PoliTalk48 : salon 2
// hosted by Paul Hoffert / Aug 26, 2009
PoliTalk48 salon 2 features Anthony Volodkin (Hype Machine), Jonas Woost (Last.fm), Juha Kyrro (Fullsteam), Vered Koren (EMI), and Nevin Domer (Maybe Mars) on the topic of Next Generation Leadership. PoliTalk48 is an interactive salon on music and entertainment industry issues moderated by Paul Hoffert, Media Professor at York University and Chair of The Bell Broadcast and New Media Fund. Each of the panellists has 48 hours to comment and interact with other panelists’ comments. Join us in person to explore this particular theme further at transmission.TALKS 2009.
// salon 2 panelists
Anthony Volodkin, Hype Machine, USA, 23
Anthony Volodkin created The Hype Machine nearly four years ago in his dorm room and has been unable to stop thinking about how people discover music ever since. In that time, a small passionate team has been assembled around the product and the Hype Machine now reaches over 1.5 million people each month. Prior to that he spent six years working as an IT consultant while constantly carving out evenings to see live music. Anthony was born in Moscow, Russia and has been living in Brooklyn, New York since he was 12.
Jonas Woost, Last.fm, UK, 27
Born in Hamburg, Germany, Jonas first starting working in the music industry at the age of sixteen with PIAS Recordings before relocating to London in 2001 to join dance label Kickin Music. After three and a half years managing Communications and Publicity, he explored his interest in radio with Ministry of Sound, one of the most successful independent record labels in the UK and syndicators of dance music worldwide. where he was responsible for liaising with its worldwide syndication partners. At the end of 2005, Jonas assumed the role of Head of Communications at Last.fm (winners of Best Music Community in the 2006 Digital Music Awards). At Last.fm, Jonas’s main focus is heading the communications team and working in partnership with UK and international recording companies and artists.
Juha Kyrro, Fullsteam, Finland, 27
Having booked shows for this mate’s bands and his own as a teenager, Juha started promoting full-time at the age of 20. He established Fullsteam Records before a two-year stint at Love Nation Finland (Then, Welldone) between 2004 and 2006, after which he added Fullsteam’s booking and promotion arm to a business that had grown to include merchandising, management and a 50 room rehearsal studio complex in Helsinki. Fullsteam, of which Juha owns 51%- also owns a share in distribution company Supersounds Music and two venues (capacity 1,000 and 450).
Vered Koren, EMI, Canada, 29
Director, Music & Brand Partnerships for EMI Canada. Past Vice-President of content and business development for Hip Digital Media.
Nevin Domer, Maybe Mars, China, 29
Nevin Domer is one of the principals for one of China’s hottest indie rock labels, Maybe Mars and also books D-22, Beijings most important live venue for emerging artists in China.
// next generation leadership
About ten years ago, Shawn Fanning worked feverishly to create the first mega-popular P2P music sharing website. He was so driven by his vision that he had no time for regular sleep. Instead he took naps throughout the day and earned the nickname “Napster”. His file-sharing enterprise, also named “Napster”, was so disruptive to the existing music business that we are still shuddering in the aftershocks of the quake it triggered.
Napster was a leader. Against all the advice that experienced pros in the business offered him, he soldiered on in the ultimate faith of his vision a world filled with music that flows through digital networks as freely as water flows through faucets, with low cost for downloading a song and high revenues to creators.
Fanning was nineteen when he launched Napster. He expected that the obvious (to him) advantage of moving the cost of music distribution from record companies to music users would be so appealing to the major companies that they would embrace his scheme establish online paid music distribution as the predominant revenue model for twenty- first century global entertainment.
People at the crucial licensing meetings between Napster and the major record companies report that his investors offered the record companies an initial guarantee of more than US $1 billion to ink a license deal. The leaders of the record companies declined, deciding instead to thwart any attempts to move control of music distribution from their physical trucks and warehouses to user’s computers and their network providers.
