Become a Music Entrepreneur

Become a Music Entrepreneur

Dick Wingate is a digital entertainment executive with over 30 years of experience in the music industry and also serves as the Principal in DEV Advisors, a consulting firm and affiliate of New York-based DEV (Digital Entertainment Ventures). He got his start in the music industry working at the college radio station and after graduation, went to work for an indie record label. Soon after, he became one of the youngest product managers ever hired by Columbia Records, where he worked with artists including Bruce Springsteen, Elvis Costello and Pink Floyd. His work with labels continued throughout the late ‘80s, as a senior executive at Arista, Polygram and Epic. Throughout his career, Dick has had a passion for technology and helped pioneer the digital music business, acting as Senior Vice President of Content Development at Liquid Audio, Inc., the company responsible for the first end-to-end digital music platform. He was also the President of Media Development and Chief Content Officer for Nellymoser, Inc., one of the earliest mobile app businesses. Most recently, he acted as General Manager of East Coast Business Development for TAG, Strategic, a digital entertainment consulting company that offers business development, content licensing, strategic partnership and distribution services.  At DEV Advisors, he joins a deep roster of other media executives who help connect technology to the music industry and provide digital business strategy, content acquisition and licensing and connect key people to resources as they develop their products and businesses.

 

 

I talked to Dick about his vast experience in the music industry and how he has seen digital music evolve over the past three decades. He also discussed why artists need to be entrepreneurs to succeed in the current industry climate and delivered some advice for artists about the importance of innovation and building dynamic relationships with their fan base.

 

Musician Coaching:

 

Thanks so much for taking some time to chat, Dick. How did you get into the music business?

 

DW:

 

I got into the music industry through college radio, as many people do. After college, I immediately went to work for an independent record label and about a year later, was approached by Columbia Records to become one of the youngest product managers they had ever hired. I spent the next three years there working with artists like Bruce Springsteen, Elvis Costello, Pink Floyd and many others. I became an A&R man for Epic Records in the early ‘80s. After discovering Aimee Mann and having a hit with “Voices Carry” and then also having a #1 hit with Eddie Grant’s “Electric Avenue,” I became the head of A&R at PolyGram Records in the late ‘80s.

 

In the early ‘90s, I became very interested in technology. There was no Internet yet, but interactive technology was starting to be used in retail stores. I got involved helping program and license all the music for an in-store previewing system called the iStation that was state of the art at the time. I had my first experience on an entrepreneurial level working with a startup, licensing music and obtaining the first-ever license that Billboard granted for interactive charts and touch-screen operated system for music stores.

 

In the mid ‘90s I was briefly head of marketing for Arista Records, then quickly switched over to BMG and got involved very deeply with their early Internet strategy. This was in about 1996, and I helped build some of the early websites for BMG artists, including their first online store, which was called Get Music. I also negotiated deals with AOL to put AOL software on various BMG artists’ CDs. During that time I also started consulting with other companies that had come to BMG and were looking for help with their Internet strategy. I met with a lot of the early streaming music companies, which included Audio Net, Real Networks and Liquid Audio.

 

I thought Liquid Audio was the most well-thought-out solution for the music industry at the time, so I started working for them in addition to working with BMG, eventually going full time with Liquid Audio in 1998. We ultimately became far and away the leading licensed digital music distributor. Most major labels and independent labels first complete catalog licenses were with Liquid Audio, including Universal. We had thousands of labels and hundreds of websites to which we distributed music, including Tower Records, CD Now, Barnes and Noble, Best Buy and even Amazon, though they weren’t yet doing commercial digital downloads.

 

In 2002, there was a change of ownership and control in the company after a failed merger, and most of the senior management left. The company was sold to Anderson, which is the company that provides all the music and merchandising for Wal-Mart. And Liquid Audio became the back end of Wal-Mart’s digital music store. And they never really promoted it, so the story had a sad ending. But, as Liquid Audio, we did lay the groundwork for the first commercial downloads in the United States from major labels. Our first downloads were from Duran Duran and became available 15 years ago. And we had a lot of the first digital music technology innovations that eventually became the standard.

 

Following the sale of Liquid Audio, I started consulting with a number of companies, one of which as putting on-demand music creation systems in McDonald’s in Germany: Digital Transaction Machines (DTM). We put systems in McDonald’s that allowed you to create a playlist and actually burn a CD in the restaurant. They were used in a number of places in Europe. It was quite an experience and really broadened my experience with European licensing and retailing.

 

I was also on the advisory board of an early leader in mobile streaming and application development:  Nellymoser. The company created the first on-demand streaming music app in the U.S. called Warner Music Jukebox. It launched in about 2005 or 2006 and ran on Sprint as the first unlimited streaming subscription app. We also built apps for MTV, Comedy Central, ABC Television, AT&T and Virgin Mobile, before the release of the iPhone.

 

That was my deep dive into mobile technology and application development. Of course, once the iPhone came out, the entire paradigm was changed, because the carriers no longer had complete control over application distribution. And that exploded the market and enabled free applications, which did not exist prior to the iPhone. Previously, carriers wanted to get paid every month for applications.

