Money on the Table
Thursday, May 6, 1999 by Dave Winer.
As always, the best thing about writing DaveNet is what comes back. There are smart and powerful people reading this stuff. I'm glad they read it, and I'm even happier when they write back.
Yesterday my day was made by an email from Mickey Kapp, a retired music industry exec. Mickey ran Warner Brothers in the rock and roll era. Now he's back on-line helping the current execs at Warners sort out their options relating to music and the Internet.
I expected Mickey to take odds with my point of view, but, to my surprise, he said the pitch was good, and he saw a win-win coming. This would be incredible. I hope the logjam breaks. Wouldn't it be great if all of a sudden the big name artists of all the big labels were available on the Internet? I think it would make almost everyone happy. In an instant the whole networked music world could grow by a billion percent!
And as a writer and opinionist, this is the best news. I win when I help move things along. That's what I like to do. Win-win. Forever. Think differently. Reallly.
Back to music..
Lawrence Lee, the editor of the fantastic Tomalak's Realm news site, sent me a pointer, in response to yesterday's piece, that changed my thinking about this music stuff.
If you're investing in music, media and/or the Internet, read every word of this piece. If their point of view is true, here's the opening. The music business environment is ripe for exploitation by the Internet.
A quote. "Where once there were highly competitive radio stations desperate to be the first to play the coolest new releases, now there are a half-dozen massed broadcast groups that barely compete at all. Taking a conservative tack, many have narrowed their pop station playlists to just 15 or 20 songs to build a fat cumulative audience that only has time for a couple hits. To boot, these broadcasters are demanding 'promotional' funds from labels in payback for every song on their short playlist."
And the labels are cutting down the number of artists they promote. "If I were starting out in today's environment, I don't know if I'd make it," said Sheryl Crow, one of the few survivors of the recent A&M records consolidation into the Universal Music Group that reduced her label roster from 90-plus acts to eight. "Given today's fragile, singles-driven mentality, I might get so frustrated I'd quit the business.."
If Sheryl Crow almost didn't make the cut, what other big name acts are floating, looking for a way to distribute and sell their music? Flipped around, the record labels, even if they fully embrace the Internet, are leaving a lot of money on the table.
To the high-tech VCs, here's your business model. Start the Internet music label. Contract with the big name performers that the current labels are leaving behind. Give the artists stock options proportional to the number of page reads they generate. Give them a shot to hit the moon. Work around the airwave distribution system. Use the artists' name recognition to build credibility for the Internet Music Hub, which in my humble opinion, does not yet exist.
I've been switching gears again.
My last eight months were spent with my head down working on the server side of our content management system. After taking a vacation, a very good idea, I've been getting out more, I've been talking with people in the financial community in Silicon Valley and elsewhere, to get an idea of what the world looks like from the financial point of view. After four years of assumption-ripping growth (who would have predicted HotMail or GeoCities?), I wanted to know what their priorities are now, looking forward a few years.
I've learned something very simple. If you show up with an ear and ask questions, even very direct ones, people will tell you what they know and how they're betting. The eyes are burning bright here in Silicon Valley these days, very high energy. People are doing big things. All kinds of unusual people are joining VC firms. Stay tuned, there are going to be some very interesting stories to tell.
And if you see me at a Red Herring or Industry Standard party, take me aside and tell me what you think. It's time to make money, it's time to have more fun!
PS: VC stands for Venture Capital.