Almost ten years later, Napster’s vision has been vindicated. Projections of global revenue for online music sales in 2010 indicate it will eclipse revenue from sales of physical CDs. The rejection of a deal in 1999 resulted in the disintermediation of record companies from their customers and left a legacy of bad will and eroded brands that has proven to be much more costly than licensing Napster might have been.
Did the leaders of the music industry in 1999 make a bad decision? Could they have ensured that their companies would participate in the new online economy and build stronger ties with their customers? If the captains of the record industry would have been younger and less steeped in the historic business culture, might they have made a different decision?
Fanning was a young inexperienced entrepreneur, in touch with his peer music audience and unburdened by historic music business practices. The heads of the major record companies were old pros. Did their years of experience dealing with 20th century music deals cloud their ability to steer the proper course through 21st century business environments?
Is it time for a new generation of leaders who are unsullied by historic and inappropriate business models and practices?
This panel has been chosen from among the young, entrepreneurial leaders who are making their marks as pragmatic visionaries. They have already established themselves as leaders and doers. They see the future more clearly than many and they are firmly grounded in the objective in building a successful and healthy music market of the future.
They are all under 30 years old.
// here’s what our panel has to say:
Poli: What are the more important qualities for music industry leaders today? Which of these do you most aspire to?
Jonas Woost (Last.fm, UK, 27): It seems to me that many music industry leaders, especially in the recording industry, have a limited understanding of their audience and therefore their customers. If I don’t have a good knowledge of how people discover, consume and share music these days it will be very hard for me to build up a good business within the music ecosystem.
The loss of control over ‘their’ content means that the recording industry needs to be able to listen to [its] consumers, understand their behavior and react quickly to changes in the market place.
It’s a confusing situation: as a leader in the music industry you have to be reactive to what’s happening with the music fans but be proactive to get the competitive advantage in the market.
Vered Koren (EMI, Canada, 29): What this industry seems to sometimes overlook is that successful leaders must not only have good knowledge of past and present business models, they must also display the traditional qualities of great leadership: management, operations, organization, and vision.
A great leader will hire people much smarter then him/her. A great leader will empower a team to take initiative to come up with new ideas. A great leader will promote change and progress.
Leadership is measured by the success of a team. I aspire to build a team of great minds and skills. I aspire to be in a position where revenue is generated through honest relationships and positive and progressive working culture.
Anthony Volodkin (Hype Machine, USA, 23): Leaders in this space will be able to think in several dimensions while avoiding echo chambers (there are many: a web 2.0/UGC/VC one in Silicon Valley, a recorded music one in NY/London, an indie 100% DIY in other pockets of the world), overhyped technologies, "solutions" and "open platforms".
They will focus on long-term value and slow sustainable growth, rather than short-term gains to boost their own bonuses or get promotions to VP of whatever. Some of this sounds unsexy (just like Vered’s note about leadership) and lacks shortcuts, but it’s also more in touch with reality than the expectation of rapid growth, massive returns that are often placed on new companies or new initiatives. If it were this easy...
Nevin Domer (Maybe Mars, China, 29): The environment of the Chinese music industry is one of constant change and a leader here has to be innovative and open to new ideas. A small current today could be a huge revenue stream tomorrow so adapting new concepts at the right time is crucial. A good leader will provide support and encouragement to those working to create something new.
Juha Kyrro (Fullsteam, Finland, 27): I think you guys already covered this.
Poli: JW notes that a key quality for leadership is to recognize that the recording industry no longer can control its content; that users now control content. You could say that the 20th century was dominated by the Industrial Age model of mass communication and mass distribution, from a few big suppliers to many consumers. The 21st century is however dominated by the Information Age model of many to many, in which every consumer can be a provider. P2P is a good example of this. In the new model, the few big suppliers no longer have the power and control they had before. Do you think that adopting this approach is the significant differentiator between the new old and old honchos?