 

Musician Coaching:

 

Well, Apple has made a habit of bolstering their hardware through free IP.

 

DW:

 

Yes. Following my stint with Nellymoser – which is still one of my clients – I started consulting again. And I’ve been working with various digital entertainment companies – typically startups or early-stage companies – helping them with their business development, content licensing and distribution strategy, or helping them find strategic partners and financing.

 

Earlier this year, I moved my consulting business to a new company, Digital Entertainment Ventures, which was founded by Alan McGlade, the former CEO of MediaNet and of The Box TV Network. Alan and I created an advisory services company in association with the venture fund. So, there’s Digital Entertainment Ventures (DEV) and DEV Advisory Services, which I run. I wear two hats:  I represent the fund; I run the Advisory Services group.

 

Musician Coaching:

 

I always tell artists that they are their own companies. Building an early-stage startup is not that much different from building an artist’s career.

 

DW:

 

It couldn’t be more similar, actually.

 

Musician Coaching:

 

As someone who is an investor, an advisor and has a background in both early-stage startups and in the music business, what do you look for when you’re kicking the tires on a prospective client or investment opportunity?

 

DW:

 

It’s funny that you said that, because I’ve made that same analogy between entrepreneurs and musicians recently in a couple other situations. Someone said to me, “You were an A&R guy who moved towards a role of entrepreneur and getting involved with other companies as an advisor. How did you make the transition?” And if you think about it, trying to identify entrepreneurs and young companies you think will be successful in the market is very similar to finding musical talent.

 

You can look at the lead singer as the CEO or Founder because that person is usually the most important. And you have to ask yourself, “Is this person someone I want to work with? Is this person the right person for the long run to run the company, or are they just the visionary that helps shape the product but shouldn’t run the company?”

 

Then, as an investor, you look at the “supporting cast”/the other company “Founders.” And in music, that’s the band. Is the band strong enough, or do some of the players have to be upgraded? It’s no different from an A&R guy trying to decide if the drummer or guitarist is good enough.

 

Then you ask, “What’s the product?” Presumably, you’re interested in the product. But the question is, “Is it done and good enough, or does it need a lot more development?” That’s like asking about the material as an A&R person:  “Is there enough good material, or does it need to be developed more before it’s brought to market?” Does the band need to write more songs to bring this to fruition?

 

You have all these parallels between the entrepreneurial business world and the music world. And sometimes as an investor, you think, “It’s okay for now, but it’s not quite good enough to get them all the way.” One of the things I learned from working for Clive Davis was, when he was trying to decide whether or not to sign an artist, he would consistently ask his A&R staff, “Is this an artist that you can see headlining Madison Square Garden – not a club, not a theater, but Madison Square Garden? Is it that good?” You have to ask yourself a similar question when you’re looking at investing in new companies:  “Is this product good … or is it game changing?”

 

Musician Coaching:

 

I never thought of it until this very moment, but we are really in a situation similar to the one the music business was in in the ‘80s and ‘90s when we were flush with people repurchasing their catalogs on all the updated formats. There are a lot of startups out there whose whole business strategy is, “I’m going to do something that Google or Yahoo! wants to buy.” I’m seeing a lot of lazy tech companies whose entire strategy revolves around getting bought by Google.

 

DW:

 

Well, some of that is, no doubt, laziness. The goal used to be to go public, but that isn’t typically a goal anymore. A lot of companies are created to get purchased, and they do that by building an audience. Even though it’s not really monetizable, there is usually a company out there that will look for a specific feature or audience.

 

That’s the kind of thing that I’m constantly evaluating when I look at technology. I ask myself, “Is this a great feature, or is this going to be a great company?” Because, there are a lot of good features out there, but some of them lack a good monetization strategy.    

 

I get excited when I see a new product and the monetization strategy has actually been thought out in advance; they haven’t just said, “We’ll build an audience and then figure out how to monetize it.” That’s the conundrum that Facebook, Twitter and FourSquare are in:  These are all great products, but they weren’t initially designed with monetization in mind. The monetization has to be bolted on, and sometimes it works, sometimes it doesn’t. You have to think about whether what you have is a feature that would work well in someone else’s app or whether it can actually work successfully on its own as a standalone company.

 

One of the companies I was wrong about was Shazam. When I first saw it, I thought it was a great feature, but I didn’t think it could be effectively monetized. It seems like the company is doing great and actually get a significant amount of affiliate fees by driving sales to iTunes. But I wouldn’t have jumped on it in the beginning.

 

Musician Coaching:

 

I think the unspoken lesson in here is, if you’re looking at running your music career as a company, clearly you have to have a product in mind. You have to have an audience and also something to sell to that audience.

 

I realize you’re doing more than just working with music-related technology. But since you do work with people in that space, which portions of it do you expect will grow and which do you think will become irrelevant in the future?

