This week In the Hot Seat with Larry LeBlanc: Laurent Hubert, president, creative & marketing, BMG US.
For good reason BMG US President Creative & Marketing Laurent Hubert proudly boasts that BMG is the world's largest and most integrated music rights company.
BMG was founded by Bertelsmann in 2008 as a response to the challenges of the digital age of music. Key to its business model is that it represents both music publishing and recording rights off the same state-of-the-art platform as well as other ancillary rights.
Bertelsmann had strategically exited the record business in 2008, and the music publishing business in 2006 and 2007, only to return with a new vision.
Since the re-launch of the new-styled BMG in 2009, Hubert has played a pivotal role in re-establishing its U.S. operation globally via a number of signings, catalog acquisitions, and company purchases.
These include acquiring the rights to the catalogues of Crosstown Songs, Cherry Lane Music Publishing, Stage Three Music, Evergreen Copyrights, Chrysalis, Bug, Virgin, Mute, Sanctuary, Primary Wave, Talpa Music and others.
Signaling two years ago that he was bearish on achieving comparable strength in recorded music as already achieved in music publishing where BMG is the 4th biggest player in the world, Hubert has since overseen an impressive parade of recorded music activity.
This month BMG acquired the recording and publishing assets of New York pop label S-Curve Records, which follows its recent acquisitions of Los Angeles-based Vagrant Records, and Portland, Oregon’s Rise Records. Among other recent acquisitions are the estate catalogs of Hal David, and Buddy Holly.
Among BMG’s prominent acquisitions previously had been X Ray Dog Music, the Verse Music Catalog, Infectious Music in the U.S., plus the catalogue specialist, Union Square Music.
The strategy is paying off as BMG is now being recognized as a high-level global player in both music publishing and recorded music.
Last month, Janet Jackson’s “Unbreakable” became the first album released by the new BMG to reach #1 on the Billboard 200 album chart. Earlier, BMG scored Top 10 entries with albums by Iron Maiden, Scarface and Alabama.
During his 8 year stint at BMG Music Publishing, Hubert was the company’s worldwide COO before the company’s acquisition by Universal Music Group in 2007. During his tenure, Hubert reorganized the company’s the Latin American business, oversaw numerous catalog acquisitions, integrated the European Classical operations, and launched BMG's first online licensing site.
After BMG Music Publishing, Hubert was a partner at Parthian Strategies, a media advisory boutique from 2007-2009 before signing on to work at the new BMG
Before joining the music industry, Hubert spent eight years in various marketing roles for Club Med. He holds a management degree from the Ecole des Dirigeants et des Créateurs d'entreprise in Paris, and a Master of International Affairs from the Columbia University—School of International and Public Affairs in New York.
Anything within the recent Pandora and Sony/ATV Music Publishing direct licensing agreement that would lead you to re-consider BMG’s own deal with Pandora?
I cannot comment on their deal as I do not know the terms, but I applaud whenever we (music publishers) have an opportunity as a content owner to engage directly with our licensees.
[In a landmark agreement for the music publishing business, Pandora has agreed to a direct multi-year licensing deal with Sony/ATV in the U.S. Pandora was able to bypass the standard U.S. compulsory licensing process, and its custodians--the performing rights societies ASCAP and BMI--to gain access to Sony/ATV’s repertoire of some 4 million copyrights.]
Is Sony/ATV Music really for sale?
Well, we understand that the buy/sell clause has been triggered so something will happen. We are not looking to go after this, but it’s a great asset. No question about it. There are a lot of challenges in managing that asset. We will see what happens there. It’s certainly an asset of quality.
[Sony Entertainment CEO Michael Lynton announced Oct. 8th, 2015 that the company had initiated a buy/sell process for Sony/ATV Music Publishing.]
Meanwhile, Pandora posted a loss of $85.9 million in the third quarter. The company predicts that its U.S. sales may get a boost as it offers customers the possibility to buy online for the first time over the holiday season.
Pandora being a healthy business is a good thing for the industry. You want them to grow. You want them to grow rapidly. As they grow on the master side, and meet the greater 25% of the per play with the (current) royalty obligation to some degree posted revenue will go down on the master side (currently the per play represents more than 25% of their revenue). But I think that’s an opportunity for everyone because that hopefully gives more room for them to pay on the performing side. I want them to monetize their business as best as they can. I think that we can all benefit from that.
With Pandora now paying for their usage of pre-1972 recordings was there a windfall for BMG or any impact on your catalog?
It has minimal impact because we have a fairly limited footprint of pre-1972 copyrights. But listen, Pandora is not going to go away. I think that they have done a reasonably good job. I’m very unhappy about their tactic, and their strategy to--in my view--underpay some writers. But I recognize that they have built a great business that they are under monetizing for the purpose of paying royalties. But we have to deal with them.
