pampelmoose: sparks + innovation — sparks + innovation

Two articles that I read back to back recently, point to two different themes in the music industry’s fight for survival and how two people involved in the discovery, marketing and selling of music are going about their business; one trying to have a positive outcome for the music industry and one apparently turning what was once a positive into a negative for the music industry and his company. Both people here also affect how music fans will react to the music business and its offerings going forward. The back story is about how people discover new music. Let’s begin with Starbucks’ Hear Music program.

Starbucks: In the late 90’s Starbucks purchased Hear Music, a small chain of music stores based in the San Francisco Bay area. I remember well shopping for CDs at its Santa Monica store as it offered selections that appealed to my eclectic tastes. Soon Starbucks was offering CDs in its stores around the country and the most compelling part of their offerings were the ‘music discovery’ items as I’d call them. I am no stranger to reggae so it was heartening to find a reggae compilation in Starbucks that had been put together with care by someone who obviously understood that genre; I also liked the idea that I would be able to discuss the merits of Peter Tosh with someone who had never previously heard of him. For some time the Starbucks Hear Music program became a convenient way for thousands of music lovers to discover great artists both old and new while grabbing a coffee; in short they had become a ‘trusted source.’ Unfortunately those days are now behind us as the NYT reports – “…for emerging talent, it (Starbucks) has raised the price of entry. When Starbucks merely stocks an album by an emerging artist on an outside label, it routinely seeks up to 50 percent of the total profit, including sales at retailers.”

What happened? Well for me the end came when I saw a Paul McCartney album being pushed heavily in the stores but here’s another explanation – “Mr. Schultz (Starbucks’ chief) decided to hire someone with a more general business résumé to oversee the company’s expansive entertainment projects, and picked Ken Lombard, formerly president of a company overseeing retail development projects for Magic Johnson, to be its entertainment chief.”

It appears that after Mr Lombard joined the company there was an exodus of talented executives from the entertainment department at Starbucks who disliked what one of them noted was Lombard’s “brusque style of management” and how he perhaps did not have a “particular creative vision.” Lombard’s focus appears to be on the bottom line and about increasing margins by squeezing the labels to take a cut in what Starbucks pays them. Which is a shame, because just as Starbucks has been criticized for losing its way with customer service and watched its stock tank, the one area of satisfaction for customers was the Hear Music program. See BBC: Why Starbucks’ Sales Have Gone Cold.

Starbucks customers have noticed the shift too – “The music offering “is more popular now,” said Hazel Delgado, 33, a social worker and Starbucks regular from San Bernardino, Calif., who attended a recent concert presented in front of one of its coffee shops by another act on the company’s label, the singer Sia. “I want to come in and be surprised,” she said. “If they do get more mainstream, why bother?” In other words if you can buy a Paul McCartney album at Target, Wal-Mart and Best Buy then Starbucks’ customers quickly realize that they are just part of a numbers game, a push to sell more units. That’s what record labels do, sell the shiny discs in the plastic hard shell wrapper – Hear Music used to sell music, the emotion. Not any longer. They are just another music retail store now; where they were once seen as a solution they are now part of the problem. What the Hear Music program originally provided for music consumers was an end run around the record companies who were forcing their more commercial wares, via the airwaves, upon a restless public who were becoming disenchanted with what popular musicians were turning out. Those days are now gone.

Warner Music Group: Meanwhile over at Warner Brothers Music Group, Thom Whalley who has had a long and successful career as an A&R director, is struggling to keep head above water as he battles not only the slump in music sales and the perception that large record labels are redundant, but also his cohorts in the building – namely Lyor Cohen and Edgar Bronfman Jr.. Neither of these two men have much support from those who work in the music business. Cohen’s critics have repeatedly called him a “bully” and Coolfer had this to say once – “In another case, when Lyor Cohen became chairman of Warner Music Group in 2004, his company was paying Hits more than $2 million a year for advertisements and promotional services. The publication called his appointment a ‘blockbuster’ deal and quoted Warner’s chief executive as saying that Cohen was “one of the most respected executives in the business. Within months, Warner significantly decreased its spending with Hits. Last month, the publication’s website described Cohen as ‘overly aggressive’ and ‘untrustworthy,’ mentioned his ‘inability to turn things around’ and compared “the staggering list of bridges he’s burned to the Russian retreat in World War II.” Granted that was a story about Hits Magazine’s ‘pay to play’ problems regarding its coverage of the labels’ acts but it doesn’t paint Cohen in too much of a good light.

Bronfman Jr., has had his troubles too. When he took control of the family business, the Seagram company, he fell foul of Wall Street through the widely criticized sale of Seagram’s stake in DuPont. He was trying to diversify the company and move it towards becoming an entertainment operation which led to the acquisition of Polygram the music company and then moved into film entertainment through acquisition of MCA and Universal Pictures. His entertainment conglomerate didn’t last long before Seagram was passed off in a controversial all-stock acquisition to the French conglomerate Vivendi in 2000. On February 27, 2004, Bronfman bounced back into the entertainment industry by finalizing the acquisition of Warner Music Group and he has served as Chairman and CEO of the music company since that time. On his watch Warner Music Group’s stock has plunged to $4.57 from a 52 week high of $18.22.

Throughout the daily circus at WMG Thom Whalley has kept a clear head and a firm hand on the rudder by signing new talent, and with it the content that the company sorely needs, as well as baby sitting the label’s stars such as Green Day and Linkin Park. In a recent Financial Times article he says – “It still comes down to A&R,” he explained. “None of this works – mobile doesn’t work, downloads don’t work, CDs don’t work – if A&R isn’t good.” And he’s right, but I can’t help feeling that he has a giant struggle on his hands. Ironically he’s one of the few record company executives that embraces the digital distribution of music and sees the power that the internet brings to the table when it’s time to market one of his artists’ releases. And yet the genie is out of the bottle and cannot be put back.

He also realizes that the industry’s problems began when music fans grew tired of paying up to $18.99 for a CD that contained at best three good songs and a lot of sub par filler. Then there was the scrapping of the single a format that often lead consumers to buying a full-length CD. Soon enough music fans had turned to the internet to find and discover music and of course in most cases download the music for free. Where the record labels used to act as tastemakers now word of mouth and music discovery on the ‘net have taken their place. Whalley may be the best of a dying breed – in the same article there’s this ominous sentiment – “Guy Hands, the new owner of rival EMI, recently derided the A&R man as an overpaid type “who gets up late in the day”. He has vowed to remove their power as part of the company’s restructuring.”

A&R folks used to be a ‘trusted source’ and a filter, ironically so did the Starbucks Hear Music program. Whalley and Lombard have got a lot of work on their hands to turn things around.