WEBVTT - Capitol Congress

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<v Speaker 1>Okay, so please welcome Bob left Sets and music industry

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<v Speaker 1>analyst and critic and the author of the left Sess

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<v Speaker 1>Letter and someone who I think is a legend in

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<v Speaker 1>his own mind. Just kidding. We love you, Bob, Come on, yeah,

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<v Speaker 1>I mean he is on insecured heart and I feel

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<v Speaker 1>like I'm a ship hit in my own mind. So

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<v Speaker 1>that ultimately works. This is a panel about change. So

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<v Speaker 1>the music business, it's not your father's music business anymore.

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<v Speaker 1>What does that mean in them to the year two thousand,

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<v Speaker 1>we lived in a monoculture. If MTV showed it, it

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<v Speaker 1>was successful. So the goal was to get on MTV.

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<v Speaker 1>Then Napster comes along and disrupts freething amongst people on

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<v Speaker 1>this side of the fence in the music business, all

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<v Speaker 1>the customers were labeled as thieves, they didn't want to pay,

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<v Speaker 1>revenue was going down, etcetera. What we've learned is change

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<v Speaker 1>is constant and the customer is always in control. If

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<v Speaker 1>you're not appealing to the customer, you're doomed. So the

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<v Speaker 1>example I always use if we look at eighteen years

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<v Speaker 1>worth of history since of Napster is some of you

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<v Speaker 1>may be too young to remember this, but on Saturday morning.

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<v Speaker 1>They used to show Westerns okay, and the bad guys

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<v Speaker 1>would rip off the bank. Now no one said, let's

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<v Speaker 1>build a really big megaphone, put it on the roof

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<v Speaker 1>of the tallest building and yell for them to bring

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<v Speaker 1>the money back. That's what it's been happening in the

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<v Speaker 1>music business until Spotify. So what do they do in

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<v Speaker 1>these old Westerns. They say, we're going to form a posse.

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<v Speaker 1>We're gonna cut them off at the past. One of

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<v Speaker 1>the great things about streaming music at this late date

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<v Speaker 1>is many people do not understand it. The example I

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<v Speaker 1>use on a regular basis, I get emails saying, uh,

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<v Speaker 1>I'm not gonna have a streaming service. I need to

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<v Speaker 1>own it because what if I'm out of a cell range.

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<v Speaker 1>Whereas everybody here probably knows, you can sink approximately two

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<v Speaker 1>to three thousand songs on your hairndheld device, so as

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<v Speaker 1>long as you have juice, you can listen even if

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<v Speaker 1>you're on the top of Mount Everest. So in the

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<v Speaker 1>music business, which is the canary in the coal mine

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<v Speaker 1>for entertainment tech, we have figured it out. We live

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<v Speaker 1>in an on demand culture. Everything has to be your fingertips.

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<v Speaker 1>Everybody say what's after Spotify? What's after these or Apple Music? Nothing? Okay,

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<v Speaker 1>as long as you can get it on demand, we're here.

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<v Speaker 1>What does that mean? A We're not like the movie business. Now,

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<v Speaker 1>if you followed yesterday's news, Disney said, we're Disney. We

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<v Speaker 1>don't really have to compete with Netflix. We don't have

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<v Speaker 1>to make as much product, which, of course, if you've

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<v Speaker 1>lived through the last eight years, your eyes are rolling. Okay,

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<v Speaker 1>So there's consolidation. Fox was sold to Disney in order

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<v Speaker 1>to compete to Netflix. And if you're following the CBS

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<v Speaker 1>Viacom story, it really isn't about less Moon Vez and

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<v Speaker 1>uh me too moment. It's about Sherry Redstone saying, we

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<v Speaker 1>gotta sell this stuff before the bottom falls out. If

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<v Speaker 1>we look at label business that's talking in the green room,

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<v Speaker 1>Universal Music is worth somewhere between twenty five and fifty

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<v Speaker 1>billion dollars, okay, and it's by far the largest company

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<v Speaker 1>in the sphere. But if you look at Warner Music,