Jonas: It seems that the new honchos might have been quicker in understanding this dramatic change which currently might have the biggest impact in the media and entertainment business (with other industries following). However, understanding it is only the starting point actually making a profitable business out of it is something that many haven t mastered. This will be the real task over the next few years and it will be important for senior decision makers to work together with a new generation to make this a sustainable business.
Anthony: While it may not be the suppliers who will have significant power and control in the new model, some businesses will be a dominant force. Today, we can already look at Apple with an overwhelming % of digital sales and there will be more major players soon. The key, however, is that they will be brand new and likely unexpected, much like Google was not expected to dominate the Internet market 10 years ago. They will be able to combine the deep understanding of new models with a good revenue source.
Vered: I think that to a certain degree it is a matter of control, yes. But the great news is that content is being distributed in a much more economical and widespread manner than ever before. We can now rely on the public for distribution. It is our job to create desirable content and to encourage participation. Music is a passion point and people will always value exclusivity, collectables, convenience, and early access.
There are commercial players that can capitalize on this demand without having to control how it s being consumed. In fact, if music consumption is socially driven then it becomes an even more valuable asset commercially.
Poli: Historically, music recording, publishing, distribution, and live performances have been separate businesses with separate execs who know their verticals well but have been largely uninformed about the other businesses. Many believe that the decline of CD sales is leading to a more horizontally integrated music industry in which the previously different businesses are merged. Examples include so-called 360 deals and artist-owned and operated enterprises. Do you think that the new leaders should have a better knowledge of all aspects of the music business?
Jonas: The answer to this can only be ‘yes’ - more knowledge is always an advantage for any leader. The idea of a ‘record company’ is probably something that will go away at some point and ‘music companies’ will appear more and more.
Nevertheless, you can’t do everything at the same time. Future leaders will have to make sure that they build up teams with different areas of expertise: just because you can put on great gigs does not mean you will be able to create a good marketing plan for recordings of your artist.
Vered: Absolutely. Each vertical has a direct affect on sales in other channels. If you haven’t already integrated multiple verticals into your business model, then at the very least there should be revenue based relationships with the partners that manage them.
Juha: Absolutely yes. But I don t think there is anything newhere; the best people in the business have always been able to see the full picture but they ve been smart enough to focus on their core expertise - and there s been enough business with just that for them.
The 360 model was already in place long time ago, before music business became gigantic, and now it feels that we ve just come around to where it started.
Anthony: Yeah, there will be (and is already) a shift away from the focus on revenue from recorded music to an assortment of other revenue streams. We’ll stop calling them record companies and start thinking of them as music companies (totally with JW here). It’s not really an option, those who will not participate, will fail.
Nevin: Yes, all sections of the music industry are becoming more and more interconnected and I believe that process will continue.
Poli: What are major hurdles that need to be overcome for sustainable and profitable music businesses?
Jonas: Understanding music fans, reacting quickly to changes in their behavior and allowing innovation to happen.
Vered: Without a doubt, developing sustainable and profitable digital business models. The industry (especially young music start-ups) has come to understand how the public wants to consume music. But very few organizations have figured out how to properly monetize this activity.
The digital sector sees new players emerge all of the time. But how many of these players are making the numbers work? Raising money isn’t the problem. On the retail side, the margins are too small. And for ad-driven models, the costs are too high. The future must include far more than just digital music sales. Perhaps the solution is twofold: 1) The suppliers (labels) must better manage funds and afford distribution partners more cost-effective content, and 2) Alternative revenue must be generated from unique artist experiences and brand partnerships created from the fundaments of social interaction and UGC.
Juha: I think it all went wrong when music companies stopped developing hardware (or hardware companies gave up releasing music). If that hadn t happened, the music business would have made a fortune with just mp3 players.
