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Transcript

Capitol Congress · The Bob Lefsetz Podcast

• 0:00
  Speaker 1: Okay, so please welcome Bob left Sets and music industry
• 0:14
  Speaker 1: analyst and critic and the author of the left Sess
• 0:17
  Speaker 1: Letter and someone who I think is a legend in
• 0:21
  Speaker 1: his own mind. Just kidding. We love you, Bob, Come on, yeah,
• 0:32
  Speaker 1: I mean he is on insecured heart and I feel
• 0:35
  Speaker 1: like I'm a ship hit in my own mind. So
• 0:37
  Speaker 1: that ultimately works. This is a panel about change. So
• 0:41
  Speaker 1: the music business, it's not your father's music business anymore.
• 0:44
  Speaker 1: What does that mean in them to the year two thousand,
• 0:50
  Speaker 1: we lived in a monoculture. If MTV showed it, it
• 0:54
  Speaker 1: was successful. So the goal was to get on MTV.
• 0:57
  Speaker 1: Then Napster comes along and disrupts freething amongst people on
• 1:02
  Speaker 1: this side of the fence in the music business, all
• 1:05
  Speaker 1: the customers were labeled as thieves, they didn't want to pay,
• 1:08
  Speaker 1: revenue was going down, etcetera. What we've learned is change
• 1:12
  Speaker 1: is constant and the customer is always in control. If
• 1:16
  Speaker 1: you're not appealing to the customer, you're doomed. So the
• 1:20
  Speaker 1: example I always use if we look at eighteen years
• 1:22
  Speaker 1: worth of history since of Napster is some of you
• 1:26
  Speaker 1: may be too young to remember this, but on Saturday morning.
• 1:28
  Speaker 1: They used to show Westerns okay, and the bad guys
• 1:32
  Speaker 1: would rip off the bank. Now no one said, let's
• 1:36
  Speaker 1: build a really big megaphone, put it on the roof
• 1:39
  Speaker 1: of the tallest building and yell for them to bring
• 1:41
  Speaker 1: the money back. That's what it's been happening in the
• 1:44
  Speaker 1: music business until Spotify. So what do they do in
• 1:48
  Speaker 1: these old Westerns. They say, we're going to form a posse.
• 1:50
  Speaker 1: We're gonna cut them off at the past. One of
• 1:52
  Speaker 1: the great things about streaming music at this late date
• 1:55
  Speaker 1: is many people do not understand it. The example I
• 1:59
  Speaker 1: use on a regular basis, I get emails saying, uh,
• 2:03
  Speaker 1: I'm not gonna have a streaming service. I need to
• 2:05
  Speaker 1: own it because what if I'm out of a cell range.
• 2:08
  Speaker 1: Whereas everybody here probably knows, you can sink approximately two
• 2:11
  Speaker 1: to three thousand songs on your hairndheld device, so as
• 2:14
  Speaker 1: long as you have juice, you can listen even if
• 2:15
  Speaker 1: you're on the top of Mount Everest. So in the
• 2:17
  Speaker 1: music business, which is the canary in the coal mine
• 2:21
  Speaker 1: for entertainment tech, we have figured it out. We live
• 2:25
  Speaker 1: in an on demand culture. Everything has to be your fingertips.
• 2:28
  Speaker 1: Everybody say what's after Spotify? What's after these or Apple Music? Nothing? Okay,
• 2:35
  Speaker 1: as long as you can get it on demand, we're here.