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<v Speaker 1>the guy who doesn't run Warner Music anymore, Dick Parsons,

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<v Speaker 1>who came from American Express, he blew out Warner Music

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<v Speaker 1>for a couple of billion dollars. That's the music business

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<v Speaker 1>we're in. It's all short term thinking. You might have

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<v Speaker 1>seen yesterday of the day before, the big news was

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<v Speaker 1>that Warner blew out their Spotify stake. That's like saying

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<v Speaker 1>the people were in business with we don't belo, we

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<v Speaker 1>don't believe in, which is nuts. Then they're proud of

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<v Speaker 1>themselves saying we are going to put one point six

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<v Speaker 1>billion dollars worth of the five billion dollar cash up

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<v Speaker 1>from Spotify towards artists. I'm getting email all day today. Go,

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<v Speaker 1>that doesn't look too good. But before we get deep

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<v Speaker 1>into the nuts and bolts, what we have to realize

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<v Speaker 1>is we are now in the era of content. Tech

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<v Speaker 1>and distribution have been figured out. You'll remember five six

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<v Speaker 1>years ago, every month there was a new rage, turntable FM,

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<v Speaker 1>you can have your own radio station. There hasn't been

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<v Speaker 1>a new rage in forever. In addition, there hasn't been

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<v Speaker 1>a viral video. Everybody here remembers getting hum style. That

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<v Speaker 1>hasn't happened anymore. Because as we've gotten into the modern era,

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<v Speaker 1>what we've found is the i'd say the clock isn't

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<v Speaker 1>working here in case, you know, I could talk forever,

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<v Speaker 1>but I want to make sure I don't so. Uh

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<v Speaker 1>In the modern era, what we've found is that I've

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<v Speaker 1>lost my place, but I remember where I'm going. So

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<v Speaker 1>the uh so Netflix, as I say, is all about distribution,

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<v Speaker 1>and in the modern era we found there's cacophony. Everybody

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<v Speaker 1>is spreading messages. One don't listen to the people yelling

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<v Speaker 1>loudest about royalties and other changes in the music business.

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<v Speaker 1>They tend to be old and uneducated and non players.

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<v Speaker 1>The number one people I get email from bitching about

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<v Speaker 1>Spotify royalty rates don't make records. They just hope that

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<v Speaker 1>at some point they can get a good deal. Okay,

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<v Speaker 1>And then you have old sers like David Crosby who

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<v Speaker 1>seems to have lost the ability to do algebra, never

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<v Speaker 1>mind regular math, and can't really figure out what's going on.

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<v Speaker 1>But these are always the headlines. I'm sure you're emailed

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<v Speaker 1>there was the big story today is from the City

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<v Speaker 1>Core uh research. People like these people know anything about

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<v Speaker 1>the music business. But then even they say twelve percent

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<v Speaker 1>of the dollars ends up with acts, and then people

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<v Speaker 1>email me that sounds terrible. It's a really big business.

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<v Speaker 1>Everybody here has to get paid, the venue has to

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<v Speaker 1>get paid. Twelve percent is not so bad. In addition,

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<v Speaker 1>it's larger than what it used to be. So my

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<v Speaker 1>point is, now is the time to focus on content.

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<v Speaker 1>What do we know? To a great degree, the major

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<v Speaker 1>label record business is running on the same paradigm it's

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<v Speaker 1>been running since nine, which is chase what's popular. If

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<v Speaker 1>you're aware of your record business history, in the seventies

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<v Speaker 1>and late sixties, the foremost label in the business, with

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<v Speaker 1>Warner Brothers Records, they did something called artist development. Artist

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<v Speaker 1>development is over the career of an artist. It doesn't

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<v Speaker 1>mean you took a record from zero to a hundred

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<v Speaker 1>in a year. That's not artist development. That's record development.