The same goes for publishers and media. Why didn t music business come up with mp3.com, MySpace or Pirate Bay? And if we had been involved in all of this from day one, I want to believe the artist would have been secured their share on all the revenue too.
Well, at least now the majors have realized they need to own Spotify... I think that to run sustainable and profitable music business you simply have to be able to understand how music is consumed and make sure you get your investment back from where the money is.
Anthony: Key hurdles are in finding ways to generate revenue that aren’t focused solely on selling plastic discs or selling downloads via a monopolistic digital music vendor. It’s also possible that the realistic sizes of some of music-focused web businesses are smaller than the VCs or entrepreneurs pitching them would believe. Some also need to focus on a more diverse set of efforts (not just showing web users some music data or giving free downloads) than the neat-looking business plans, of say SpiralFrog.
Nevin: The thing to understand about China is that the music industry here is only at the beginning and the big hurdles still are developing a market for underground music and discovering what products and services people will pay for in an environment that has never had widespread forms of traditional physical distribution.
This makes a lot of the basic tasks of music distribution and promotion difficult but also forces people to look into innovative strategies that may have been overlooked or disregarded otherwise. We are dealing with the same problems that others in the industry are facing everywhere but for us they are even more urgent and appear even more basic.
Poli: Juha’s point about integrating hardware and software is interesting. The Edison Company, which developed the first wax cylinder recorders and players was the first major record company. RCA records grew from its roots as a manufacturer of victrolas, and so on. Today it’s Apple making iPods and iPhones. Is Apple or Microsoft poised to be the next major record company?
Jonas: They are staying away from that area for a good reason: those companies know that being in the music content business is not a big money maker and it makes much more sense to focus on what they are good at. Music copyright law is complex (and therefore expensive) and it is very unclear what the monetary value of recorded will be in the near future. All this doesn t really sound like a business you want to into right now.
Anthony: The hardware/software companies will only enter the music world when they see a sizeable opportunity to benefit from their success in their primary businesses. Currently, they don’t find it worthwhile mostly due to the problems JW outlined, but also because the margins from selling their products are great.
Vered: Hardware companies still rely on creative industries to produce content. I don’t know if hardware companies will ever have the inclination and means to develop, market, and license new music.
Poli: Do you think we need to sweep out the old guard and replace them, or do you think young leaders benefit from the mentorship of experience?
Jonas: Of course we don’t want to ‘sweep out the old guard’ - experience is one of the main qualities of leaders anywhere in the world. However with technology changing to fast there needs to be a bigger exchange of ideas and information between senior leaders and younger innovators for this business to move forward successfully.
Vered: Sweeping out is not an option or a solution. But, as with any industry, leaders must embrace and understand their consumers (including their behavioral history). So, if the old guard is able to recognize and value young leadership, then they can only benefit from these fresh perspectives.
Embracing young minds and new ideas will make the so-called old guard look good. You don’t have to be young to recognize the value of a new business model built on logic and knowledge.
That said, industry leadership should reflect the values of the target market. Music is not just being consumed by middle-aged men. Enough said.
Juha: Sometimes it feels that the brightest young talent is definitely somewhere else than in the (recording) music business. Many of them have actually developed new business models that the music business should have come up with.
I think we definitely need both the experienced "veterans" who are willing to share their knowledge and stories and the youngsters who think they are immortal. Even though you need to screw up every now and then to learn, you don t need to repeat every single mistake along the way.
Anthony: Sweeping out old guard only makes sense if the ‘guard’ is unwilling to experiment or change as the world around them evolves. Alas, it’s exactly in those situations where changes are most difficult and business has been suffering because of shifting landscape.
Nevin: The Chinese scene is in much need of experience and often foreign professionals are the ones who run the record companies, recording studios, clubs and promotion companies. The experience that they bring from the US, Europe, Japan and Taiwan has been extremely valuable in helping to build China’s nascent music industry. It’s the young Chinese kids however who benefit from this experience and then adapt in their own unique ways who will have the largest effect on the Chinese industry.