 

DW:

 

Clearly, streaming will continue to grow as a percentage of music consumption. There is less and less need to own a file, as long as you have access to it. The one piece that’s still up for grabs in that area is the automobile, though there is certainly plenty of competition. Once there is true Internet connectivity in the car, on an airplane or in the subway – once you have cached music – there will really not be a need for ownership anymore. I think we are moving towards a very streaming-centric music industry, if we’re not there already. The whole idea of managing thousands of music files and putting them on an iPod will slowly drift away.  

 

The monetization piece is really problematic, because the rates that actually end up flowing through to an artist are fractions of a penny per song; streaming doesn’t make a whole lot of money for artists. And their download numbers are modest, so they have to make their living on the road and through merchandizing. That’s just the world we live in right now.

 

I think we need to get streaming subscription services to real mass market. And I don’t mean a few million people. Right now – and don’t hold me to these numbers – I think Spotify is claiming 20 million subscribers. But three-quarters of them are not paying a fee. And they claim a 20-25-percent conversion rate, but that is probably higher than they’re seeing in reality. But even if it’s really that high and you have four or five million, that’s still peanuts compared to what the music industry needs the revenue to be.

 

A situation where you have 50 or 100 million subscribers is what the industry needs to ramp up to. Paying $5 per month, or whatever amount it ends up settling at, should just be something consumers expect in order to have their music anywhere, anyhow, anytime. Bundling streaming services has become the easiest way to get people to pay for it. Apple is the one company that can establish subscription music in a very significant way, because they have so many credit cards on file. I think everyone in the industry needs Apple to go in that direction, but the company just hasn’t gone there yet. They will probably milk every bit of the download model they can with iTunes before they offer a subscription service.

 

Musician Coaching:

 

I’m sure they have it in beta already. And whenever the transition is optimal, they’ll roll it out.

 

DW:

 

If you think about it, Apple’s whole model is to get you to iTunes as often as possible, even though iTunes is not really its main moneymaker. If Apple were to offer a subscription service, you’d have less reason to go to iTunes on a regular basis; on the music side, you wouldn’t be making any purchases other than the subscription fee once per month. At some point in their financial modeling, they will likely say, “If we can convert a certain percentage of our customers to a subscription, what’s the tipping point? How many of those subscriptions will we need to cover the loss of a la carte music?”

 

Musician Coaching:

 

Where do you see mobile headed? In my experience, the smarter phones get, the worse they are as phone and email devices. Is mobile just going to go towards more streaming?

 

DW:

 

It already has. You can’t really even separate mobile from any other format at this point. If you include tablets and phones, we’re already at a very high adoption rate. And that’s only going to get higher, quickly. If, as rumored, Apple is going to come out with an iPad “mini” at a lower price point than the regular iPad, it will just explode the tablet market.

 

Musician Coaching:

 

Do you have any more advice you can share for artists trying to thrive in the current climate?

 

DW:

 

I think this is the time for artists to be experimenting as much as possible with how their music is presented and how it’s released to the public. We’re at a point where it’s important to have music flowing regularly and to maintain a close relationship with your fan base.

 

And it’s also a time where using and developing mobile apps doesn’t have to be expensive. There are companies that enable a fairly cost effective way of getting an app out there, but having an app out there is only as good as how you use it. There has to be a regular flow of content and communication through the app, because, research shows that a huge majority of apps on people’s phones get abandoned quickly. Somebody coined the term “zombie apps”:  They’re on your phone, but they’re never opened. We all have apps we hear about, download, use once or twice and then forget. If an artist app becomes a zombie app, it’s not useful.

 

There are also new technologies that are coming to bear. SonicNotify is very interesting company that DEV invested in and is actually being integrated into the Mobile Roadie platform, so you can wake up the app with an offer, notification or link to a new piece of music or video and do it in a geo-targeted way. So, it can be set to go off in a specific city venue or retail chain. It actually scales down to a three-foot radius. It’s an audio notification that’s inaudible to the human ear, but it wakes the app up when you’re in a specific location. It can even be as specific as the frozen food aisle at Whole Foods.

 

There are lots of these things out there that let artists get creative and communicate with their fans, whether to make offers or just to alert people to a new piece of media, a new tour date or anything else. For example, SonicNotify would be very useful for letting people know about a new tour date that has just been added and offering people with the app the first shot at the tickets.

 

Musician Coaching:


That’s great. And with how personal artists are getting with their fans, it could be, “I’m going to a movie. The first four people to respond get to go with me.”  

 

DW:

 

Yes. And I think if a band is going to embark on mobile apps, they have to be willing to keep them fresh. Otherwise, they just get forgotten. And they need to have some exclusive content only available through the app. Not everybody is going to be able to do what T-Pain did with Viddy. But that’s the gold standard for creating a separate experience on mobile and creating an app that became a hit just because of the experience of using it.

 

And then you have Bjork, who decided to release an app for every single song on her Biophilia album. That may be a bit of overkill, because people might not want 12 apps from one artist, but it did get her a lot of attention.

 

To learn more about the work Dick Wingate does, visit the DEV Advisors website. You can also follow him on Twitter.