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<v Speaker 1>But there's none of that here. Okay, major labels only

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<v Speaker 1>want to sell what's what there's there's a reaction to

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<v Speaker 1>already someone comes in, well, what are your socials? We

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<v Speaker 1>want to know you can get the word out. It's

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<v Speaker 1>not an evaluation of music. So right now, hip hop

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<v Speaker 1>is the dominant force. Why has hip hop the dominant force?

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<v Speaker 1>Because rappers embrace the Internet before everybody else. If you

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<v Speaker 1>go on Spotify where all the numbers are regularly, you

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<v Speaker 1>know Spotify is the largest player. But I also use

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<v Speaker 1>it because it's an open platform to the degree if

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<v Speaker 1>you are on the desktop application and you hover over

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<v Speaker 1>in the right and we'll tell you how many streams

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<v Speaker 1>the track has, where you can't get that information from

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<v Speaker 1>competing services. But we see that the main thing that's

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<v Speaker 1>played is hip hop music. That's great. Just like when

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<v Speaker 1>we went to sound skin and we got an accurate

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<v Speaker 1>kind of sales, we found that country music was much

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<v Speaker 1>bigger than we thought of it is. But the business

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<v Speaker 1>at large right now is excluding every other sound. Okay,

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<v Speaker 1>so the biggest act in the world, okay, time has

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<v Speaker 1>gone by. Three biggest acts in the world are Adele

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<v Speaker 1>Drake and Taylor Swift. Let's start with it, doll, what

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<v Speaker 1>is she selling. Well, she's not doing any of the

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<v Speaker 1>traditional hype, and she's not selling it on glamour. She's

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<v Speaker 1>selling on songs that people can sing along to, that

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<v Speaker 1>something that you know. It's not like a unique person.

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<v Speaker 1>It's not like an athlete, and we can't clone Lebron James,

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<v Speaker 1>but we could clone that sound. We're not doing that.

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<v Speaker 1>So as we move forward, as the rest of the

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<v Speaker 1>audience comes to streaming, which is country, which has come

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<v Speaker 1>to a certain degree, Okay, rock which is still rebelling

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<v Speaker 1>because if people in rockers such streaming haters, they're gonna

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<v Speaker 1>be other genres. So it's your job to find those

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<v Speaker 1>acts and literally find an audience for them where someone

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<v Speaker 1>else will beat you to it. This is the story

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<v Speaker 1>of Chance the Rapper. This is the story of Spotify.

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<v Speaker 1>Now a lot of this stuff is piety and plain site.

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<v Speaker 1>When Spotify did its road show in the spring, just

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<v Speaker 1>to get a little bit into the nuts and bolts.

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<v Speaker 1>At this particular point in time, it's a bad business

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<v Speaker 1>because it doesn't scale. One of the great things about

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<v Speaker 1>music business, once you make the record, doesn't cost much

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<v Speaker 1>more to sell ten million copies than one million copies,

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<v Speaker 1>or to use today's lingo, it's not that hard to

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<v Speaker 1>get a billion streams as opposed to a hundred million.

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<v Speaker 1>Where Spotify they continue to have to pay royalties. They

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<v Speaker 1>have a very low margin in the neighbor of thirty

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<v Speaker 1>the neighborhood of thirty odd percent. So what they said

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<v Speaker 1>in their road show is we are going to make

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<v Speaker 1>direct deals with artists. One thing you have to know

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<v Speaker 1>is today's artists are sophisticated. It's not the fifties with

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<v Speaker 1>Ahmed Er again and the other labels saying, oh, you

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<v Speaker 1>want to have royalties, Let's go to dinner. Let me

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<v Speaker 1>give you a Cadillac. You know, there's so much information

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<v Speaker 1>out there. Don Passman's book. When you make a deal

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<v Speaker 1>with somebody, they have a music business attorney and they

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<v Speaker 1>know what's going on, and they're not always saying yes,

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<v Speaker 1>what do they want from a major label? Which this

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<v Speaker 1>is they want money and they want awareness. Let's go

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<v Speaker 1>back to distribution. You'll hear all the time content is king.

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<v Speaker 1>That is complete horseship. When anybody ever tells you that

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<v Speaker 1>know that they have no idea what they're talking about.