Poli: All panelists believe we should somehow couple the experience of the old honchos with the market understanding of the new honchos. If you were given a blank slate to organize the executive structure of a 1) new major; or 2) existing major music company, how would you structure the mentoring of the new honchos by the old?
Jonas: Open conversations are vital. Unfortunately those are not happening often enough this can be due to structural or geographical hurdles or just because of the sheer arrogance of individuals that should be part of the conversation. And just to clarify: it doesn t have to be the old honchos that are not interested in a discussion; there is also a new generation of individuals that think they know everything already. We all need to be able to admit that there are parts of the business that we don t understand.
Anthony: Jonas is really on point here; it especially applies to certain sectors within tech, that are quite dismissive "of the old music industry ways". A brief visit to Techcrunch.com is a good example. As far as new structures go, it’s difficult to imagine a new major: it’s more likely that smaller music companies will gradually evolve into larger ones as a result of their success in the new world.
The success will come from thinking holistically and not focusing on technology as the answer to everything nor on existing methods of making money with music as the sole solution either.
Vered: I think the key is knowledge. Knowing your consumer and market potential. Everyone in the music business needs to know his or her audience better. Old or new, we all need to understand how best to monetize current and future market activity. I am always restructuring (in my mind)...constantly thinking about how my team can be more productive, more strategic, more profitable. Sometimes this requires upward management It always requires listening (to each other and to our partners/consumers).
Poli: What would have you done you if presented with the Napster deal in 1999? Would you have made the deal or rejected it? Or is the idea of a world without P2P even possible to contemplate anymore?
Jonas: It’s always very easy to have an opinion about this deal 10 years later. Of course we would all have engaged with Napster and make P2P a legal business right from the start. If this had been done many things would be different for the recording industry right now.
But I’m not a fan of looking back and regretting choices that have been made - the problem is that similar choices are still being made today. Innovation can still be prohibited by music owners through very expensive licensing hurdles which means that starting a new service that uses recorded music is extremely difficult. I find it frustrating that in times where we need new ideas and models for the industry to stay sustainable it is still difficult to engage with the recording industry in a legal way.
Vered: Not sure how this question is all that relevant or important. I have no idea what I would have done 10 years ago. Different time, different value system.
Juha: What would you have done if someone had presented you an idea about an audio file format called MP3 in 1990?
Anthony: Jonas said it perfectly: "the problem is that similar choices are still being made today. Innovation can still be prohibited by music owners through very expensive licensing hurdles which means that starting a new service that uses recorded music is extremely difficult. I find it frustrating that in times where we need new ideas and models for the industry to stay sustainable it is still difficult to engage with the recording industry in a legal way".
Nevin: If that had happened in China the decision would have been much easier, mass production of pirated CDs already undermines physical sales and downloading mp3s is as easy as a baidu (and now google) search. In retrospect the decision is pretty obvious but I don’t really know what I would have done at that place and time.
Poli: What’s the most frustration aspect of being a professional under thirty?
Jonas: I don’t get frustrated as a professional. I only see issues that need to be resolved and I hope I can be part of the solution. I would get frustrated if I stopped to learn but in this business this will probably not happen any time soon.
Anthony: The biggest challenge is to keep your mind and heart open to new thinking and people. It gradually gets more difficult to look at a new startup or initiative and accept it on its own terms, rather than dismissively throw it into some been-there-done-that bucket. On the flip side, there are lots of people trying the same things people have tried before without much progress, so sometimes this is fitting too. Otherwise, I have no complaints.
Vered: There is too much talk of the past and not enough affirmative action. We need to develop expectations that make sense today. I hate waiting. And also, I don’t take kindly to old school “boys club” values.
Original illustration by Dushan Milic, a Canadian illustrator (frequent contributor to the Globe & Mail) currently making his home in Amsterdam. www.dushanmilic.com.
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