It’s a matter of music publishers dealing with them directly and bypassing the standard U.S. compulsory licensing process or having ASCAP and BMI negotiate on their behalf with them on some level.
I agree. I always see a benefit of a direct relationship. Not purely on the licensing front, but I think that there is always a benefit of getting to know your licensees. You may not agree with them. You may sometimes really disagree with them.
[When BMG withdrew from BMI on Jan. 1, 2014, it asked for a rate that Pandora was unwilling to pay, prompting the service to pull songs that BMG controlled a 100% stake in for about six months. However, it appears that Pandora pulled down only 100% controlled BMG songs, and not those songs shared with other publishers. Eventually BMG and Pandora reached an agreement.]
But the relationship would be there to directly resolve issues. They are a client.
That’s right and I have always believed from that a greater relationship will eventually—and, it may take a long time—deliver a greater value for songwriters and ourselves. When we entertained the idea of a direct deal, this came out of a situation where we disagreed on the issue of 100% licensing with them. They claimed that when we asked them to remove our catalog, that they only removed 100% compositions. We said, “Wait a minute. You have to remove anything that contains a share of a BMG controlled copyright.” They argued 100% licensing. Well, from my perspective, it was “You don’t have 100% licensing, and if that’s your position then we will have a different conversation, and we will escalate to potential litigation.”
You ended up making a deal with them in the end.
And Pandora didn’t actually seem to pull down BMG’s full catalogue.
That’s another conversation (laughing). I believe that in most cases we can always resolve commercially our differences. I will go to litigation only when I really see that commercially that we are at a complete impasse. Let me put it in parentheses, if somebody is infringing a copyright I will go hard after that. I don’t want to give the message that...I am not negotiating with people who are willfully infringing our copyright. But when people are in the business of exploiting copyrights, and they have a platform to do so such as Pandora, I will go as hard and as far as I can to find a commercial resolution. That is what happened in this case. I met with them a couple of times, saying, “Hey, we can go the litigation route or we can go the commercial route. I am pro-business. I’m not pro-litigation.” Fortunately, we were able to come to terms that we felt were acceptable. By the way, I’m not suggesting that those are the terms that I want to see forever. But those are terms I can deal with now.
The Copyright Royalty Board (CRB) is rumored to be looking at setting varying rates by market share for music licenses for Pandora, Spotify and other services. A bit scary.
It is scary. I don’t think that we are quite there yet.
Music publishers in America suffer from a legal framework that has prevented the creation of a stand-alone buyer-seller marketplace with mechanical and performing rights. The result has been that per capita publishing revenues are significantly lower in America than in Europe, with publishing rights being significantly undervalued compared with recording rights.
The vast majority of our business in the U.S. is under tremendous constraint as a statutory or a consent decree, or in the case of performance of statutory mechanicals. One could argue, and I think is a fair point, that the two model businesses are overregulated.
About 2/3 of our revenue is regulated under the statutory mechanical rate--subject to CRB process--and performance revenue (in the case of BMI and ASCAP) subject to consent decree. In essence, for these revenue sources, our rights are not subject to traditional market forces of a willing buyer/seller.
That music publishers in America suffer from provisions of the Copyright Act, specifically compulsory licensing where they are forced to give a license. There’s no negotiating room.
A fair contrast to Europe and other markets like Canada.
It is. When I’m presenting results to our board—and I’m talking publishing here, which is a different picture than our recorded music business—but with music publishing, I am always being asked the question of why in the largest music market of the world is digital revenue so low. I have to often explain that we are a victim of a (licensing) framework that is not favorable to bringing our rights to market.
Janet Jackson's long-awaited album, “Unbreakable.” Not a bad launch.
Not bad at all. It was especially good given that she had not released album for such a long time. When that happens, you always get a little nervous, but we are very pleased with the results. To us, it was a real milestone because it’s our first U.S. #1.
[“Unbreakable,” the first album on Janet Jackson's newly formed Rhythm Nation label, was released on Friday, October 2nd, 2015. It topped the Billboard 200 Chart on its first week of release, becoming her seventh #1 album.]
It difficult to believe that “Unbreakable” came out nearly 30 years after Janet, Jimmy Jam and Terry Lewis’ groundbreaking "Control" album (Feb. 4, 1986). And being away 7 years wasn’t the kiss of death because her music feels fresh.
You are absolutely right, and I think that comes through her consistency. She has been very consistent over the years on a creative level. She’s a multimedia professional, and she is very hard on herself. I can tell you how hard that she has worked, and you could see it at the concert I saw recently at the Santa Barbara Bowl (on Oct. 21, 2015). She works so hard. You would think that when an artist gets to that level that they, perhaps, can let themselves have some slack, but that’s not the case. She’s unbelievably focused, and disciplined. It’s wonderful to watch.