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<v Speaker 1>They have drunk the kool aid. To use the expression

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<v Speaker 1>distribution is king. It's a very simple example. If we

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<v Speaker 1>sit here right now, we make the best movie of

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<v Speaker 1>all time and there's nowhere to see, it doesn't make

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<v Speaker 1>any difference. It's all about the distributor. So how did

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<v Speaker 1>distribution used to work in the physical era? It was

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<v Speaker 1>about relationships with the retailer. Okay, so what you had

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<v Speaker 1>is you ship product. Sophisticated people know here, they didn't

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<v Speaker 1>pay for the product. They paid for the product when

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<v Speaker 1>you had new product, and you were always behind when

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<v Speaker 1>each other blew up. The labels were always losing millions

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<v Speaker 1>and millions of dollars in revenue. They hadn't been paid.

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<v Speaker 1>There's a famous story of Bobby Walmack was on a

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<v Speaker 1>record coming called Beverly Glen. They had a million seller.

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<v Speaker 1>It put the company out of business. Why they could

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<v Speaker 1>just never get paid. Those days are done. You can

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<v Speaker 1>get paid from Spotify. There may not be anybody listening

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<v Speaker 1>and there's no money there, but you can go to direct.

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<v Speaker 1>This is a very important thing. So what is the

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<v Speaker 1>advantage of the traditional player, the major label. Well, the

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<v Speaker 1>main advantage is they wield their catalog and they've been

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<v Speaker 1>doing that for twenty years. But we're at the end

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<v Speaker 1>of the road. If you notice, Spotify is going to

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<v Speaker 1>go into India and there's some hesitation and there's some

0:11:14.679 --> 0:11:17.800
<v Speaker 1>scuttle but saying well, the hesitation comes as a result

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<v Speaker 1>of the major labels are pissed that Spotify wants to

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<v Speaker 1>sign people direct. The major labels can't back out of Spotify,

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<v Speaker 1>and prior to being involved with Spotify going public, they

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<v Speaker 1>actually lowered the percentage that the major labels are paid

0:11:33.559 --> 0:11:36.640
<v Speaker 1>because they're the number one account. It's like going to Walmart.

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<v Speaker 1>If you've ever sold to Walmart. They pay the lowest

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<v Speaker 1>price to the manufacturer, so an act can go directly

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<v Speaker 1>to Spotify. So what do you have? You have terrestrial radio.

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<v Speaker 1>This is a business that has run ontorestrial radio to

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<v Speaker 1>its detriment. We've known forever that radio isn't about music,

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<v Speaker 1>it's about selling advertising, and the power is going down.

0:11:59.240 --> 0:12:01.240
<v Speaker 1>The people in radio, or like the people who are

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<v Speaker 1>Trump fans, they're just built on disinformation. If you say

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<v Speaker 1>anything negative about radio, they will wow, it's better than ever.

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<v Speaker 1>But I ask you to talk to someone between the

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<v Speaker 1>age of ten and eighteen and asked them if they

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<v Speaker 1>ever listened to the restal radio, and you'll find no,

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<v Speaker 1>they never do. Okay, this is the history of what's

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<v Speaker 1>going on at large. This is like kodak Oh digital cameras,

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<v Speaker 1>they're never gonna come there to come whoops. In one year,

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<v Speaker 1>everybody got a digital camera. Okay. So the major label

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<v Speaker 1>has an advance, okay, and it's a really big thing.

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<v Speaker 1>People are looking for money to make a record, which

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<v Speaker 1>is cheaper than ever before, to live on, to go

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<v Speaker 1>on the road. But it's also the relationships put the

0:12:41.080 --> 0:12:46.480
<v Speaker 1>traditional relationships mean less than ever before. Radio comes last, okay,

0:12:46.520 --> 0:12:52.280
<v Speaker 1>and television is relatively meaningless. Sunday Morning CBS counts for

0:12:52.280 --> 0:12:55.199
<v Speaker 1>an older demo and Saturday Night Live. As a manager

0:12:55.200 --> 0:12:57.760
<v Speaker 1>put it the other day, it just creates buzz later

0:12:57.760 --> 0:13:02.319
<v Speaker 1>in the week. It's not like someone is actually watching that, okay.