• 2:39
  Speaker 1: What does that mean? A We're not like the movie business. Now,
• 2:42
  Speaker 1: if you followed yesterday's news, Disney said, we're Disney. We
• 2:45
  Speaker 1: don't really have to compete with Netflix. We don't have
• 2:48
  Speaker 1: to make as much product, which, of course, if you've
• 2:50
  Speaker 1: lived through the last eight years, your eyes are rolling. Okay,
• 2:53
  Speaker 1: So there's consolidation. Fox was sold to Disney in order
• 2:58
  Speaker 1: to compete to Netflix. And if you're following the CBS
• 3:01
  Speaker 1: Viacom story, it really isn't about less Moon Vez and
• 3:05
  Speaker 1: uh me too moment. It's about Sherry Redstone saying, we
• 3:08
  Speaker 1: gotta sell this stuff before the bottom falls out. If
• 3:12
  Speaker 1: we look at label business that's talking in the green room,
• 3:15
  Speaker 1: Universal Music is worth somewhere between twenty five and fifty
• 3:19
  Speaker 1: billion dollars, okay, and it's by far the largest company
• 3:23
  Speaker 1: in the sphere. But if you look at Warner Music,
• 3:26
  Speaker 1: the guy who doesn't run Warner Music anymore, Dick Parsons,
• 3:30
  Speaker 1: who came from American Express, he blew out Warner Music
• 3:34
  Speaker 1: for a couple of billion dollars. That's the music business
• 3:37
  Speaker 1: we're in. It's all short term thinking. You might have
• 3:39
  Speaker 1: seen yesterday of the day before, the big news was
• 3:42
  Speaker 1: that Warner blew out their Spotify stake. That's like saying
• 3:46
  Speaker 1: the people were in business with we don't belo, we
• 3:49
  Speaker 1: don't believe in, which is nuts. Then they're proud of
• 3:52
  Speaker 1: themselves saying we are going to put one point six
• 3:56
  Speaker 1: billion dollars worth of the five billion dollar cash up
• 3:59
  Speaker 1: from Spotify towards artists. I'm getting email all day today. Go,
• 4:03
  Speaker 1: that doesn't look too good. But before we get deep
• 4:06
  Speaker 1: into the nuts and bolts, what we have to realize
• 4:10
  Speaker 1: is we are now in the era of content. Tech
• 4:14
  Speaker 1: and distribution have been figured out. You'll remember five six
• 4:19
  Speaker 1: years ago, every month there was a new rage, turntable FM,
• 4:22
  Speaker 1: you can have your own radio station. There hasn't been
• 4:25
  Speaker 1: a new rage in forever. In addition, there hasn't been
• 4:28
  Speaker 1: a viral video. Everybody here remembers getting hum style. That
• 4:32
  Speaker 1: hasn't happened anymore. Because as we've gotten into the modern era,
• 4:38
  Speaker 1: what we've found is the i'd say the clock isn't
• 4:42
  Speaker 1: working here in case, you know, I could talk forever,
• 4:44
  Speaker 1: but I want to make sure I don't so. Uh
• 4:47
  Speaker 1: In the modern era, what we've found is that I've
• 4:51
  Speaker 1: lost my place, but I remember where I'm going. So
• 4:53
  Speaker 1: the uh so Netflix, as I say, is all about distribution,
• 4:59
  Speaker 1: and in the modern era we found there's cacophony. Everybody
• 5:02
  Speaker 1: is spreading messages. One don't listen to the people yelling
• 5:07
  Speaker 1: loudest about royalties and other changes in the music business.
• 5:11
  Speaker 1: They tend to be old and uneducated and non players.
• 5:15
  Speaker 1: The number one people I get email from bitching about
• 5:18
  Speaker 1: Spotify royalty rates don't make records. They just hope that
• 5:22
  Speaker 1: at some point they can get a good deal. Okay,
• 5:26
  Speaker 1: And then you have old sers like David Crosby who
• 5:28
  Speaker 1: seems to have lost the ability to do algebra, never
• 5:31
  Speaker 1: mind regular math, and can't really figure out what's going on.
• 5:34
  Speaker 1: But these are always the headlines. I'm sure you're emailed
• 5:38
  Speaker 1: there was the big story today is from the City
• 5:40
  Speaker 1: Core uh research. People like these people know anything about
• 5:44
  Speaker 1: the music business. But then even they say twelve percent
• 5:47
  Speaker 1: of the dollars ends up with acts, and then people
• 5:50
  Speaker 1: email me that sounds terrible. It's a really big business.