Returning to the marketplace, she also faces a new school of provocative female pop megastars including Adele, Taylor Swift, Lady Gaga, Ariana Grande and others. That’s a lot competition.
It is. I know that I am completely biased here, but I’d like to think that when you spell the word “Jackson,” and you have Janet Jackson, that this is an iconic kind of artist. To me at least. I’m 47-years-old and for me, it resonates. Yes, it’s competition. You are absolutely right. But I think that there is an immense fan base that resonates with her, and that fan base is very solid, and very loyal to her.
Is it a global fan base or more in America?
It is more of a U.S. fan base. There is a bit of a base in Europe, but it’s not as strong. Mostly because she hasn’t traveled or toured there (as much). It’s taken a bit longer. But I think in the U.S., it is very clear that the name resonates, but that fan base may not be as big (internationally). It’s true.
Within the time period that Janet has been away social media has exploded. Now this former MTV superstar may get a greater boost internationally from social media coupled with some aggressive international touring.
I agree with you, and she has this tour with the international dates. We are very excited.
[Janet Jackson has just wrapped up the first leg of the “Unbreakable” tour before kicking off a 47-show run next year. Several U.S. postponed dates have been rescheduled, including: Denver (Jan. 9th, 2016); St. Louis (Feb. 14th); Kansas City (Feb. 15th); and Salt Lake City (June 29th).]
S-Curve is the third American label acquired by BMG, following Los Angeles-based Vagrant Records, and Portland, Oregon’s Rise Records. What made the label attractive to BMG?
S-Curve has always been known for breaking true talent, and their catalog represents some of the very best in pop music. A prime example is the smash hit “Honey, I’m Good’ by Andy Grammer, which ranked among the Top 10 best-selling singles in 2015. Steve Greenberg of S-Curve will be joining the BMG team to develop our mainstream pop offering. Steve has built the label with an indie sensibility similar to BMG’s philosophy, so bringing him onboard makes the deal even sweeter.
BMG has had a string of recent estate acquisitions including catalogs of Hal David and Buddy Holly.
I love Hal David. I had the honor of meeting Hal. I’m on the board of ASCAP, and when I joined he was still on the board. For me to have the possibility of acquiring those song rights I had to pinch myself. The same with Buddy Holly.
[Hal David’s catalog filled with iconic songs including "Raindrops Keep Fallin’ On My Head," "Do You Know The Way to San José," "I Say A Little Prayer," "What’s New Pussycat?," "What The World Needs Now Is Love," and "Alfie.”]
I interviewed Hal for a CelebrityAccess profile in 2011 when he was 90.
An amazing gentleman. As I said I had the pleasure to serve with him on ASCAP for a very short period of time before his death (on Sept. 1, 2012). He was very sharp, and a great listener. I was clearly in the presence of a legend. It was great.
Other than being a brilliant songwriter, Hal was deeply involved in music publishing issues, serving as the president of ASCAP from 1980 to 1986, and then serving as a director of the organization.
You are right. I didn’t know him very well. I only shared a few meetings with him. He clearly had left/right brain capabilities. That’s a rare gift.
BMG’s deal for Buddy Holly’s catalogue includes overseeing various aspects of his music including name and likeness, and recordings outside the U.S. This seems far beyond the scope of a traditional estate agreement.
It is. I first met Mary Elena (Holly) in 2010. I admire her energy, and the hard work that she’s done in preserving as best as she could the legacy of Buddy Holly. I have to give it to her because it was such an untimely death. Look at those copyrights. To me, it’s the birth of rock and roll in some perspective. We always talk about Elvis Presley when we talk about that period of music. We forget that Buddy Holly was a songwriter, a producer, and a performer at a very, very young age. Maria Elena speaks so fondly of Buddy Holly, and seeing that deal through her was very exciting for us. To answer your question, Mary Elena wanted to essentially sell everything. I understand that idea and we were...
[In the BMG deal for Buddy Holly’s catalogue controlled by his widow Maria Elena Holly, custodian of her husband’s legacy since his tragic death in 1959, three separate elements of the Buddy Holly catalogue are included: U.S. music publishing rights in virtually every song written by Buddy Holly, including “That’ll Be The Day,” “Peggy Sue,” Everyday,” “Words Of Love,” and ‘Not Fade Away’; Royalties due throughout the world on sales of Buddy Holly recordings as well as his writer’s share of publishing royalties; and all of the rights in Buddy Holly’s name, image and likeness.]
Maria Elena will be 83 next month. That’s likely why she wanted to sell everything.
