the things that I realized at Grand Royal was that we had a lot of great ideas for things that we could do online but there was no infrastructure in which to do them. Here I was, at a small independent label (Grand Royal), I had the biggest digital team in the business and I had two people. It wasn’t like I was going to build a consumer service, right? And the (system) just didn’t exist to do anything grand.
At Mediacode, our original idea was that with this emerging technology with web services you could build a loosely-coupled ecosystem of services that could power new media applications. We started with just one application. We built a network media player. We were early to be honest. Being early isn’t the same as being wrong. In 2001 and 2002, it was a difficult time to be a startup (company) and raise money, but we did it. 2003 was a difficult time to suit up a company, but we did it. We were lucky to have a good outcome with the company. We sold it to Yahoo! in December 2003.
We had a great product that was along the lines of what Google announced (recently) with the purchase of Simplify (Simplify Media), where you can get your music in a cloud. So that was our focus but underneath what we were trying to build was a network of layered web services that would help boost a new media value chain, which I think still hasn’t come to fruition.
[Simplify Media's software looks at the non-DRM music in an iTunes software library and allows you to then stream that music from its servers in the cloud to any of your android devices.]
What did you learn at Yahoo!?
Yahoo! was a really great experience. I built their subscription service and there was the Media Player and the acquisition (in 2004) of Musicmatch (that developed the Musicmatch Jukebox software). Music Match was a great product that we cut off its path too early in my opinion. But we learned a ton about how hard it is to get into the space and how difficult it is when you don’t have the rights that you need to build an old business or to build a value proposition to interest consumers. Even the might of a Yahoo!, with hundreds of millions of users, can’t build an interesting business.
[Musicmatch was subsequently shut down as a service by Yahoo!.]
With many subscription services, so much music still isn’t available.
It’s true. The problem is exacerbated because (people) do have choice out there beyond you.
People don’t have to use your front door; they can go around you.
A great example of that when we’re talking about subscription services is Yahoo’s music video business. Yahoo! Music, when I started there, was the king of music videos. They were the absolute king. But they couldn’t get access to everything. During the time I was there, they lost the license to Warner Music Inc. over a disagreement about royalties. The price of the content that we had kept going up. Where we used to pay a smaller percentage to the majors for those videos, by the time I left, it was a much higher percentage. Usually when the price goes up, you can discern why. Goods become scarcer or people are investing more into the product or something. But the opposite was true here. We suddenly found ourselves competing with YouTube, which had a much broader selection and we were paying more for the product. It became a much less interesting business. If someone comes to Yahoo! and they search for the video that they want, they are only going to not find it once, maybe twice, before they say, “I’m not searching here anymore.” They go over to YouTube, and they never come back.
The music industry has wanted to monetize everything.
When money was plentiful, there was a promotional side (to licensing music videos and music). But, when I was at Yahoo!, I had such a hard time convincing the music industry about that. I’d say, “Look guys. Yes, we are the most popular music destination online but I’ve gotta be honest with you, this business is not a good business for Yahoo!.” The business itself was more than $100 million but the profit margins in music, because of what we are paying for content, looked nothing like the profit margins of, say Yahoo! News or Yahoo! Mail.
When Yahoo! looked at the business, they’d go, “Hold on. Your product is getting more expensive. Your traffic is declining. You have all of this stuff going on with the CRB (The Copyright Royalty Board of the Library of Congress). The subscription stuff is growing very slowly.” I was sitting there with a very challenged business.
Every time I would go to the music industry and ask, “What can we do together that really pushes the needle?” The answer was, “How much can you pay me?”
My hope is that MySpace Music doesn’t find themselves in the same situation because I believe MySpace Music is still a valuable property, probably more so than MySpace overall. MySpace is sort of losing its viability while MySpace Music remains viable if they find a model that works with consumers first.
Many of the services can’t afford additional content, including editorial content that could promote music because of the fees being paid for music content.
It is dangerous place for the (music) industry to be in where the word “music” could cease to exist as a noun, and these businesses could still carry on. For Apple, Amazon, Best Buy, Wal-Mart, Yahoo!, and AOL--if music disappeared for each of those companies, it would be a blip. But, it would be a very big deal for the music industry. I think that’s why the pure plays like Pandora are so important. We should all want to see them survive. They are great music companies for people who care about music.
The industry always had a problem with Yahoo!, Rhapsody, AOL, etc., who have had radio as a small part of a bigger service.
Their theory was that we were loss-leadering radio. But Pandora was able to change the broken royalty rate because they're a pure play.
What is your personal music taste?
It’s all over the place, but I pretty well stick to my roots. Someone looked at my record collection once and said, “You have hardcore everything. Rock, reggae, country.” I love rock and soul but I also like a lot of hip hop. My number one and two records of all time are Sly and the Family Stone’s “Fresh” and the Stooges’ “Fun House.”
One of my favorite things right now is the Avi Buffalo (self-named) record which Sub Pop just put out (in April, 2010). It’s not an easy-on-the-ears record but I love that kind of stuff that you can’t quite imagine this sound comes out of an 18 year old kid.
Larry LeBlanc 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, the London Times and the New York Times.
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