• 5:52
  Speaker 1: Everybody here has to get paid, the venue has to
• 5:55
  Speaker 1: get paid. Twelve percent is not so bad. In addition,
• 5:58
  Speaker 1: it's larger than what it used to be. So my
• 6:02
  Speaker 1: point is, now is the time to focus on content.
• 6:06
  Speaker 1: What do we know? To a great degree, the major
• 6:09
  Speaker 1: label record business is running on the same paradigm it's
• 6:13
  Speaker 1: been running since nine, which is chase what's popular. If
• 6:18
  Speaker 1: you're aware of your record business history, in the seventies
• 6:22
  Speaker 1: and late sixties, the foremost label in the business, with
• 6:25
  Speaker 1: Warner Brothers Records, they did something called artist development. Artist
• 6:29
  Speaker 1: development is over the career of an artist. It doesn't
• 6:32
  Speaker 1: mean you took a record from zero to a hundred
• 6:35
  Speaker 1: in a year. That's not artist development. That's record development.
• 6:39
  Speaker 1: But there's none of that here. Okay, major labels only
• 6:43
  Speaker 1: want to sell what's what there's there's a reaction to
• 6:46
  Speaker 1: already someone comes in, well, what are your socials? We
• 6:49
  Speaker 1: want to know you can get the word out. It's
• 6:51
  Speaker 1: not an evaluation of music. So right now, hip hop
• 6:53
  Speaker 1: is the dominant force. Why has hip hop the dominant force?
• 6:57
  Speaker 1: Because rappers embrace the Internet before everybody else. If you
• 7:00
  Speaker 1: go on Spotify where all the numbers are regularly, you
• 7:03
  Speaker 1: know Spotify is the largest player. But I also use
• 7:05
  Speaker 1: it because it's an open platform to the degree if
• 7:07
  Speaker 1: you are on the desktop application and you hover over
• 7:11
  Speaker 1: in the right and we'll tell you how many streams
• 7:13
  Speaker 1: the track has, where you can't get that information from
• 7:16
  Speaker 1: competing services. But we see that the main thing that's
• 7:22
  Speaker 1: played is hip hop music. That's great. Just like when
• 7:24
  Speaker 1: we went to sound skin and we got an accurate
• 7:27
  Speaker 1: kind of sales, we found that country music was much
• 7:30
  Speaker 1: bigger than we thought of it is. But the business
• 7:33
  Speaker 1: at large right now is excluding every other sound. Okay,
• 7:37
  Speaker 1: so the biggest act in the world, okay, time has
• 7:41
  Speaker 1: gone by. Three biggest acts in the world are Adele
• 7:45
  Speaker 1: Drake and Taylor Swift. Let's start with it, doll, what
• 7:50
  Speaker 1: is she selling. Well, she's not doing any of the
• 7:52
  Speaker 1: traditional hype, and she's not selling it on glamour. She's
• 7:56
  Speaker 1: selling on songs that people can sing along to, that
• 8:00
  Speaker 1: something that you know. It's not like a unique person.
• 8:02
  Speaker 1: It's not like an athlete, and we can't clone Lebron James,
• 8:06
  Speaker 1: but we could clone that sound. We're not doing that.
• 8:08
  Speaker 1: So as we move forward, as the rest of the
• 8:11
  Speaker 1: audience comes to streaming, which is country, which has come
• 8:14
  Speaker 1: to a certain degree, Okay, rock which is still rebelling
• 8:18
  Speaker 1: because if people in rockers such streaming haters, they're gonna
• 8:21
  Speaker 1: be other genres. So it's your job to find those
• 8:25
  Speaker 1: acts and literally find an audience for them where someone
• 8:28
  Speaker 1: else will beat you to it. This is the story
• 8:32
  Speaker 1: of Chance the Rapper. This is the story of Spotify.