That’s right. She’s older. She’s in her 80s. She wanted a company that could take on that legacy, and bring it to the next level. It didn’t make sense to just sell part of it to Company A, and the other part to Company B. She realized that by giving all of those assets to one party the chances of us doing a great job on the legacy of Buddy Holly would be greatly amplified, and improved. So that’s how we started to talk about all those different rights that she had. Name and likeness is something that we have always been very curious about, and keen on because it’s a natural extension of our business.
It may be but it’s something rarely touched upon by traditional music publishers.
You are absolutely right, Larry.
There are various lawyers, and music industry people like Seth Berg at South Bay Music who has worked with the estates of Frank Sinatra, Nat "King" Cole, Dean Martin, Ricky Nelson, and Peggy Lee who work within this sector.
That’s true, and that’s how the music business has evolved. They (label executives and music publishers) have been thinking about a silo (mentality) approach to everything that they do. Whether it’s recording, publishing or anything else. BMG is different. We’ve built our business on the foundation of being a music rights platform; whether it is music publishing; whether it is the underlying music copyright; whether it is recorded assets; whether it is name and likeness, and we can also go beyond that. We have a music-related audio-visual business. We see ourselves as a music platform that can work across many different copyright aspects of our business, and enhance the value of those copyrights. For example, name and likeness has always been something that we have been looking at. We were waiting to find the right approach to do that. We think that Buddy Holly is the right approach. We are looking to expand beyond that. It is something that is interesting, and a natural extension of our business, and we are looking to do business around that area.
Other than S-Curve, Rise, and Vagrant Records, BMG had a spate of earlier label acquisitions including X Ray Dog Music, and Infectious Music in the U.K.
We will continue to acquire. The reality is that there is a real scarcity of quality assets. That is especially true if you are looking for sizable quality assets. We think that most of those have already connected. Not to say that they won’t come back again, but most of those have connected. We are looking for smaller assets. So we are active in the acquisition area. We have directed part of our catalogue to recorded assets. Obviously, as you just said between S-Curve, Vagrant, Rise and Infectious. This is an area that we are putting a lot of attention. We are very bullish on the recorded business. I know that it is sort of an anomaly when you say that in the business, but we believe that going forward—and I am not saying the next two years—I’m looking 5 to 10 years.
Major labels have long cherry-picked key independent labels, and then buried them within their own catalog.
There are exceptions like Concord Music Group which has built up an outstanding portfolio of stand-alone labels.
But not many others have done that.
But not many. It’s not our view. I will give you an example. When we acquired Rise, Craig (Ericson) who owned Rise at the time, did not believe me (about continuing the label’s independence). I said, “Listen Craig, I understand your business. You have a very specific business. You have a niche business. You have a way that you do things. The last thing that we are going to do is mingle in your business because if we did it, excuse the expression, we are going to screw it up.” I said, “I’m going to give you total autonomy. You are in Portland, I’m not asking you to move to L.A. Keep your staff there. Keep what you do, and the way that you do it. What we will give you, however, is an international reach. We will give you an infrastructure to grow your business. We will educate you about music publishing. Perhaps, there will be some opportunities for you to expand beyond recorded music, but that’s what we will do. We will not tell you how to do your business because we think that you are doing it best.”
[Under BMG’s ownership, Rise--home to artists including Of Mice & Men, Memphis May Fire, Crown The Empire and The Devil Wears Prada--continues to operate from its headquarters in Portland, Oregon under the leadership of Craig Ericson, who founded the company in 1991. BMG handles back office functions while offering Rise artists access to its international network.]
This strategy differs with multinationals just burying a former leading independent within its infrastructure.
There so much value in iconic labels like Rise. People are buying those artists because Rise is viewed as a creator. They are not just in the music business. They are a community business saying that, “We create the music. We bring you that music that supports 1.67 million YouTube members.” I think that they were the first label to put all of their music content on YouTube, and that was such a smart move.
BMG reaching a milestone with its first #1 album with Janet Jackson’s “Unbreakable” surprised me until I recalled that BMG had only created a recorded music division in the U.S. in 2011. A short time period, really.
It is. Little by little we are making our marks in the U.S. market and beyond. We are building a business. I would say that for many of our competitors, it took them 60 or 70 years to build a business, and we have done it in 7 years. So it is intense as you probably can imagine.
Remember that we really started our recorded business in 2011, we had to start building the (entire) business. A lot of that was with the acquisition of (music publishing) catalogues, not much of labels. We intensified that in 2014 and 2015. Now we have the full capabilities to really break an artist here in the U.S., and on a global scale. So we are pleased with this milestone and we are looking to have more of those.
The recorded music strategy developed in 2011 certainly became apparent with breakout of the Janet Jackson album.