0:13:02.360 --> 0:13:06.280
<v Speaker 1>So all the tools in the box of the major label,

0:13:06.640 --> 0:13:10.240
<v Speaker 1>the bottom is coming out, okay, So you have to

0:13:10.280 --> 0:13:13.600
<v Speaker 1>be aware of that. So the key is to look

0:13:13.640 --> 0:13:16.600
<v Speaker 1>to the future because the past is never coming back.

0:13:16.920 --> 0:13:20.359
<v Speaker 1>One of the foremost business educators is like Clayton christiansen

0:13:20.760 --> 0:13:24.960
<v Speaker 1>Clayton Christians and said, you build your competitor across the street,

0:13:25.760 --> 0:13:29.160
<v Speaker 1>and then at some point you then join with your competitor,

0:13:29.200 --> 0:13:30.600
<v Speaker 1>you move your business. So what do we hear in

0:13:30.640 --> 0:13:32.880
<v Speaker 1>this business? No one's gonna want to listen to an

0:13:32.960 --> 0:13:35.720
<v Speaker 1>MP three. Okay, we all heard all these things people

0:13:35.720 --> 0:13:38.240
<v Speaker 1>didn't want to do. It doesn't sound good enough. Listen.

0:13:38.280 --> 0:13:41.840
<v Speaker 1>I've got more stereo equipment, probably the people in this room.

0:13:42.000 --> 0:13:45.719
<v Speaker 1>Oftentimes I'm listening to the echo. It's just so convenient.

0:13:45.920 --> 0:13:50.240
<v Speaker 1>And staying on that point, okay, the voice control is

0:13:50.280 --> 0:13:52.720
<v Speaker 1>totally where it's at. If you don't have one of

0:13:52.720 --> 0:13:54.960
<v Speaker 1>the disease devices and I would say to get an

0:13:55.000 --> 0:13:58.720
<v Speaker 1>Echo as opposed to a Google Home because ultimately they're

0:13:58.720 --> 0:14:01.440
<v Speaker 1>more options because people can tie you into it. Google homes,

0:14:01.559 --> 0:14:04.120
<v Speaker 1>I mean, Apple's a closed system, dead on arrival. Let's

0:14:04.120 --> 0:14:06.520
<v Speaker 1>say open it. You can make Spotify the default, but

0:14:06.559 --> 0:14:09.520
<v Speaker 1>if you use Amazon Music, it'll give the lyrics, which

0:14:09.559 --> 0:14:13.080
<v Speaker 1>is really good. So it's not about sound. It's about reaction.

0:14:13.120 --> 0:14:15.480
<v Speaker 1>It's about the music cliche and the hip hop role

0:14:15.520 --> 0:14:17.760
<v Speaker 1>that may not apply. You know, three chords and a

0:14:17.840 --> 0:14:20.760
<v Speaker 1>chorus had a good beat, that's what you're selling. All

0:14:20.800 --> 0:14:25.200
<v Speaker 1>this other stuff we focused on recording quality, etcetera. They

0:14:25.280 --> 0:14:30.520
<v Speaker 1>don't really matter anymore. So how do you reach the audience.

0:14:31.040 --> 0:14:33.880
<v Speaker 1>So we hear all this stuff about playlists. I'm not

0:14:33.960 --> 0:14:38.920
<v Speaker 1>going to underestimate playlists, but let's not forget playlists are

0:14:38.960 --> 0:14:43.720
<v Speaker 1>primarily for passive listeners, and this business, more than ever,

0:14:44.640 --> 0:14:48.680
<v Speaker 1>is built on active listeners. Okay, if you talk to

0:14:48.720 --> 0:14:51.000
<v Speaker 1>a music fan, they say, oh, yeah, I picked my

0:14:51.000 --> 0:14:55.000
<v Speaker 1>own music on whatever service they use. So the point