• 8:35
  Speaker 1: Now a lot of this stuff is piety and plain site.
• 8:37
  Speaker 1: When Spotify did its road show in the spring, just
• 8:42
  Speaker 1: to get a little bit into the nuts and bolts.
• 8:44
  Speaker 1: At this particular point in time, it's a bad business
• 8:48
  Speaker 1: because it doesn't scale. One of the great things about
• 8:50
  Speaker 1: music business, once you make the record, doesn't cost much
• 8:54
  Speaker 1: more to sell ten million copies than one million copies,
• 8:57
  Speaker 1: or to use today's lingo, it's not that hard to
• 8:59
  Speaker 1: get a billion streams as opposed to a hundred million.
• 9:02
  Speaker 1: Where Spotify they continue to have to pay royalties. They
• 9:06
  Speaker 1: have a very low margin in the neighbor of thirty
• 9:09
  Speaker 1: the neighborhood of thirty odd percent. So what they said
• 9:14
  Speaker 1: in their road show is we are going to make
• 9:16
  Speaker 1: direct deals with artists. One thing you have to know
• 9:20
  Speaker 1: is today's artists are sophisticated. It's not the fifties with
• 9:23
  Speaker 1: Ahmed Er again and the other labels saying, oh, you
• 9:26
  Speaker 1: want to have royalties, Let's go to dinner. Let me
• 9:28
  Speaker 1: give you a Cadillac. You know, there's so much information
• 9:31
  Speaker 1: out there. Don Passman's book. When you make a deal
• 9:35
  Speaker 1: with somebody, they have a music business attorney and they
• 9:38
  Speaker 1: know what's going on, and they're not always saying yes,
• 9:41
  Speaker 1: what do they want from a major label? Which this
• 9:43
  Speaker 1: is they want money and they want awareness. Let's go
• 9:48
  Speaker 1: back to distribution. You'll hear all the time content is king.
• 9:52
  Speaker 1: That is complete horseship. When anybody ever tells you that
• 9:56
  Speaker 1: know that they have no idea what they're talking about.
• 9:59
  Speaker 1: They have drunk the kool aid. To use the expression
• 10:02
  Speaker 1: distribution is king. It's a very simple example. If we
• 10:06
  Speaker 1: sit here right now, we make the best movie of
• 10:08
  Speaker 1: all time and there's nowhere to see, it doesn't make
• 10:11
  Speaker 1: any difference. It's all about the distributor. So how did
• 10:14
  Speaker 1: distribution used to work in the physical era? It was
• 10:17
  Speaker 1: about relationships with the retailer. Okay, so what you had
• 10:23
  Speaker 1: is you ship product. Sophisticated people know here, they didn't
• 10:27
  Speaker 1: pay for the product. They paid for the product when
• 10:29
  Speaker 1: you had new product, and you were always behind when
• 10:32
  Speaker 1: each other blew up. The labels were always losing millions
• 10:35
  Speaker 1: and millions of dollars in revenue. They hadn't been paid.
• 10:39
  Speaker 1: There's a famous story of Bobby Walmack was on a
• 10:41
  Speaker 1: record coming called Beverly Glen. They had a million seller.
• 10:44
  Speaker 1: It put the company out of business. Why they could
• 10:47
  Speaker 1: just never get paid. Those days are done. You can
• 10:51
  Speaker 1: get paid from Spotify. There may not be anybody listening
• 10:54
  Speaker 1: and there's no money there, but you can go to direct.
• 10:57
  Speaker 1: This is a very important thing. So what is the
• 11:00
  Speaker 1: advantage of the traditional player, the major label. Well, the
• 11:03
  Speaker 1: main advantage is they wield their catalog and they've been
• 11:06
  Speaker 1: doing that for twenty years. But we're at the end
• 11:09
  Speaker 1: of the road. If you notice, Spotify is going to
• 11:11
  Speaker 1: go into India and there's some hesitation and there's some
• 11:14
  Speaker 1: scuttle but saying well, the hesitation comes as a result
• 11:17
  Speaker 1: of the major labels are pissed that Spotify wants to
• 11:21
  Speaker 1: sign people direct. The major labels can't back out of Spotify,
• 11:25
  Speaker 1: and prior to being involved with Spotify going public, they
• 11:29
  Speaker 1: actually lowered the percentage that the major labels are paid
• 11:33
  Speaker 1: because they're the number one account. It's like going to Walmart.