I think that’s when it all came together, and it was very visible. But we had other successes. Alabama, for instance, we did very well just earlier with “Southern Drawl.” We weren’t #1, we were #2 by 3,000 units. That band is Southern rock, and it is great. We worked on this album with them, and they’ve done an incredible job. My guess is that we will sell 120,000 or 130,000 albums of that album (in the U.S.). We are pleased with that too.
Meanwhile, Iron Maiden and Scarface reached the Top 10 in America.
Yes, Top 10 successes. Absolutely. Iron Maiden was part of a prior acquisition (of Sanctuary Records Group). It’s (“The Book Of Souls”) been a great success here in the U.S. I think that we will do 120,000 units or more now. We signed Scarface) about a year and a half ago. It took a long time to put an album (“Deeply Rooted”) together.
What do you have on your plate for 2016?
My purpose is to grow the footprint on the label side. I want us to be a very visible successful across the different imprints that we have in 2016. We will continue to be aggressive in looking for and acquiring good assets; and continue to building our team.
Any major projects in coming months?
A lot of projects. I can’t disclose them at this point. But we will be very active. The first quarter of 2016 will be a strong quarter for us. If I look at the marketing share on the publishing side, it’s been good this year. We have control of 12 of the tracks on Justin Bieber’s album (“Purpose”). So we are happy about that. It takes a long time to build a roster, and it takes a long time to build a catalog. We are only now hitting our stride. All of the hard work that we have done in the past three to four years in aggressively signing is starting to pay. I’m very excited about that.
When BMG launched its recorded music division in 2011 in which the company controls of both publishing and master rights, you were initially working on a 75/25 formula with 75 in favor of the artist/writer. You took the concept of a co-publishing split, and applied it to a label model. Are you still doing 75/25 splits?
Well, no. We started that way. The idea behind that was that this is generally how a (label) corporation would work as you know. So we said why can’t we make this work under a recorded contract where we would not own the copyright but we would have a license for a period of time, and we would not necessarily pay in advance but we would advance the project? Not necessarily an advance for the artist.
So that’s how you started the recorded side of your business. What changed?
We have evolved in the past three to four years on that point, especially as we acquired companies such as Infectious, Vagrant and Rise. We started at 75/25 and we still offer those type of deals, but we will provide more flexibility in the type of deals that our artists can choose from. We have had to be more open to different types of deals, whether it is a PPD (a record's dealer price), or whether it’s a joint venture deal. We are open to those deals with the caveat that we have to be forward thinking, and be absolutely transparent. All of those silly deductions you could see in those old recording contract; all that had to go away. We have been very vigilant in all of those acquisitions to say this is the way you can conduct business going forward.
In fact, I was talking to Craig (Ericson) recently, and I said, "When you are talking about a PPD, and if we are doing a royalty deal, we have to be richer than we were. We are not going to offer 15% deals. It has to be 20% or greater, and we have to be transparent. We have to be fair in a way that we do a deal.”
Still having control of the master and music publishing rights gives BMG greater control of a project.
That’s very true
Still, it isn’t working within the traditional label model.
Exactly. What’s very different also for BMG is that if you look at the majors, to put it bluntly, they own the publishing. If not the publishing, then the recording. That has to lead to some tension in terms of deciding how to approach some of those issues, especially on a copyright side. At BMG we are agnostic. It’s not like the publishing owns the recorded, or the recorded owns the publishing. We are in the music rights business. We believe that there’s a huge opportunity to have expanded rights, whether it’s publishing, recorded music or, as I mentioned, name and likeness, and other rights. We believe that if we manage rights in an ecosystem that can earn a greater value than having one overstepping over the other, but really looking holistically we can earn greater value by having all of those rights in the same bucket. We can do a better job for ourselves obviously, but obviously for our artists and our writers as well. That’s our fundamental premise, Larry.
What you are saying is the label model may not be a bad business, but you don’t think it’s your business because there are further opportunities available.
We see a lot of opportunities to mingle those different activities. For instance, when we sign an artist and that artist needs songs, the same team can say, “Hey, what can we do here? Where are our songs? What would work for this project?” This is a very collaborative approach. The same way when we are—we are involved in the audio visual business--how can we make all of those different activities work toward increasing the artist’s success? We sign an artist and that artist can also be an artist/writer. Then we can put that artist with some interesting writers. Then there are some opportunities that we can bring to the record.
How can we—referencing back to the silo (mentality) we were talking about earlier—try to eliminate those silos, and try to bridge those different activities as effectively as possible? It’s not easy. Sometimes the co-ordination or the opportunity doesn’t lend itself to make it work. It’s about mind-set. I always tell my team, “We have the assets. We have the skill sets. Let’s make sure that we have the right mind-set. Let’s make sure that we do the right thing, and understand how we work together.”
