You won’t steal our music anymore: The
fraction of a cent that saved the major labels
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Watching rap videos with his
grandson, a vilified music executive had an aha moment that
changed everything |
By Stephen Witt |
Salon |
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Taylor Swift, Beyoncé, Kanye
West (Credit: AP/Evan Agostini/Jordan Strauss/Zacharie Scheurer) |
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Excerpted from "How
Music Got Free"
American music executive Doug Morris was the target of satirical
cartoons and a great deal of vicious Internet flaming. The
website Gawker, reblogging other people’s work with
characteristic restraint, called him the “World’s Stupidest
Recording Executive.” The anger was shared by many of his
employees, some of whom in fact were gifted technologists who
had passed up jobs in Silicon Valley to work for him. “He made
the company look ridiculous,” Larry Kenswil, the chief of
Universal’s digital strategy at the time, would later say. “That
was insulting to a lot of people inside the business.”
The chorus of criticism that Morris was too old, too out of
touch, began to crescendo. He was 69. Vivendi had a mandatory
retirement policy for all of its executives, effective at age
70, and the company’s management board had informed Morris that,
while they were willing to stall for a couple of years,
ultimately he was not exempt from this policy. Already, Morris
had begun training his own successor, the British music
executive Lucian Grainge. In 2010—two years—he would be done.
For his critics, the deadline couldn’t come soon enough.
But for Morris, redemption was always just around the corner.
Perhaps [Seth] Mnookin’s public shaming of him [via a Wired
magazine profile] was ultimately a net positive. Perhaps it
jolted him out of his complacency. Perhaps it took this kind of
widespread embarrassment to make him change direction. He denied
this, of course, but in the period immediately following the
Wired interview he began to innovate as never before. Whatever
his motivations, the business decisions he made over the next
two years laid the framework for the economic future of the
recording industry.
It began with a visit to his teenage grandson. In a hands-on
experiment in consumer demographics, Morris had asked the kid to
show him how he got his music. Morris’ grandson explained that,
while he didn’t pirate anything—promise—neither did he buy any
albums nor even many digital singles. Instead, for the most
part, he just watched music videos on YouTube from the computer
in his room. Soon the two were seated in front of the screen.
Watching rap videos with Grandpa sounded like the premise for a
comedy skit, but in Morris’ case most of the videos were ones he
had green-lit and budgeted himself. After a bit of searching,
the two opted on a mutual favorite: 50 Cent’s “In Da Club,”
which Morris’ grandson liked because it bumped, and which Morris
liked because it had moved eight million units. The video had a
clever conceit. It featured 50 Cent reclining in a nightclub,
surrounded by his entourage, while on the dance floor gorgeous
models waved snifters of expensive cognac in the air. The camera
then panned through a dummy wall to reveal that the dance floor
was actually located in the “Shady/Aftermath Artist Development
Center,” a secret desert laboratory where Dr. Dre and Eminem,
standing with lab coats and clipboards, watched through a
one-way mirror, perfecting the science of the club banger.
Had that framing device been used again, the camera would have
panned from the desert to Morris’ office in New York. He was the
ultimate patron of this culture, the one who signed the checks
that Curtis and Andre and Marshall cashed. Now, in his
grandson’s bedroom, watching this music video, he made a
startling observation. Next to the video, in small embedded
boxes on the YouTube website, were a series of advertisements.
The ads were junky. They offered weight-loss supplements and
mortgage refinancing and One Weird Tip to Shrink Your Belly,
Discovered by a Mom. But their presence meant that, somewhere in
Silicon Valley, an economic transaction was occurring—a slice of
revenue was being sold against the creative product that he had
spent 15 years developing. And he wasn’t getting paid.
The next day, Morris summoned his lieutenant Zach Horowitz to
his office for a memorable conversation.
They’re selling ads, Morris said. Who is? said Horowitz.
All of them! said Morris. The websites. They’re selling ads
against our videos!
Doug, said Horowitz, those videos are promotional.
Promotional for what? “Get Rich or Die Tryin’”? said Morris.
That album came out four years ago.
Doug, we give those videos away, said Horowitz. Not anymore we
don’t, said Morris.
He ordered Horowitz to draft an ultimatum to all the major
websites: give us eight‑tenths of a cent every time you play one
of our videos, or we pull everything. By the end of 2007,
thousands upon thousands of videos on YouTube went dark, and
every artist in Universal’s roster disappeared from the major
video hosting sites.
