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Warner Music goes on the road

People look at compact disks in a New York City music store.

TEXT OF INTERVIEW

Kai Ryssdal: You know a company's in trouble when the CEO says there's a gap between the share price and where he thinks the company ought to be valued.

Today's case in point is Warner Music. The record label posted a greater-than-expected quarterly loss today. Shares fell about 3 percent. The reprise is a variation on the digital blues. Customers are downloading their music, not buying CDs.

But Warner is at least trying to fight back. Ted Cohen used to work in the music industry. He's a consultant there now. Ted, good to speak with you.


Ted Cohen: Good to be here.

Ryssdal: First point, Mr. Cohen: I guess it's not really news that a record label's in trouble, is it?

Cohen: Well the news is, I think, the acceleration of the decline of the physical business. So I think the companies out there, the music companies — Warner among them — are being more proactive than they've been in having a dialogue with new digital companies, services and products that want to license music content.

Ryssdal: One of the other things they're doing, we learned this morning, is moving into merchandising and touring, ticket sales. Do you think that's gonna do it? Will that model work for them?

Cohen: Well, I wasn't part of the deal so I won't take credit for it, but four years ago, or five years ago now, we did such a deal with Robbie Williams — who was, outside of the U.S., one of the biggest artists in the world. We did a deal with him, what I would refer to as a 360-degree deal. It was no longer being involved just in Robbie's CD sales, but being involved in his touring, in his merchandising, in all aspects of his career.

I think what it does — in fact, I know what it does — for the music companies is it insures the bet. Because as we're living in a world now where most young music fans believe that music should be free — whether that's right or wrong — for a music company right now, if you're gonna make a million-dollar investment in a new artist, you really have a very unlikely chance of recouping that investment.

Ryssdal: If you're a new artist, though, and you've been raised, in a manner of speaking, on digital music and easy access to consumers, what does a label offer you that you just can't get by putting yourself out there online?

Cohen: I have to tell you, probably friends of mine'll be surprised I'm gonna say this, but labels offer you a lot. Everyone talks about the fact that the Internet and mobile and all these digital environments have created a democratization and a lowering the bar fir access for new artists to have the opportunity for exposure. And the most important thing to realize is all it's providing is the opportunity for exposure. It's not guaranteeing the exposure. What a label, what a major label or a really strong indie brings to the table, is the ability to get you noticed above that level playing field. How do you stand out, you know, when there's a million artists competing for attention? So the label provides marketing expertise, they provide promotion, they provide publicity . . .

Ryssdal: So that new artist, then, he's sort of outsourcing all this work to the major labels, right? So they find a publicist, they do all the scout work.

Cohen: Right. And what Warner has announced is a good approach, because it's going to put them into all those various revenue streams. And as people decide "I like this artist, I want to sign up to their website," so the label probably has, you know, will have equity in the website. I want to buy a T-shirt, the label will, you know, some type of revenue share on that T-shirt. Now they're on tour, I buy tickets, again, that's another revenue stream. So these multiple revenue streams, at it's most simplistic level, mitigates the risk.

Ryssdal: Ted Cohen's a managing partner at TAG Strategic, it's a digital entertainment consulting shop. He used to be one of the suits at EMI. Ted, thanks a lot.

Cohen: My pleasure.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.
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