Traditionally revenue streams for music publishers broke down to being 1/3 mechanical, 1/3 sync, and 1/3 performance. That’s certainly not true anymore.
It is changing, you are right. Sync is healthy. Performance, in some ways, is healthy, not because the rates are good but there’s been an explosion in the marketplace, and we are benefiting from that. Mechanical is going down and will continue to go down because of the conversion from a download to a stream has, unfortunately, created quite a disillusionment for us. That’s not positive.
You remain an optimist about the music business. While new technologies and varied ways of working continue to prove challenging to many established players, BMG plans to continue investing in the future of the music business.
I will tell you why. I am an optimist because we tend to often have a U.S.-centric view or North American view of our business, and we should look further than that. If you look further than that, the signs that I see are quite positive. I do see that copyright protection, and copyright enforcement—generally-speaking in a number of markets--are showing some signs of real life. That’s the case in South America, even although Brazil is going through challenging times now, but I firmly believe that those markets will be healthy. I see what’s happening in China, and what is happening in South East Asia, and that will eventually happen in continents like Africa.
I’m an optimist from that perspective.
I also see that collection efficiencies will become a reality. It will take some time, but it will become a reality. I see it here in the world of PROs that greater competition will lead to greater efficiencies. Those PROs will also put great pressure on the collection societies in Europe, and we will eventually get a positive outcome from that for writers and content owners. So if you start adding up all those different pockets of value, then I’m an optimist. I think that investing in IP music assets, be it music publishing, or be it recorded assets, or name and likeness as we talked about earlier is a good investment
From Europe, we are seeing a greater transparency in royalty collections. Not as good as it could be, but far better than five years ago.
I agree with you. That’s where technology will be such an enabler for greater transparency. There’s no reason why if you think about it. You can use Fed-Ex today, and you can track your package from your home or your office to the recipient in almost any given time. There’s no reason why eventually that we could not track the use of a song with the same perspective. From any type of user. We should be able to get to that point, and we will. We will. It’s a matter of time.
China has faced huge obstacles in overcoming piracy but there’s been a change there. The National Copyright Administration of China (NCAC) has been penalizing companies that were reportedly slower to legitimize their catalogs. So there’s change there.
I think you are right. I have a holistic view about China. The country is the largest owner of U.S. debt. If you look globally, the US economy is, by and large, an IP (Intellectual Property) economy. For them not to support IP, and IP protection, eventually, is not a good bet.
[On Aug. 3rd, National Copyright Administration of China had 2.2 million songs removed from China’s most popular digital listening outlets, including 640,000 from Baidu, 23,700 from QQ, and 26,000 from Xiami and TTPod.]
It would hurt them.
Exactly. I have always had the view that eventually they would come around and that they would realize the enormous opportunity that IPs create for themselves. At the end of the day, they will realize that IP is a pretty good bet. It’s not a surprise to me in see what is happening in China. It’s quite an opportunity for all of us. I mean all copyright owners. I don’t limit that to music. Video games, movies and so on.
India is a more limited market for Western music companies although Sony Music Entertainment India has made inroads there with international and domestic music.
I agree with your sentiment about India. I think that the fundamental difference is that China is more receptive to Anglo American repertoire. The perils of India is that IP copyright framework is not enforced. They originated it (copyright) from the British. Yet they are not as receptive to Anglo American repertoire as China is. China had no IP reference in terms of copyright protection, but there’s a real interest in Anglo American repertoire.
China seems more drawn to outside cultural influences while Indian entertainment remains dominated by Bollywood.
That’s right. I view China from a BMG perspective as a real opportunity. As you know Bertelsmann has had a long history with China, which we have benefited from as well as BMG. We have done a deal with Alibaba’s Digital Entertainment Business Unit, which I’m sure you are aware of. So I’m fairly bullish about China. It’s positive to see that the Chinese government is really understanding the value of IP and cleaning up the market. They really are trying to eliminate as much piracy activity as possible. I think that eventually this will have an impact on South East Asia at large.
The recording industry was the first media sector to feel the full impact of the Internet, and technology-empowered consumers. You once said that pre-Napster in 1999, that music activity was about buying music, whereas today it’s about consuming music. You have also said that more business people in the music industry should listen to a 12-year-old. I agree.
I agree. I don’t have children, but a lot of my friends have children and I look at them. People tell me that Spotify is the future. I love Spotify. It’s a great interface. I’m a user. But I’m an old guy. And I am looking at the 12 or 15 year olds and they don’t listen to their music on Spotify. They listen to their music on YouTube or SoundCloud. That’s where they go.
With music being consumed rather than bought, that’s a profound shift that has many implications, from the value of music to the management of rights. The iPhone, IPod or smart phone are the best things to come along for music consumption since the transistor radio in the ‘50s because people can take their entertainment any place that they want to.
