Terry McBride

0:01I'm hot! I'm hot! Terry, thank you. You're welcome. So, network music. Tell me the beginnings. Tell me the beginnings of your musical fascination. Like, do you remember the records that you're like, this is... I want to go in this direction with my life. No. No? I don't... No. I don't... You know, I think it's... It all evolves. You know, there's no way that I could say when I was 17, I'm going to do this. Or when I was 15, 13, 11. I think by the time I was 21, I was like, hmm, I think this is what I want to do. But it was only that. So, I mean, the earliest records I had, you know, it was anything from the Beatles to the Elton John's to the Led Zeppelin's to, you know, all of the music that was popular at that time. The more I got into music, the more I moved away from what was on the radio to what, you know, I really wanted to put my passion around, which at that point tended to be more music coming out of the UK, whether it was things like door division, or I called them a bunny man, a ball house, or anything like that.

0:59And I think that was the first time I was in the house, or, you know, any of that movement of music. And then obviously the local scene here, that was basically marrying that. That wasn't the top 40-roxy type situation. So, you know, I think one evolves into what they want to do. They find their passions. Maybe some people find them at 11 years old. I didn't find mine. I was in mode 21. Fair enough. Did you play anything or did you always know it was the business side that you wanted to go to? Okay. When I was in high school, but obviously I only did it for three years, so I couldn't have been that good at it. Fair enough. Will you chose to go the other end? Well, I just chose music. Doesn't mean you have to play it. No. I mean, what is music? Music's emotions. Songs are emotions. So I don't think you have to play an instrument to be affected by the emotional value of music.

1:48You say, well, it's not even anything physical anymore. It's out there. Well, it is physical in that it's waves of energy that are floating through. Okay. Alright. I'm going to go take the emotional part. Like floating through the air. But I mean, songs, I mean, I don't do songs as chords, lyrics, melodies. I view it as emotions. And we tend to attach our own emotions to songs that really affect us, and those songs then become bookmarks within our own lives. That's always been the rub with the sort of music business, is that the music business thinks that they own these songs. And my hope wanted to use you can't own emotions. Right. That was about the second. You put them right on emotions. No, but what I think you can do is I think you can set them monetize emotions. You know, the context that you wrap around the content is what the real value is.

2:35And how do artists profit in the future in this world that we live in with Spotify and everything like that? If you really think about what I just said, it's the content that amplifies the value of the content, the content for all essential purposes within the age of the world. And so, you know, the content that you're using is the content that you're using. And so, you know, the content that you're using is the content that you're using for all the resources within the digital space is worth zero. So, once you get your head around that, which a lot still have it, once you get your head around that and you begin to understand that it's the context that drives the content value. Then you can understand why live concerts have been a growing business where the intellectual property part of it hasn't been. Or a digital download. Well, that's not really a context that you can really touch because the days of going in to a record store and someone behind the counter introducing you to new music kind of went away when the big box stores, like the Walmart's and the Tardins and all those, became the major way to get music.

3:34The context change, then it went from music being something special to music just being a product. Right. So, to me, that was a major, a major like shift on it. So, I think the spotify of the world, what you spotify or, you know, who knows what app is going to do with Lala, who knows what Google is going to do around the Android phones. Spotify, are we seven or Pandora, or last time, they're all apps. Right. And those apps deliver context to the content that they actually deliver. So, how much you value that will be, how much you're willing to pay. Now, what's your subscription based in that regard? Absolutely. I mean, the concept of downloading and owning music will become historical in the next five to ten years.

4:22I mean, the next generation, you know, right now we're kind of dealing with the, you know, millennium generations of the kids that were born in like the late 80s to like early like 90s. And the fact that they no longer accept music getting pushed at them, but they actually pulled their music. Right. So, that was a huge behavioral shift. This next generation will not only pull it, but they won't store it. They'll just pull. So, it will turn into be not about downloads, not about those thousands of files you pull from somewhere. That, by the way, you only listen to about five percent of them maybe. So, the rest of it really is just junk and clutter. It'll all be about accessing music through the clouds. And the value that you'll associate to it is the ease of use and what context is wrapped around that concept.

5:13So, Spotify being one of the first ones, I think, to really hit a sweet spot. And you've seen what's happened in Sweden, I think, in the UK where the adoption rate has been really, really high, to point that they have to slow it down. You've seen peer-to-peer file sharing and those two countries dive. So, all of these litigious ways of going after those downloaders, all of the legislative ways didn't work. But the minute that you had this digital valley come along and add context to the content, it changed the value proposition and all that downloading just plummeted. How do artists make money off that? They'll all Spotify. That's what I'm still trying to wrap with it around. Well, you need to... I love the way that people always put it. Right now, artists are getting nothing. Period.

