—— Forwarded Message From: “Digital Coast Daily”
by Ben Fritz
With many of its colleagues in the online music space–like MP3.com and Launch Media–being acquired by larger companies, ArtistDirect <the new world of digital music. COO, President and Co-founder Keith Yokomoto also joined in the conversation.
Let’s start off with the obvious question: At a time when the online world isn’t what’s considered hot in Hollywood, why did you decide to join ArtistDirect?
Ted Field: It was for very specific reasons. I understood that an artist network was valuable as a platform to market artists and music. I believe that of course the Net is in its infancy, a shakeout period has now occurred, and ArtistDirect was going to be — and now is — one of the survivors. And so for me what better way to start a record label than with ArtistDirect funding the label with not just inert money but proactive money that could add tremendous value. As we entered discussions and I learned more about ArtistDirect they talked to me about becoming CEO of the entire company. I got to know Marc [Geiger, co-founder and former CEO and chairman, now vice-chairman and president of artist services] and Keith [Yokomoto] and I thought we would make a great team working together. So I agreed to take the CEO slot.
Do you think the ArtistDirect site and the new label will be intimately connected?
TF: I think they will be. The skills of ArtistDirect in viral marketing, as an agency and some other pieces make it a terrific launching platform for any act. Of course we’ll do traditional promotion and marketing and touring as well. We’re looking at the overall company as a marketing solutions company as well as an Internet company. The model that excited me is a hybrid of offline and online businesses. Then the idea is try to cross-pollinate those businesses in a way that makes sense. We all know a strictly e-commerce model is not effective. That was never intended to be the ArtistDirect model according to Marc and Keith. I endorse that and, in fact, want to make it a bit bigger. I’m big on the idea of branding. That’s why we’re calling the label ArtistDirect Records instead of Radar [the name of Field’s production company].
Is there a lot of pressure for you to make ArtistDirect profitable really fast?
TF: I think the bifurcated answer is that for the online piece of business, since I’ve been here I’ve been extending what Marc and Keith are doing in terms of getting it to break even on its own. I can say that we’re very close to doing that and will have done that on a running basis shortly. The corporate overhead here can then be allocated toward the expansion of the agency and development of the record label.
Marc Geiger, who stepped down as CEO when you joined, is now in charge of the agency, correct?
TF: That’s not correct, entirely. He’s also doing a new heritage record label that will specialize in artists who can’t get a record deal but have household names and big touring bases. The notion is to use the network initially to try to break new records while engaging with them also on the touring side and the marketing solutions side. The heritage platform is something Marc is spending a good deal of time on. We’re about to announce the hiring of a big name music producer who will specialize in producing those albums.
“We’re not competition for the efforts of the labels. We want to be one of the places where consumers can subscribe to music owned by the labels.” -Ted Field
What’s the status of Marc Geiger, in general, now that you have taken over as CEO? What’s your relationship with him like?
TF: One of the key reasons I joined was Marc and Keith’s desire to stay. Had either said they were going to leave I might not have joined. Really it’s a tripartite management team. I consider Keith and Marc my partners. I’m nominally CEO, but without their skills I’d be floundering.
You said you are thinking of ArtistDirect more as a marketing solutions company. What do you mean by that?
TF: We’re already doing marketing for labels and will continue with that. But I mean more. I’m talking about the ability to sell sponsorships across everything we do for various constituents. Our Fan Nation tour, for instance, could be made into a bigger thing and we think there will then be opportunities to present a lot of related options to sponsors. We’re trying a lot of new things with sponsorships, including a deal for a satellite and cable ArtistDirect TV channel.
A TV channel? How would that work?
TF: That would be a TV channel for music using our skills in programming and musicology from the digital music piece. These guys engineered an end-to-end solution for music and one thing I said when joined was let’s just see how much obstruction there is in terms of getting directly to the consumer. We’re developing what I call our music schema, which is a system to navigate digital music that we’re going to be offering consumers hopefully sometime in 2002 if we can get licenses from the labels or join up with MusicNet or Pressplay or both. That’s transferable to an ArtistDirect-branded channel. We’re not going to compete with MTV, but try to provide programming that MTV doesn’t. Then we can say to sponsors that we have an agency to help you, a TV network, a network on the Internet Å the idea is integration.
Where do you see ArtistDirect fitting into the rapidly developing and consolidating online music space?