That’s right, and that’s the power of music, Larry. Music, unlike other forms of entertainment, can be experienced anywhere, and on the go with minimum time, unlike a book or a movie. If you look at any other form of performing arts, if you look at a book, if you look at a movie, if you look at a ballet, if you look at a live concert, you have to make a real effort to be engaged. The power of music is that in 35 seconds on your iPod or iPhone or your smart phone you can be completely immersed into the music experience, and we are not taking full advantage of that. I sometimes get a little upset that people just tend to give away the music. We’ve done such a poor job of really looking at the value of the music. If you want to see a movie in New York it’s $12 to see a movie and after an hour and a half, it’s done. When I was at the Janet Jackson concert, a T-shirt was selling for $45, and a CD was $10. Considering the amount of work, money, and management that went into the CD versus a T-shirt, one can say, “Wait a minute, there’s some market anomalies here.” We have to do it (sell music) better. By the way, we are not the ones that can dictate what the value of music is. The consumer will tell us. And that’s where we need to do a better job.
Over the years numerous European music executives have come to America to work in the music industry but many of them failed to grasp the complexities of the American music market. You seem to have both a global and American perspective that probably benefits you.
I’ve been, maybe, a little lucky, but I have been here for 27 years. I moved to New York when I was 20. I love America. I love North American culture. But I really love America. I think that there is something that is so exhilarating here. I see America as a world of possibilities. I came to the U.S. largely I was lured by that. I grew up in Paris. I love France. Obviously, I love the French culture, but growing up, it was somewhat limiting to me. I come from a middle class family. I didn’t go to the best schools. But I always worked very hard. Most of the time, I win when I compete. It’s not because I am necessarily smarter, but I work harder. I believe in hard work.
When I came to America I saw that it was full of possibilities, and I saw it applying to myself. I want to do this. And if I work hard enough, I can get there. But I always kept that European culture in a sense that you cannot be 100% Anglo American-centric (in a global business today). You have to open yourself to the different world, and a different vision. I bring that to (my job) because that is the way that I grew up. When I have conversations sometimes with American executives, they are very Anglo-American centric. Well wait a minute, the world is not limited to America.
There are exceptions of American music executives that have global outlooks. Sire’s Seymour Stein made his mark with UK-based acts in the late ‘60s, and he’s been drumming up support for music from India and China for decades.
With technology you can have a writer in LA, and a writer in Stockholm working together on a 24/7 time frame. And, by the way, the music can be better too. Technology has been such an enabler in making music sound differently. The idea of genres isn’t as clear anymore. The idea that this is pop, rock, Southern rock, urban, rap...the reality is that the kids don’t look at it (music) that way today. They listen to everything. They will go crazy on a country act like Little Big Town and the next song that they will listen to on their iPod will be the Kings of Leon. That’s how they consume music, and that’s how music is being made.
When you attended grad school at the Columbia University—School of International and Public Affairs, you interned at BMG Music Publishing?
I started at the old BMG as an intern between my first and second year at Columbia University. I worked for Nick Firth (chairman & CEO, BMG Music Publishing). Then I graduated in 1999, and I joined officially in Jan. 2000 in the executive management program where you were worked with the head of a division. At the end of the year, depending how it went, you stayed on in a different role. Eight months into that job, I said to Nick that strategic planning and acquisitions were okay, but I wanted to be in operations. “I want to be in the thick of it.” He said, “Okay, take care of South America.” Then we acquired a number of businesses and he said, “Why don’t you integrate those businesses, especially in the classical side of our business.” That’s what I did.
A great experience for someone so young.
It was an amazing time. I learned a great deal working for Nick at BMG. He really taught me everything about music publishing, even things that people never want to hear about like rental and print rights. He said to me that print rights were very important because when you speak to a writer, one of the few tangible things that they can see is a print folio. To them, it really matters. To ignore it would be a very bad idea. He said, “You have to understand that side of the business even although represents 2% of our revenue.” It’s true. We do often forget that. The same thing with rental rights, rental scores. When you go into The Met, and you have a performance of Puccini, there’s a score and that score is worked very hard. It doesn’t happen by accident. That’s the job of a publisher to make sure that score is available and to make sure that it’s clean, correct and is produced properly. I enjoyed learning a lot about that.