6:01So, let's just start from like 0. 95% of all digital consumption is not paid for. So, Spotify is focusing on that 95% that right now 0. So, if they had $1, you're already further ahead than what you are now. So, let's put it in per spectrum. So, the value propositions around Spotify are, it's like an add model, which I don't think works. It's a subscription model, which I think works on mobile. And as long as it's able to tether. So, you get it on your mobile or you get it on your PC and everything basically communicates. Then it has value. But also, it's the real-time data. And that's a huge value that the bangs and the googles and the app, who's well-won access to.

6:51It's the same value that really drives Twitter. It's the ability to do real-time search. And that's a huge value to advertisers to see what's trending where. So, to me, the two economic points of something like a digital value, which Spotify has won, is the subscription on mobile. Not cathered to a PC because you're not going to carry that around. And their ability to sell real-time search data to all of the different search engines. So, Spotify is young. But if Spotify got traction, I think he would see it over like time, adding between Spotify and whatever else comes, a couple billion dollars to the overall music business,

7:40which right now is sizable. What do you think about charging ISPs a subscription fee where they get the money back to the artists? You think that's not what that works? That's a model that would have to be legislated and I can't see that happening. Again, forcing businesses to do things that they don't want to do never really works. And the pipe providers or the ISPs or the DSPs have a free get out of jail card from the burn agreement 25, 30 years ago, which said if you go build those pipes and invest billions of dollars, you don't have to be responsible for what goes through them. Otherwise, there'd be no way that they ever would have built them.

8:27So, the intellectual property part of the puzzle really got screwed then. Because maybe it should have said that, you know, you can't get sued, but at a certain point, if you're generating revenues through power to intellectual property, you have to then split some of your profits around. That would have been a much, much further away. I can't see that happening. But I see everything going wireless anyway. I see it all being apps. So, it's not going to be the ISPs or the DSPs. It's going to be apps. And those are what's going to deliver the value. I mean, as you say, you saw Apple Buy, blah, blah. That tells me there within six, nine months of creating a subscription model similar to what Spotify is. Google, I got a guess by the end of this year and now this is something very, very similar to that, upon us and upon us and where it falls.

9:18So, it's all getting out of the pipes. It's all going to those clouds. So, we're about to see a huge shift to smartphones off the desktop. So, all those people that built those pipes would have been creatively saying that they're not responsible and they can't figure out what's going through their pipes when, in fact, they have been, are now going to be on the other side of the stick. They're about to pay the, you know, karma. The karma price. Do you think then Google and Apple would be the new labels of sorts? Not labels, but like they'll be the two music providers for Apple. Well, I mean, if you think Apple already has about 40% of the music marketplace, so I would say that they already are one at the major movement.

10:09They are the number one pro-vider. But, I mean, I think you've got to look at it is it's not necessarily an Apple or a Google. It's an application. Now, would it, will it be Google's application? Apple's application? Spotify's an application? The last FM? I don't know which one. But what's going to be great is that all of these applications should work with almost any device. Okay. So, that's the behavioral shift that's going to happen in the next five years. And that will then determine the consumption habits for probably the next decade afterwards. How is network going to adapt to fit into that model? There's nothing really for us to do but to continue to do what we do, which is, I mean, we've been very open minded since 2003 to all these technologies.

10:59Probably the first player to actually be that way. What we've got to focus on is music that we love and releasing music that we love. And realize we can't really do much about the rest except to promote the adaption of these new behaviors. Something like Polyphonic that was going in a different direction. It's kind of like an investment for bands. Yeah. It's all Polyphonic is. And it's a really simple process. It's basically saying there's no one company that's best in practice at everything. That includes network. I'd say the best record company is maybe 60% best in practice. So what happens if you lined up funding behind an artist and a management company that know what they're doing?

11:45And that can hire best in practice services for every part of that artist's career. Well, then the chance of success for that artist I think goes way up. And that's the premise upon which Polyphonic's focused. And how do young bands get to Polyphonic? Because I'm sure your desk is looking at all their disks everywhere. There are disks everywhere. And that's got nothing to do with Lola. You know what? They've got to go up there and like tour. Because Polyphonic is not for bands that stay home. These are for bands that are really serious. This is what their career is going to be. This is what their passion is. This is where they're going to put their energy. This isn't, you know, this is for people who are going to get out there and do it. So you must be a touring band. So the way that we look at it is you have to get out there, you have to play, you have to develop an audience.