• 11:36
  Speaker 1: If you've ever sold to Walmart. They pay the lowest
• 11:39
  Speaker 1: price to the manufacturer, so an act can go directly
• 11:45
  Speaker 1: to Spotify. So what do you have? You have terrestrial radio.
• 11:48
  Speaker 1: This is a business that has run ontorestrial radio to
• 11:51
  Speaker 1: its detriment. We've known forever that radio isn't about music,
• 11:55
  Speaker 1: it's about selling advertising, and the power is going down.
• 11:59
  Speaker 1: The people in radio, or like the people who are
• 12:01
  Speaker 1: Trump fans, they're just built on disinformation. If you say
• 12:04
  Speaker 1: anything negative about radio, they will wow, it's better than ever.
• 12:08
  Speaker 1: But I ask you to talk to someone between the
• 12:10
  Speaker 1: age of ten and eighteen and asked them if they
• 12:12
  Speaker 1: ever listened to the restal radio, and you'll find no,
• 12:15
  Speaker 1: they never do. Okay, this is the history of what's
• 12:19
  Speaker 1: going on at large. This is like kodak Oh digital cameras,
• 12:23
  Speaker 1: they're never gonna come there to come whoops. In one year,
• 12:25
  Speaker 1: everybody got a digital camera. Okay. So the major label
• 12:29
  Speaker 1: has an advance, okay, and it's a really big thing.
• 12:33
  Speaker 1: People are looking for money to make a record, which
• 12:36
  Speaker 1: is cheaper than ever before, to live on, to go
• 12:38
  Speaker 1: on the road. But it's also the relationships put the
• 12:41
  Speaker 1: traditional relationships mean less than ever before. Radio comes last, okay,
• 12:46
  Speaker 1: and television is relatively meaningless. Sunday Morning CBS counts for
• 12:52
  Speaker 1: an older demo and Saturday Night Live. As a manager
• 12:55
  Speaker 1: put it the other day, it just creates buzz later
• 12:57
  Speaker 1: in the week. It's not like someone is actually watching that, okay.
• 13:02
  Speaker 1: So all the tools in the box of the major label,
• 13:06
  Speaker 1: the bottom is coming out, okay, So you have to
• 13:10
  Speaker 1: be aware of that. So the key is to look
• 13:13
  Speaker 1: to the future because the past is never coming back.
• 13:16
  Speaker 1: One of the foremost business educators is like Clayton christiansen
• 13:20
  Speaker 1: Clayton Christians and said, you build your competitor across the street,
• 13:25
  Speaker 1: and then at some point you then join with your competitor,
• 13:29
  Speaker 1: you move your business. So what do we hear in
• 13:30
  Speaker 1: this business? No one's gonna want to listen to an
• 13:32
  Speaker 1: MP three. Okay, we all heard all these things people
• 13:35
  Speaker 1: didn't want to do. It doesn't sound good enough. Listen.
• 13:38
  Speaker 1: I've got more stereo equipment, probably the people in this room.
• 13:42
  Speaker 1: Oftentimes I'm listening to the echo. It's just so convenient.
• 13:45
  Speaker 1: And staying on that point, okay, the voice control is
• 13:50
  Speaker 1: totally where it's at. If you don't have one of
• 13:52
  Speaker 1: the disease devices and I would say to get an
• 13:55
  Speaker 1: Echo as opposed to a Google Home because ultimately they're
• 13:58
  Speaker 1: more options because people can tie you into it. Google homes,
• 14:01
  Speaker 1: I mean, Apple's a closed system, dead on arrival. Let's
• 14:04
  Speaker 1: say open it. You can make Spotify the default, but
• 14:06
  Speaker 1: if you use Amazon Music, it'll give the lyrics, which
• 14:09
  Speaker 1: is really good. So it's not about sound. It's about reaction.