TF: We’re not competition for the efforts of the labels. We want to be one of the places where consumers can subscribe to music owned by the labels. All of the label heads have indicated that they are open to licensing across multiple platforms. We do have a proprietary way of navigating by more than just genre. We really can offer musicology that acts as a digital DJ. We think that will be one of our magnets for subscribers. We think another is early ticketing. We can offer subscribers the opportunity to buy concert tickets for their favorite artists early. We think that gives us some special edge. We’re looking for things that will get us subscribers. We don’t have to be first.
Keith Yokomoto: We’ve always been on the sidelines a bit. A lot of folks have overlooked us as a result. But we made a lot of conscious decisions. We could have released a Napster version. But we’re inside the industry and have investments from the labels. We’ve been largely under the radar, developing and showing our services to a few people. But we’ve been in discussions with Pressplay and MusicNet about the evolution of our service. If we got something launched at the end of this year it would be like Yahoo’s carriage deal with MusicNet.
“It seems to me you’ve got to look at this company five years down the road having a successful record label, our heritage label, a digital subscription service, our own TV channel Å We’re looking at a big, long-term build.” -Ted Field
A lot of other independent music companies, like MP3.com and Launch, have been acquired recently. Do you see ArtistDirect as a likely acquisition target?
TF: I think we’re not an acquisition target. We are in a building phase right now. It seems to me you’ve got to look at this company five years down the road having a successful record label, our heritage label, a digital subscription service, our own TV channel Å We’re looking at a big, long-term build. Everyone is committed for long term. Of course, we’re a public company and we can’t help it if someone buys our stock. But we’re not in a mode of trying to sell ourselves. We think a lot of what we do is revenue generating. The TV channel will not require one dime from us. The agency is being built largely without cash. The record label should be cash positive very quickly. A lot of things are not intended to burn cash. And we still have a substantial hunk of cash. [At the end of the first quarter of this year, ArtistDirect had over $80 million in cash and short-term investments]
Is entering the wireless space a part of your strategy?
KY: Yes, we’ve been working with AT and other folks on cross-promotion stuff. Nokia is sponsoring Fan Nation. Also, a lot of the things Ted was talking about with the music schema is the ability to program on your own, and for that preference to follow the user whether on a mobile device, a PC, or even a stereo. I think those things have to happen for consumer to feel like they are getting value.
In the long run, do you think CDs and online music will co-exist, or will digital music eventually supplant physical products?
TF: I look at the analogy of people thinking that TV would supplant radio. People always think the next technology will supplant what came before. I think things find their level. Some people want their music hands-on and some people want everything digitized. There’s clearly an increasing utilization of the Net to deliver music. How quickly will it develop? Anyone can throw out crystal ball predictions, but the point is not to be too early but not to be behind. We’ve got to be well positioned with our digital subscription service. And we’re exploring a lot of other kinds of services like narrowcasting channels for artists or music that consumers can’t normally get, or even outtakes from concerts. If someone is a rabid fan they might be willing to pay $2 for that, and we’ve got the capability to provide that.
Do you think ArtistDirect got too caught up in the Internet hype of the last few years?
KY: Anybody with hindsight can say, “We should have spent money on this or that.” My job was to raise money and build capital. We raised $170 million and we had to spend some of that to be competitive with the marketplace Å you really did have to go do a Yahoo deal to be public. That being said, what we did as soon as we saw some of market turnaround was to start tearing some stuff down. We’ve been doing it in a logical way by getting out of some distribution and marketing deals. But now that we have invested, we have a good service. Our e-commerce system, for instance, now takes only two people to run.
Marc and I founded the agency, a smaller record label, and the online company back in 1996. Then they were each just worth a couple of million dollars. When things became favorable we raised a lot of money. Launch and others didn’t have the insider management team like Marc Geiger, not to mention Ted Field. We’re really uniquely positioned.
TF: Another way of looking at it is if anyone at all believes it was a good thing for the company to get me to join, I wouldn’t have done it without what they have built. That’s what lured me as someone who had other options. We are, though, trying to step back in the sense of trying to rationalize our Internet business to see what can now be used to support our own label, a heritage label, a TV channel, the agency–all of these pieces which we see as integrating well together. But now have to do more than talk about all that. We have to execute.
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—— End of Forwarded Message