The takedowns extended not just to officially licensed music
videos but to millions of amateur efforts scored with music from
Universal artists. Your fan-made cage-fighting highlight reels
set to Limp Bizkit; your supercut of Ross and Rachel’s most
romantic moments scored to Sixpence None the Richer; the Josh
Groban montage you made for Brad and Sharon’s wedding video—all
of it went quiet. The outcry from the YouTube commentariat was
as furious as it was predictable, and in thousands of comment
threads Morris was personally attacked for his parsimony and
greed.
But what made the public angry made his artists ecstatic. Soon
the video hosting sites were forced to negotiate, and they gave
Universal a significant portion of the advertising revenue
stream. Morris, with a few threatening letters from his legal
team, had created hundreds of millions of dollars in profit out
of thin air. The MP3 revolution had caught him flat-footed, but
it had at long last taught him something, and he was determined
never to let anything like that happen again.
He began to look for similar sources of income. Advertising
streaming revenue was a new front, one that offered an
opportunity to correct for the mistakes of the past. In addition
to the charts, Morris now began to pay attention to the
Internet’s fundamental unit of exchange: the cost per thousand
impressions, abbreviated as “CPM.” The metric represented the
price advertisers were willing to pay for a bulk unit of 1,000
advertising views. CPM rates were determined by instantaneous
electronic auctions, and prices could range from fractions of a
cent to hundreds of dollars. Video CPM rates were especially
good, and on average cleared about thirty bucks a unit.
His growing familiarity with these attractive economics were
what led Morris to propose the music video syndication service
known as Vevo. Many years earlier, at the dawn of the MTV era,
the decision had been made to use music videos as promotional
devices for album sales. Morris had always decried this
decision, and now he saw a chance to reverse it. Throughout 2008
and 2009, he oversaw the creation of a centralized repository
for more than 45,000 videos, stretching back forty years. With
the birth of Vevo, music videos were repurposed as economic
assets of their own, in some cases earning far more than the
albums they were intended to promote.
The service launched in December 2009 with a gala bash in New
York City. Morris generally shied from publicity, but when it
came to Vevo he pushed for as much press attention as he could
get. It was a good party. Google CEO Eric Schmidt and U2 front
man Bono both spoke. Lady Gaga and Adam Lambert performed.
Rihanna wore a banging V-cut sport coat open to her navel.
Justin Timberlake wore an ivy cap and horn-rimmed black glasses
and looked like a newsboy. Young Jeezy wore sunglasses and
diamond earrings, and turned his baseball cap 135 degrees to the
right. A stunning 19-year-old Taylor Swift was seen canoodling
with a rumpled 32-year-old John Mayer. At 15, Justin Bieber
required a chaperone. At 77, so did Clive Davis. And Doug
Morris—hair flecked gray, clad in pinstripes, arm around Mariah
Carey’s waist—lorded over it all. Vevo’s video-sharing website
was ceremonially activated at the party, and it crashed almost
immediately, the victim of overwhelming demand. But order was
soon restored (at the website, not the party) and the venture
quickly turned a profit.
The aggregate earnings potential was yooge. Auctioned off by
Vevo’s syndication service, thirty-second “pre-roll” ads in
front of Justin Bieber’s “Baby” would, over the next few years,
be watched more than a billion separate times, grossing more
than thirty million dollars. Advertisers also invested in
sophisticated tracking services that embedded themselves in
viewers’ Web browsers and tracked their subsequent purchasing
habits. If the viewer of one of these so-called “call to action”
advertisements eventually bought, say, a pair of Beats by Dre
headphones, or a branded Hot Topic #YOLO shirt, Vevo then earned
an additional reward. Forty years earlier, scouting the
order-taker had meant hanging around a clerk in a windowless
office. Now it was seamless, conducted by automated Web trackers
connected to a giant electronic brain.
Finally, at the age of 70, Morris had innovated. Vevo took over
thirty years of creative output from more than 10,000 artists
that had been written off as promotional cost and transformed it
into a high-growth profit center. It became YouTube’s most
popular channel, and the criticism of Morris began to die down.
Excerpted from “How
Music Got Free” by Stephen Witt, published on June 16, 2015
by Viking, an imprint of Penguin Publishing Group, a division of
Penguin Random House LLC. Copyright by Stephen Witt, 2015.
Reprinted with permission of the publisher. All rights reserved. |
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