• 14:13
  Speaker 1: It's about the music cliche and the hip hop role
• 14:15
  Speaker 1: that may not apply. You know, three chords and a
• 14:17
  Speaker 1: chorus had a good beat, that's what you're selling. All
• 14:20
  Speaker 1: this other stuff we focused on recording quality, etcetera. They
• 14:25
  Speaker 1: don't really matter anymore. So how do you reach the audience.
• 14:31
  Speaker 1: So we hear all this stuff about playlists. I'm not
• 14:33
  Speaker 1: going to underestimate playlists, but let's not forget playlists are
• 14:38
  Speaker 1: primarily for passive listeners, and this business, more than ever,
• 14:44
  Speaker 1: is built on active listeners. Okay, if you talk to
• 14:48
  Speaker 1: a music fan, they say, oh, yeah, I picked my
• 14:51
  Speaker 1: own music on whatever service they use. So the point
• 14:55
  Speaker 1: is what can the label do that no one else
• 14:58
  Speaker 1: can do. It is a relationship business. But the more
• 15:01
  Speaker 1: you try to extract an announce of flesh from the
• 15:05
  Speaker 1: acts the more that they react, they can make the
• 15:08
  Speaker 1: music in their living room. People say, oh, it's not
• 15:10
  Speaker 1: like you can cut for a hundred thousand dollars, but
• 15:12
  Speaker 1: very few people are getting a hundred thousand dollars to cut. Okay,
• 15:16
  Speaker 1: you can promote it yourself. So we go back to
• 15:19
  Speaker 1: the playlist. It's about creating a hit song. Hit song
• 15:23
  Speaker 1: is something you have to play more than once. However,
• 15:27
  Speaker 1: now more than ever. If it's great, that doesn't mean anything. Now,
• 15:31
  Speaker 1: if you talk to people on the street, they have
• 15:33
  Speaker 1: to leverage their fans. Your key is leveraging other people's
• 15:36
  Speaker 1: audience to get something exposed. If it's exposed to audiences,
• 15:40
  Speaker 1: then it can react. We're all inundated with messages all
• 15:44
  Speaker 1: day long. People send me a record, they go listen
• 15:46
  Speaker 1: to it five or six times and tell me what
• 15:47
  Speaker 1: you think. Are you fucking nuts? I mean, babies are overscheduled.
• 15:52
  Speaker 1: I'll listen for thirty seconds if it doesn't hook me,
• 15:55
  Speaker 1: not because I'm an asshole. That's what everybody does. We
• 15:59
  Speaker 1: hear this. The kids have short attention spans. They don't
• 16:01
  Speaker 1: have a short attention span. They have an incredible ship detector.
• 16:05
  Speaker 1: So it's about great, Okay, something has to be great.
• 16:09
  Speaker 1: The other thing you have to realize, like the world
• 16:12
  Speaker 1: at large, music business is and will continue to be
• 16:15
  Speaker 1: a business of winners and losers. If you go on Spotify,
• 16:18
  Speaker 1: if your new rock band is not that good, I
• 16:20
  Speaker 1: can listen to led Zeppelin all day long, you're competing
• 16:23
  Speaker 1: against the history of recorded music. But in addition to that,
• 16:27
  Speaker 1: it is it's not like the old days. Well, if
• 16:29
  Speaker 1: I got a local market and everybody in South Dakota
• 16:32
  Speaker 1: they got the five hundred channels, they got the hundred
• 16:34
  Speaker 1: gigabye down Internet, everybody's on the same page. Thanks for listening.
• 17:00
  Speaker 1: M can think of in the reason I don't know
• 17:20
  Speaker 1: me exactly. One must be