12:35Once you've developed a live following and you've got a really great show and your songs are reacting to that whole tribe, then you're at the level of that. We want to look at you. Like the R stage thing for example on what we'll mention Lola. Yeah. It's a big thing this summer. Yeah. I mean they had, I think they had well over 7 million votes for that. And I don't know how many artists, but I spent at least six hours this weekend going through 20 artists over 90 artists. So 180 artists I had to listen to to pick the winner for each of those cities. Do you have the winners? For the first nine cities. Yeah. And I did Denver when I was at the Dallas airport last night.

13:22Last night? Well you're just everywhere. Well because I, you know, I have to be able to honestly say that I've listened to those finals and that we've had and that we've picked it. I'm just not going to pick who might have been number, you know, number one. The contest says, you know, the top group. So I honestly have to go and listen. So I can honestly say that I have listened and pick something that I think is really really good. Is there anyone that you heard surprised you that you had never heard of and that maybe like you know what? I could, I could say this. I mean I would say in eight of the nine marketplaces. I had a hard time deciding because there was two or three contenders that were really good. And in one marketplace I had a hard time finding one that that I thought was.

14:11Good enough. Well it's not that it wasn't good enough but was really good. There's all of them are good enough. But you're after something that you know, just kind of like what we did 11 years ago. Where's that Tegan and Sarah? Where's that Nellie Furtado? Where's that Christian Aguilera? Because they were all on the village stage. So you know where's that thing that makes you go hold on? What's this? Right. And so that's kind of what I spent the weekend doing. Fun. I got another 25 to go or something. Well that'll be fun. You know, it opened you up to a whole bunch of new music. Yeah I mean look again it's something that we set this up. We made a commitment. We got to deliver on that commitment. On that topic you mentioned the concert business going up.

14:57Lesus was talking about this two for one deal with Lilith tickets everywhere. And it's kind of pissing people off that already spent so much money on tickets. What's the concert business like right now? Well the concert business this summer is really hurting. And it's not just Lilith. No I know what's not. I mean when you've got live nation that because Pro Motor doing a service free for the month of June. You know it tells you how tough it is. I think the recession is being felt this year. It's too little while to get to us. Yeah I think it took a little while to get down to the concert business. I think live nation last week got canceled 200 shows. You know we've to date have only canceled one and probably only going to cancel one more.

15:43On the whole two for one issue you know it's kind of a double-edged sword because if someone buys a ticket and then resales it for five times the value does the artist promoter get any of that profit? No. You know what happens when you know when we want to fill up a venue and because it's soft out there right now we have to do a two for one. So I always question like you can't have it both ways. You know so we have the right to do it. I would rather not be doing it. Right. But the reality is is that you know there's a lot of people hurting. Are ticket prices too high? Not for Lilith but overall for a lot of the acts. I would say yes but I would also say that's somewhat driven by the artist.

16:33I'm sure there's no explaining managers in the audience. Artists wanting bigger, bigger, bigger like fees. Why? Because lives about the only place that they're making any revenues. I mean if you rewind 10 years ago and you're getting rosy checks on the publishing side and on the records side then the lives side doesn't have to be 95% of your income. But when the lives side becomes the majority of your income then you know your price tends to go up and at a certain point the market pushes back. What's one band everyone should know that we don't know? Who's on Lilith? No, no. Who do you know of that's just about to break that most people haven't heard of yet? Oh God. I'm quite sure people have heard of almost everything that I've heard of. If you'd asked me six months ago it would have been Tempere Trap.

17:20Right. I think that's a brilliant album. I think there's lots of great music. I hate just picking one just because you know I hear things, I mean Aneca I think is amazing. She's this, I think she's Ethiopian from Germany. There's something about her that's pure magic. You know but I'm lucky enough in that you know music's my passion. So if I sit here long enough you'll have a list of about fifteen seconds. Some people will have heard of it and some people wouldn't have. I mean I love a lot of the artists that we've stuck upon Lilith that are unknown. I mean Grace Potter to the LaRue. I mean LaRue is obviously known more, Gossip's known.

18:05But there's some amazing artists like Kate Miller from Australia. There's some great artists and people are going to show up and they're going to be intro-induced at each level. So at least five to six artists that they've never heard of before. Awesome and we can't wait. So let's two and a half weeks. It's getting there. Almost. Thank you. You're more than welcome. I appreciate it. Take care.