0:14:55.120 --> 0:14:58.080
<v Speaker 1>is what can the label do that no one else

0:14:58.120 --> 0:15:01.400
<v Speaker 1>can do. It is a relationship business. But the more

0:15:01.440 --> 0:15:05.200
<v Speaker 1>you try to extract an announce of flesh from the

0:15:05.200 --> 0:15:08.440
<v Speaker 1>acts the more that they react, they can make the

0:15:08.520 --> 0:15:10.640
<v Speaker 1>music in their living room. People say, oh, it's not

0:15:10.680 --> 0:15:12.520
<v Speaker 1>like you can cut for a hundred thousand dollars, but

0:15:12.640 --> 0:15:16.320
<v Speaker 1>very few people are getting a hundred thousand dollars to cut. Okay,

0:15:16.440 --> 0:15:19.040
<v Speaker 1>you can promote it yourself. So we go back to

0:15:19.120 --> 0:15:22.960
<v Speaker 1>the playlist. It's about creating a hit song. Hit song

0:15:23.040 --> 0:15:26.240
<v Speaker 1>is something you have to play more than once. However,

0:15:27.200 --> 0:15:31.400
<v Speaker 1>now more than ever. If it's great, that doesn't mean anything. Now,

0:15:31.440 --> 0:15:33.040
<v Speaker 1>if you talk to people on the street, they have

0:15:33.080 --> 0:15:36.680
<v Speaker 1>to leverage their fans. Your key is leveraging other people's

0:15:36.720 --> 0:15:40.600
<v Speaker 1>audience to get something exposed. If it's exposed to audiences,

0:15:40.600 --> 0:15:43.960
<v Speaker 1>then it can react. We're all inundated with messages all

0:15:44.040 --> 0:15:46.040
<v Speaker 1>day long. People send me a record, they go listen

0:15:46.080 --> 0:15:47.600
<v Speaker 1>to it five or six times and tell me what

0:15:47.680 --> 0:15:52.600
<v Speaker 1>you think. Are you fucking nuts? I mean, babies are overscheduled.

0:15:52.960 --> 0:15:55.800
<v Speaker 1>I'll listen for thirty seconds if it doesn't hook me,

0:15:55.960 --> 0:15:59.400
<v Speaker 1>not because I'm an asshole. That's what everybody does. We

0:15:59.520 --> 0:16:01.960
<v Speaker 1>hear this. The kids have short attention spans. They don't

0:16:01.960 --> 0:16:04.840
<v Speaker 1>have a short attention span. They have an incredible ship detector.

0:16:05.440 --> 0:16:09.480
<v Speaker 1>So it's about great, Okay, something has to be great.

0:16:09.640 --> 0:16:12.040
<v Speaker 1>The other thing you have to realize, like the world

0:16:12.080 --> 0:16:15.080
<v Speaker 1>at large, music business is and will continue to be

0:16:15.120 --> 0:16:18.760
<v Speaker 1>a business of winners and losers. If you go on Spotify,

0:16:18.800 --> 0:16:20.640
<v Speaker 1>if your new rock band is not that good, I

0:16:20.640 --> 0:16:23.480
<v Speaker 1>can listen to led Zeppelin all day long, you're competing

0:16:23.480 --> 0:16:27.320
<v Speaker 1>against the history of recorded music. But in addition to that,

0:16:27.760 --> 0:16:29.720
<v Speaker 1>it is it's not like the old days. Well, if

0:16:29.720 --> 0:16:32.880
<v Speaker 1>I got a local market and everybody in South Dakota

0:16:32.880 --> 0:16:34.880
<v Speaker 1>they got the five hundred channels, they got the hundred

0:16:34.880 --> 0:16:40.120
<v Speaker 1>gigabye down Internet, everybody's on the same page. Thanks for listening.

0:17:00.040 --> 0:17:20.560
<v Speaker 1>M can think of in the reason I don't know

0:17:20.960 --> 0:17:24.760
<v Speaker 1>me exactly. One must be