At BMG Publishing, you were very bullish on Latin music. Betcha you never expected what’s happening today with Enrique Iglesias, Pitbull, Nicky Jam, J Balvin, Gloria Trevi, Daddy Yankee and so many others
That’s true. When I was at the old BMG, I always felt that we didn’t pay enough attention to Latin American music. Not only Latin American music in Latin America but Latin American music in America. I was lobbying my board and my management that we had to be more aggressive. We have to be more active. We did a few deals. We signed Pitbull at the very beginning. I brought a guy from Spain, Rafael Artero (as U.S. Latin VP of creative for BMG Music). I said, “I’m going to put you in Miami. You are going to be scared shitless in the market, but bring what you have. Bring your music tendency. Bring your music affinity. I am going to leave you alone. Do what you think is right.”
That’s a lot of trust.
I have always believed that you let people do what they want to do, within reason, within a framework, but if they feel strong about something, if they see something, let them run with it. It’s not because you don’t see it, that you shouldn’t do something. I always say to my guys, “It’s not because I disagree with you that I value you any less. Sometimes I disagree with you very strongly, very furiously, but I value you.” I want people who are smarter than me around me. I’m not hiring smart people to tell them what to do.
Who did Rafael Artero sign?
Probably six months into his deal he called about Pitbull. “Come down and see him in Miami.” I was there for the very beginning of Pitbull. I saw a guy who had an amazing work ethic. He worked super hard. I said “Sign the guy.” We signed him at the old BMG. I wished I had signed him at the new BMG.
Today, you remain very bullish on Nashville as well. While Nashville’s song community is attractive to music publishers and writers, why is country music’s sync revenue typically lower than other catalogues?
A very good question, Larry. I always struggle with that. There are two things that I struggle with country. One is how can we make global acts out of country music?
Get country artists to tour overseas more. Look at Toby Keith’s stature in Scandinavia.
Sync is very much driven by lyrics and, maybe, that’s a bit of the challenge because country songs will be lyric specific. I have seen some examples where it’s getting a little better, but they are still an anomaly. I think you are right. Getting country music to a more open sync market, it’s still challenge.
The news from Paris is so tragic.
Every terrorist act is senseless, tragic and shocking. This one hurts especially hard as the music community—fans and those in the industry—suffered injuries and deaths. This is a reminder as to how fleeting life can be.
Where in France are you from?
I was born in Clichy and raised in Paris, a suburb of Paris, Beauchamp. My father was an accountant. My mother was a stay-at-home mother. I lost her three years ago. She was wonderful, and I miss her. I don’t think I get over this. My father is still alive. I speak to him almost every day. I have a great relationship with him.
Being an only child what did your parents think about you leaving France for America?
My parents have always been very supportive. My mother was Dutch born, and raised in Indonesia. For them the idea that I lived outside of France was very natural. They always wanted me to be happy. Regardless of where I lived or what job that I did, as long as I was happy, and surrounded by people that I liked then they were happy.
Before the music industry, you spent nearly a decade in various marketing roles at Club Med. What’s the best Club Med vacation spot?
(Laughing) My favorite destination and it’s not the best in terms of the amenities although I understand that they have evolved was Martinique. I like Martinique because of the location.
What did you do at Club Med when you joined in 1991?
I started as a GO only for six months to understand the product.
GO meaning Gentil Organisateur in Club Med language. What does the job entail?
You work for the guests. In my case, wanted to learn the business. Then I worked in marketing quite a bit. I stayed 8 years there. I got the job completely by accident. I was looking for a job in New York, and I happened to meet the chairman of Club Med. I told him I wanted to work for a Club Med anywhere at whatever salary. So he hired me.
Last month, France’s Minister of Culture Fleur Pellerin proposed that not only should the new digital environment be more transparent and more equitable, but that industry stakeholders, in particular, should share with all artists and songwriters income received from online music services, and to guarantee them a minimum wage in return for the digital use of their recordings.
I agree with her all the way to the last point. I am a big defender of writers. I think that writers, especially in a digital world, are being unfairly compensated and Pandora is the worst offender of that. But I don’t believe that this is the role of government to set a minimum wage in terms of activity.
Compensation should be left to market forces?
That’s right. I will fight as hard as possible to insure that there’s an incredible share for the writers. No question about it, but I’m not sure that this (proposal) at the point that we are trying to get the government out of our business in the U.S. I’m not sure that is the necessarily the view of the industry that we set minimum wages for songwriters. Maybe I am old fashioned that way.
You are just not enough of a socialist.
(Laughing) That’s probably right.
Larry LeBlanc is widely recognized as one of the leading music industry journalists in the world. Before joining CelebrityAccess in 2008 as senior editor, he was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-89. He was also a co-founder of the late Canadian music trade, The Record.
He has been quoted on music industry issues in hundreds of publications including Time, Forbes, and the London Times. He is co-author of the book “Music From Far And Wide.”
Larry is the recipient of the 2013 Walt Grealis Special Achievement Award, recognizing individuals who have made an impact on the Canadian music industry. He is a board member of the Mariposa Folk Festival in Orillia, Ontario.
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