I had a distinct honor and privilege to be in the audience where I saw the unflappable music business icon Terry McBride of Nettwerk Music Group (Avril Lavigne, Dido, Sarah McLachlan, Barenaked Ladies), be interviewed as the keynote for the Le Recontres conference in Montreal last Thursday.
Terry was, of course, engaging, interesting, and controversial. I have long been following his career, and was moved deeply by his profile in Wired magazine in 2006 which got many music business entrepreneurs like me really thinking…
This talk was so perfect and it so succinctly summed up this point and time in the music business, I don’t think I need to insert my opinion here, I for the record agree with everything he said. I would also like to point out that during this time of complete music business turmoil Terry McBride’s company is doing extraordinarily well. So without further ado: Here are some highlights from his interview, I think most traditional record industry people probably find Terry a bit on the radical side he is outwardly pro artist and anti mainstream industry mentality. It is my genuine hope that all independent artists and music business professional take a page out of Terry’s insight and apply just one nugget –
On why Nettwerk was structured the way it is:
“Artists are inherently lazy, so we had to do everything for them.”
On the 360 deal & The Barenaked Ladies:
“To control aspect of an artist’s career of a 360 deal is a disaster. It’s not a solution. It’s a paradigm created by fear.”
Terry says he thinks he’s got his artists somewhere between 180 and a 270 deals, but he believes that a 360 deal is fraught for disaster. He talked about his experiences with Sarah McLachlan. “At first with Sarah we had a 360 deal, but as she grew, we gave her publishing back, and she owns half of her merchandise company. There is no business without the artist.”
Barenaked Ladies started their own label called Desperation. They own the masters and publishing, and so far they’re on $10M in sales using only Nettwerk as their label and management firm – Nettwerk’s team manages all of the aspects of their career and leverages them through their own management company and connections.
Bands are brands and emotions
Terry talked a lot about artists being both brands and emotions. Consumers attach their own life experience to every song. These songs become the fabric of the people’s lives who listen to the music. With the advent of the CD and computer, we went from pushing to pulling, and it created a change of behavior with having the “repeat” button on all CD players and listening to the same track over and over, which was something that was not possible with cassette tapes or LPs
Music is free
Terry has always believed that music is free. Back in the 1930’s, music companies were terrified about radio and it took an act of Congress to get music played on the radio. His question is: How do you monetize free now that the fan owns the song, and the fan is part of a tribe?
Wherever there is fear, there is always opportunity
You will never change the behavior of tens of millions of teenagers, but you can monetize that behavior. If you shut down one avenue of dispersing free music another opens. Terry asks: “How many tens of millions of songs are being sent via IM?” and points out that we are so focused on suing the kids that we forget that they’ll just go around us, and I’m not about that type of negativity. Litigation is an awful thing to do. Terry also made a great point: There are millions of hackers versus thousands of programmers. Kids will always find a way around the system.
The consumer does not understand copyright. They never have and they never will. So, educating the consumer on “why it’s wrong” will get us nowhere.
Bury the suing paradigm and figure out how to monetize.
The new paradigm = more profits
A CD in the old paradigm of traditional printing and distribution used to cost something like this: $3 for the disc, $2 to get it on the shelf, $1 for marketing, $1 for the publishing royalty, and maybe $2 went to the artist, then you get 20% to 40% of those CDs returned on top of all of this.
In digital, there is no manufacturing, no distribution, and no return. The profit on digital is so much higher. When you go digital, you will be more powerful and more profitable.
Digital profits are currently up 300%.
Controlling intellectual property worked for between 30 and 40 years, and it does not work anymore. All of his peers disagree 100% with his philosophy. Terry thinks from their standpoint, they are right. Trying to control music is right. However, Nettwerk has another vision. They see a lot of opportunities and they are having a lot of fun.
If a share of the profit from cable companies could go directly to artists
music industry profits would double overnight
Terry is always looking at who is making money from this and are they sharing it? Cable companies, tool manufacturers like Apple and iPods, blank CD manufacturers — that’s where laws and litigation should be pointing their fingers. Litigation and legislation should work in the realm of business to business, but litigation should not be business to consumer.
Now kids are getting sued for something that we’ve been doing for years. I used to make mix tapes and share them.
Terry also thinks there should be a compulsory license, and if there was, the music business revenue would double overnight.
So where is the music business in 10 years?
Terry thinks music will be available everywhere. You won’t pay for it
10 years from now, music will be in the clouds. You will be able to audit one company to get all of the numbers. It’s not going to be Bell, it may be Google. Consumption of media knows no borders.
I believe the price of music has to come down. The millennium generation looks at value, and the value of music is not 99 cents a track.
Music is the connective glue between the fans and the artist.
People love artists, they love what artists stand for. They don’t love all of their songs. We need to re-evaluate free. We need to understand that music is the connective glue between the fans and the artist.
We must ask: What causes that artist is related to? What causes is that artist supporting? What does that artist stand for? Who is this artist? Using those pieces of information, we can put ads on websites and links on websites to monetize the fans’ behaviors. Everything you do around or about needs to be directed back to a lifestyle and back to that artist.
If I were a long-term investor, I’d buy servers and the buildings that all the servers are going in. The millennium generation does not care about ownership. They go where the data is.
And, if you have been living under a big rock and did not see the article on Terry Mcbride in Wired: