...When one goes into the world of music, describe it. What is it?

Well the music business is kind of like a wheel with a couple of dozen spokes on it. There's all different aspects of it. There's the aspect of recording, which involves, especially in the '60s and '70s, there was a real important skill set having to do with acoustics, getting a good drum sound, engineers, mixes, stereo was just coming of age, multi-track recording was just coming of age. So there was a whole world of people that knew about recording.

Then there's a whole world of people who knew about touring, which involved the logistics, among other things, of lights and sound and traveling. Of booking, of how you combine different artists, you know, into a show to attract people. And what do you [do], one encore, two encores, and whether or not you have a set or not. And the energy involved in the business of touring.

And then there's the business of record companies. You know, which has many different aspects to it. From manufacturing, to sales, dealing with retail, to radio promotions, dealing with the radio station. …

So it's not one business, it's a cluster of many businesses. Nobody knows about all of them, and certainly nobody knows about all of them all at the same time. ...

What were the economics for the artist in the late '60s early '70s, up through that '77 period?

The economics evolved starting from the late '60s up until today. In the late '60s, you'd have artists getting a royalty of 3 to 5 percent of the retail price. Today, typically an artist will get 16 to 20 percent. That's sort of been pushed year by year, having to do with market forces and the clout that artists have. Similar to what happened with baseball players and baseball teams, or movie stars and movies. Performers really are the driver of enough of the income, and the people who represent them figured this out and over the course of time it increased the amount of money and the percentage of the money that goes to the performers. Because they're the key element in the business.

And did it work the same as it works now? That is, there was recoupment and all of that when somebody cut an album.

... In general, the economic model has been that the recording costs and artist advances are considered an advance to the artist and those are recouped … prior to initial royalties being paid. …

Do you know a hit when you hear one?

Only sometimes do I know a hit when I hear one. There's things I think are hits that aren't hits, and there are things that I wasn't sure about that become hits. I knew Stevie Nicks was going to be a star as a solo artist. So I've been wrong many times, on both sides of the issue of knowing a hit, but that was one time I was right. You don't have to be right all the time to do well in this business, but you have to have a reasonable batting average.

And what would you say yours is?

My batting average? I'm still in the business. I still don't have a real job and it's been 35 years, so it's a good enough batting average to still be in the business. Certainly not the best, but certainly not the worst. ...

We're heading to the early '80s. MTV is on the horizon, maybe exists by '81-'82. CD's are coming. Sometimes I think of it as an arc, and at the top of that arc might be that moment. [How is the business doing?]

There was a down moment in the business in the late '70s. There was a terrible crisis, similar to what's happened in the record business over the last few years. Two things converged. The biggest thing was the baby boomers got older, and there was this huge demographic group that had been teenagers and college students, who were buying lots of records, first vinyl and then cassettes. But whatever, they were buying, there's tens of millions of us.

And then as people of my generation got into their mid-20s, like every other generation, they started buying less music. They got jobs. Some of them got families. Although they still would occasionally buy a record, it was not 15 or 20 a year like what many people do in their high school and college years. And the subsequent generation was a smaller number of people. So there was a demographic blow to the macroeconomics of the business in the late '70s.

And also it was a time when the music business had what I consider to have been its worst format, which was pre-recorded cassettes. Cassettes had the worst packaging of anything that business has ever put out and turned out to be rather easy to copy. And there were these cassette-to-cassette machines that came on the market.

There was a hysteria and a gloom very similar to what happened in the business when the first couple of years of downloading and CD copying happened. You know, sort of 2000-2001. Huge layoffs in the business, and a tremendous sense of hysteria. …

The business was saved by the introduction of the compact disc, or the CD, in the early '80s. That reversed the decline and created another 15 years of growth and profits for the business as, over the course of that period of time, people converted from buying, I don't know, what was then a $6.98 cassette to $13.98 CDs, you know.

And for the first couple of years that most people got a CD player they would actually replace a lot of their collection. So classical sales went through the roof and old recordings went through the roof, and the business therefore bounced back, and had another 10 to 15 years of double-digit growth as the bean counters at the big corporations like to say.

[How many record labels were there in the 1970s?]

Well, there were certainly more record companies in the '70s than there are today. You had a company like Motown, which was a really dynamic independent company that is still going. Even though they're associated with the '60s and the '70s, they're still putting out Commodores records and Stevie Wonder records. They're a separate company of A&M Records, a very creative, unique company run by Jerry Moss and Herb Alpert, who himself was a musician. And they spawned Carol King's Tapestry and Frampton Comes Alive, you know, major forces.

You have Chrysalis Records, Island Records. So there was a group of mid-sized independent companies that were very dynamic and competitive and were breaking artists. Chrysalis breaks and produces Pat Benatar and Island signs and introduces Bob Marley and so forth.

There were still the major companies that were divisions of multimedia companies such as CBS Records, that had Bob Dylan, and Capitol Records, and so forth. So there were probably about 15 major companies at that time.

Who was running these companies? I have this idea that now it's guys from Germany who have Blackberrys and Palm Pilots and stuff. But then, I have this romantic view that maybe it wasn't.

I think it's a mistake to overly romanticize the past in the music business. I think that there were some shallow people then and there are some very creative people now. It really depends on who's sitting in the chair and who's not sitting in the chair, and how they feel about not sitting there.

Mo Austin, who's considered one of the greatest record executives ever, who ran Warner Bros. Records during the glory years of the '60s and '70s, goes from signing the Grateful Dead and Jimi Hendrix, through Madonna and Prince, and Neil Young, and so many others, was a finance guy. He was the accountant for Frank Sinatra's label Reprise. He just happened to be a finance person who had a creative soul and a gift for building a record company.

Clive Davis was running the CBS companies at the time and he was signing Janis Joplin and Sly Stone and so forth, and who today is still one of the most revered record executives. He was a lawyer. It's not like this is the first generation of record executives to spawn from lawyers and accountants, and so on. …

I just think that there's always a tendency to see the past through pink-colored glasses and to see all the warts in the present. But I see good and bad in both the present and the past. ...

There's no question that when there's more money being made, there's more money to invest. And investment includes sticking with an artist for three or four records instead of one or two records. That includes sticking with an album for 12 months instead of 12 minutes. ...

There were artists being dropped in the late '70s also because labels just didn't have the ability to hang in there with them. But in general, the business was better in the '70s and '80s than it is today, and therefore record companies had more money that they could invest. Because, you know, after they made their double digit growth and profits they could put the rest of the money back into signings, investments. And that is harder to do today when there's been a decline in sales. ...

When you first hear about MTV as an idea, what's your thought?

Well it was exciting that MTV started. I mean, I had no idea it was going to become as powerful as it did, but I remember Bob Pittman and others going around explaining what they were going to do. It was a chance to expose music.

The whole thing of marketing music, these large apparatuses, of record companies and to a certain extent management companies, it's all about getting people to hear music. Once they hear the music they either like it or they don't like it, the music then takes it the rest of the way. So the job of marketing is getting it on the radio, getting it on television, getting it to a listening post in a store someone can put on the headphones and hear it. Getting it into a movie soundtrack, getting it now in these days, into a video game. Whatever it is, it's about getting people to hear the music.

The way radio works is that there's different formats -- whether it's hip-hop or country or so-called adult contemporary or things like that -- that have narrow boundaries of what's acceptable within the format. And then there's all sorts of music that is not in a radio format. And any time something comes along that can expose that kind of music, it's incredibly exciting to those of us who work with artists, because there's now a chance to get people to hear music that otherwise you just can't get them to hear.

So for example, a group like the Stray Cats could never have become successful without MTV. Musically they were playing rockabilly music that didn't fit any of the radio formats. But by making innovative, clever visual videos, they were exposed to the public by MTV and then go on to sell millions of records.

Bonnie [Raitt], we had a very hard time getting radio stations to play her. She was considered too old for rock radio, and not mainstream enough for hit radio, or adult contemporary radio. And at that time VH1 was emerging and was open to giving a shot to somebody like a Bonnie Raitt, and really-- The first half a million records we sold, to get to the Grammys, I would say VH1 was the single biggest factor in that. Without that I don't know that she would've been able to expose the music too enough people for them to know about the record.

So the development of music video television was a great boon to people in the music business because it was another way of getting people to listen to music.

What would you do? Would you pitch or did people who worked for you pitch over at MTV? Do you remember the first thing you ever got on and what it was like?

At the beginning of MTV, it was more of a creative outlet for artists. It wasn't the transformative one. I remember when Stevie Nicks and Tom Petty did the big duet "Stop Dragging My Heart Around," I sat with Jimmy Iovine, the producer of the record, in the editing studio. And together we edited that video, to get certain close-ups and certain things like that, because there had just been someone in the recording studio where they lip-synced to it.

Seeing it on MTV was really exciting. She was very attractive and charismatic, and it helped I think accelerate her emergence as a solo artist, although radio was still the dominant marketing medium then.

But I've always been someone who, to this day, when I'm excited about something, will call the people at MTV. MTV's a national channel. Radio is local. So you have a radio in New York, radio station in Chicago, radio station in Mobile, Alabama, or Seattle. But there is no national radio station. But there is a national television station that plays music, MTV, and the MTV networks. And now Fuse, you know, is a national music channel. The ability to get music exposed nationally is limited to music television. So it's something that a lot of people in my line of work still will promote personally even though we have several video promotion people, because it's such an important medium.

… Michael Guido says that he blames MTV for the death of the album and too much of a reliance on singles, a kind of circumscription of the kind of people who get to bring their music forward and taking the fun out of listening to a song and imagining what the girl looks like, because it has to be seen, and therefore eliminating artists. [What's your response?]

I think middle-aged people who are grumpy about the music business need to hang around with teenagers and see the way they react to MTV, the way they react to the iPod, the way they react to artists like OutKast and Pink… I don't think there's any emotional difference between the way teenagers process music today and the way they did when I was a teenager. I think it speaks to their inner emotions in a way that music uniquely can. Videos can be boring or exciting, and when they're exciting it's an art form, and when they're boring the music still can be exciting.

And I thank God for the music video channels because they're another way of getting people to hear music. And that they have enough of an audience that when they do hear music, if they like it, they respond and become fans and buy concert tickets and albums. I think that the emergence of the music video has just expanded the palette of tools available to artists to connect with an audience.

I know when I worked with Nirvana, Kurt Cobain cared as much about the videos as he did about the records. He wrote the scripts for them, he was in the editing room, and they were part of his art. And I think they stand up as part of his art, and I think that's true of the great artists today. Not every artist is a great artist and not every video is a good video, but in general having it available as a tool, to me, adds to the business. I wish there had been music videos in the heyday of the Beatles, and the Rolling Stones. I think they would've added to their creative contribution, not subtracted from it.

And the idea that it has taken us to this sort of three minutes and 30 seconds, or 2:19 second universe, that we walked away from in the '70s?

No, I don't believe that's true. I think that there's always been at least two different kinds of music fans. There are people that just are into songs, and there are people that are into artists. You know, I don't think there was any more downloaded song than 50 Cent's last year, and yet it sold 9 million albums. So there were 9 million households that felt despite the fact that they had seen the video, despite the fact that they could get it online, that they wanted to hear the full statement that 50 Cent was making.

I don't think that MTV is a negative. I think the availability of illegal copying of music is subtracting from sales, but up until that phenomenon came along you had more than a decade of tremendous, explosive growth of album sales, during the time when MTV was maximizing the careers of people like Madonna and Prince and Duran Duran and all these other audio/visual stars.

So it's just objectively not true that MTV hurt the bond between people and artists, and their assessment of albums. They were associated with Thriller -- greatest album seller in history, was also filled with very powerful videos. Michael Jackson's dancing and theatrics made him bigger, and made more people hear his album, not less people.

I just think people who grumble about the media sometimes are more grumbling about their own relationship to music and not being objective about what's happening. Because you're only a teenager for 13 through 19, and then the rest of your life you're not. But that doesn't mean that other people aren't teenagers, that they're not inspired by what's happening musically. I think the music today is inspiring to a lot of young people.

There are business problems, but I don't think there's any problem with the emotional connection between the audience and the music. And that includes listening to full albums.

[How did record labels become part of these huge conglomerates?]

The record business starting in the late '60s became part of big business, and in particular it was a huge part of the growth of Warner Communication. Steve Ross recognized that the music business could throw off huge amounts of cash, and use the cash, after he acquired Atlantic and Elektra, and built up Warner Bros. Records and created what was then the biggest record company in the world, Warner Music Group. That helped fund the growth of the whole creation of the Warner Cable System, and helped fund all sorts of other businesses. And Warner Communications became a very influential corporation in the business world that had this stock that went way up, and he was considered one of the great geniuses.

Big corporations from that moment on were interested in record companies from the late '60s up until about five or six years ago. So you have Sony buying the CBS Music Group from CBS, and you have BMG buying the RCA record company from NBC. And, you know, it becomes one of the things on the multimedia, corporate merger agenda.

And that did change somewhat the environment that record companies worked in. Especially when they were part of public companies and had to focus on quarterly profit members, instead of the long-term growth of the assets.

The effect being?

Well the effect of looking at quarterly numbers is to think quarterly. And the cycle of a musical career doesn't happen in 90 days. You know, you have to record the record, and put it out, and then it has to be marketed, and then it sells, and if you have a new artist it may take two or three years for that to become valuable, even if it's a pretty fast-moving artist. Not two or three months.

So you end up with a dissonance between the real asset growth of developing artists and catalogues, and the short-term requirement to hit your numbers if you're going to keep your job in a public company. So that's caused a certain amount of tension in record companies. But it's never been perfect, I mean it's not like record companies in the '50s and '60s were these paragons of artistic virtue like the Medicis. They also had some real moral and business flaws to them.

But the public companies owning record companies combined with a slowdown and decline in sales, has definitely caused more short-term thinking and less long-term thinking. And that's hurt some artists.

Well and this word, this dread word now, synergy, which is what you were talking about a little while ago. What proved to be wrong, or at least ineffective, about synergy?

Well, there's nothing inherently [wrong] with synergy. The only problem with it is that it turns out to be much harder to achieve than is assumed on paper. Because people that run a movie company are culturally completely different from people who run a record company. And they're completely different from people who may run an Internet company, or a book company. So it's not easy to tie these things together.

The best executives are often iconoclastic, turf conscious, inflexible. But if they're delivering their quarterly numbers, it's hard for the CEO of the bigger company to push them around. And so it's not so easy to achieve connectivity between the music business and other entertainment media. It's not impossible -- you see some soundtracks, for example, coming for movies that add to the value of what Sony or Universal is doing. Where they have a successful movie company, for Warner a successful movie company, successful record company. There are flashes of it.

When I was in the Warner companies we were able to get good advertising rates into the magazines, and on Warner cable, and have a certain advantage in marketing some of the records. But in general these different pieces tend to function autonomously, and tend to be consuming jobs to be the CEO of one of these divisions. There's not a lot of time for collaboration between disparate businesses, even if they're part of the same corporation.

And that's especially true in terms of the music business, which is an idiosyncratic, unique business that produces executives who are not always the most collegial people in the world, despite the best of intentions of their masters running these jobs. ...

You talked very articulately about the nature of the music business being kid driven, teenager driven. How do you stay hooked into that? …

Well, first of all, the music business is not all about teenagers. There is an adult business. In fact, what I do now at Artemis, a lot of it is the adult business. And you see a phenomenon like Norah Jones album, which shows the size of the adult business.

But the teenage business is the most dynamic part of it, because even in addition to the number of teenagers that exist, they buy more CDs, more albums, go to more concerts, buy more t-shirts per person than any other age group.

And if you're in a position at a record company, there are different ways into it. First of all, because there are so few record companies and so many people wanting records, you've got hundreds of things coming at you. People often say, "Gee how do you find the artist?" But the artists find you, and the question is, how do you choose the artists?

It depends on the genre. In the hip-hop area, the producers are very important. So you'll see somebody like Dr. Dre produces Eminem, and then Eminem is involved with introducing 50 Cent. So the studio talent, songwriting, mixing, producing, is predominant in pop, R&B, and hip-hop.

The other thing about, about records is that it's extremely cheap to record a record and to press out the thousand CDs that get into the hands of dance clubs, and a local DJ. So there are little microcosms of test markets that can show you that there's an audience for thinking. …

For rock 'n' roll you can also look at the live performing career of a young artist. Most rock artists and some singer-songwriter types build up a live audience in clubs and small concert halls before they get their record deal. So you can gauge the response of an audience to what they're doing. If you see a thousand people show up in Buffalo, that's probably more impressive than an artist who has the same amount of exposure, who draws 80 people.

Finally, there's a few A&R people that really are visionary. I'm not one of them. But I look at somebody like Jason Flom at Lava Records who picked Kid Rock and picked Matchbox 20, and over the years has picked many many artists just based on his opinion of the music. There are a handful of those people. There's not enough of them to go around, and the rest of us have to kind of feel the audience response to things and make educated guesses, but there are a few brilliant A&R people that still exist. Even they are wrong most of the time, but they have a much higher batting average than the rest of us.

And a good batting average is what?

Oh, I think if you're right 20 percent of the time you're doing great. You know, in terms of picking new artists.

What's the business doing in the '90s?

Well the business during most of the '90s was great. It was still growing. You had a series of new genres exciting younger people. So-called grunge in the early '90s, led by Nirvana, Pearl Jam, Soundgarden, and then the explosion of hip-hop as a mass culture.

And it was continuing its growth, so-called double-digit growth, for the corporate sector up until probably '99 or 2000 when the Internet phenomenon took hold and the alternative ways of getting music, including free music, put a big dent in the sales growth, especially in certain genres.

Let's talk about technological innovation and the record business' response kind of across the board. I'm sure its apocryphal but I've read things where people say, when sheet music came along, people in the business were saying, "It's going to kill vaudeville or whatever it is."

I don't know about other business, but I think in the entertainment business in general, people who are successful tend to fear change and fear the unknown. I mean you read about people in movies that thought talkies weren't going to happen, and certainly many people in the movie business thought television was going to be the ruination of movies. Only the visionary Lew Wasserman understood that the idea was to get into the television business, not to fight it.

When videocassette recordings came along, the movie studios I think sued to stop the ability to tape off of television. Luckily for them they lost, because pre-recorded movies ended up becoming a gigantic income stream for the movie companies.

The music business is the same. It's nervous about change, and the more powerful people are the more they like the status quo. I was not around when sheet music first emerged, but I'm sure there were people that thought it would hurt vaudeville, and certainly there's been anxiety as new technologies come along. The CD was not embraced immediately and music television was not embraced immediately. Some companies made videos, many didn't.

In terms of dealing with the Internet, it's been a profound challenge for the music business. And unlike some of those other examples, the people that are concerned about it are not completely wrong. There is a problem if someone can get an album for free. And it's very hard to think of what you can do to get somebody to pay for something that they can easily get for free, especially if they can get it legally for free.

So it's a challenge, but there's a lot of harder challenges in the world and I still think that those of us in the music business are pretty lucky and you've got to figure it out. And I think there are going to be a number of strategies that will turn the business around, and I think we're already seeing some of them. ...

Did you hear people actually say [about CDs], "We've got to stop this, this is horrible"?

No, no. No, no, no. Nobody wanted to stop the CD. It took awhile for it to be clear how attractive it would be. So it became a resource question of, do you make a CD for a new artist or not? There was extra mastering costs, extra manufacturing costs. And in the early years, not every artist got a CD.

I remember when I managed Bonnie Raitt, her last album for Warner Brothers, she said, "I want a CD." They wouldn't make a CD of her record because she wasn't important enough to have a CD. A few years later, of course, CDs were starting becoming the dominant format.

But, again, if you're thinking short term, by definition you're not thinking long term. And short term it's better not to invest in new technology. It's better to spend as little money as possible and make as much as possible. But that can end up cutting off your nose to spite your face, in terms of how it affects your business next year or the year after. So the same syndrome that discourages long-term investment in artists also discourages long-term experimentation, in terms of new delivery systems, technology, and so forth, because of the enormous pressure to make short-term financial targets.

And when you have executives who themselves may not know how long they're going to keep their job, and they don't have the security that they're going to be there in five years, it's hard to motivate them to think five years out.

Some people have said to us, you know the great thing about the CD was a) there was this infusion of cash because people replicated their vinyl. On the other hand, it digitized music for the first time ever. It led, inevitably, to whatever is happening with the Internet by the end of this century.

Yeah, so? I'm not a great expert on technology, but certainly you have ups and downs in the life of a business, and the music business, the same as movies or books has ups and downs. Technology over the long haul has so far been a big help. But short term sometimes it's hurt.

The challenge right now for the music business, I think, is to add value to the product, give people a reason to buy it. When I was in high school, the album cover and the liner notes were part of the reason we bought records. So just to have gotten the vinyl without the packaging would've been a big disappointment to me. I think that we're going to see more thought going into packaging, maybe boxes that include a t-shirt or access to concerts, kind of a happy meal concept. McDonald's sold hamburgers in part by giving away five cent plastic toys.

I think you're going to have to add value to the product to make it unique. Even if a piece of it can easily be replicated digitally, the total statement of the artist will be harder to replicate, or in some instances impossible. That's what I think you need to do. I think people still love artists. But if you can get exactly the same thing for free, and there's virtually no enforcement of it, you know, people are going to take it for free.

It's mostly carrot, a little bit of stick. I don't think is the end of the world. My company, Artemis, is not a member of the RIAA. We haven't sued any of the people. But I sympathize with the theory that the big companies have to try to create some legality in the protection of the copyright. I don't envy the position of the people at those companies, trying to figure all this out over the last few years, although it hasn't been a strategy that I've used at Artemis.

Were you ever in a room in the '90s, late '90s, where somebody said, "Jesus, you know, this has all been digitized, there's all these computers, there is this thing called the Internet, and we better get out ahead of this"?

During the time I was in major companies, I never had a boss who asked me to think a couple years in advance. And rarely had a boss who asked me to think even one year in advance. Ninety percent of the conversations were about the next quarter. ...

So one day somebody woke up. When did Danny Goldberg wake up and say, "Jesus, God, the Internet and the piracy of burning CDs -- the music has gotten out of our control?"

This is the fifth year of Artemis. So I started Artemis in the middle of the year 2000 and we put out our first records at the end of 2000. So I left the big companies the end of '99. The end of '99, no one was worried about the Internet. They were just worried about having hits, and controlling costs.

But by 2000, when I'm trying to finance this company, the Internet boom is taking place and suddenly investors are very disinterested because we don't have a dot com in our name. So the first place I felt it was the investment community. And the rhetoric of the Internet businesses was very much, "There will be no records anymore, it's going to be like the water company or the electric company." And these extremely radical notions of what the new world was going to be like.

So in fairness to the record company people who didn't see the future, the Internet people also didn't see the future accurately. They had wildly exaggerated notions of how fast change was going to take place and what it would be. A lot of people at record companies would meet these Internet people who were saying it was all going to be like the electric company or the water, and it sounded like the ravings of lunatic, except these lunatics were making hundreds of millions of dollars.

So it was a strange time, but my concern was financing the company. And then we originally, and to this day, had a niche that focused substantially on an older audience. And so I don't think our particular business has been dramatically affected by the CD copying or downloading. We have to be conscious of it, we have to budget according to what records will sell today, when maybe they would've sold 15 or 20 percent more if they'd come out four or five years ago, certain titles. But as we're building a small company, we're in the business still of just trying to have hits and control our costs. Whereas the big companies, the macroeconomics are a much bigger deal in determining the day-to-day priorities of the executives there. ...

What prevents the majors from adding value to the product?

Nothing prevents them from it. I think it's a matter of priorities and time. There's been some experiments of packaging a DVD and a t-shirt and a CD together, that have gone pretty well. I think that the thing you're going to see a lot of in the next six to 12 months is a hybrid CD-DVD because, although DVDs also can be downloaded and copied, it's harder to do so. On the other hand the technology is there to include a DVD and a CD onto one disc. That the cost of producing visual material has go down with digital camcorders and digital editing. So I think that's going to be a common product. You're going to see more and more audio/visual products. You know, audio/visual albums.

I think that the one most logical connectivity, which would be between the concert business and the record business, is culturally a very hard connection to make. That's going to take more years. Because the touring business has been a completely separate business, with agents and managers involved in that who are not record company people, and it's just a different culture. To connect those two businesses is easy on paper but hard in practice.

The same type of issue that came into existence when people talked about synergy with multimedia companies. In the microcosm of the music business, even creating synergy within different parts of the music business still runs into the reality of human beings and their relationships and their turfs and all that stuff. Over the long haul I think you'll see more connectivity, because I think that it doesn't really make sense for a record company to market a t-shirt career, a concert career, a songwriting career, and a movie career, and only get revenue from selling records. Especially when you have a shrinking pie of records.

Ten years ago the value of masters was so great that people like David Geffen and Richard Branson would become billionaires just by selling masters. There was no reason to focus on these other, smaller businesses. But today you have the value of records going down, and the value of these other music businesses going up. It becomes more important to do it. But it's going to take many more years for those connections to be made, because there is a short-term status quo business, where someone's making plenty of money from a Bruce Springsteen concert tour. And Sony still has his records, and his catalogue sells well enough, and there's not an urgent overnight need to try to fuse these square pegs into round holes.

Is a different artist emerging in the world you've just described? An artist who tours well, an artist who's attractive, an artist whose poster is something that they really want, and the music becomes one of five things the artist does?

I'm not sure that the business model is what drives the development of artists. I think the business models encouraged certain type of celebrities and certain type of success stories, but the big artistic trend, the great lasting artists, I don't think are produced by technology. I think they're produced by psychological and spiritual issues combined in the audience, combined with the occasional emergence of genius in artists. I don't think Bob Dylan's career was the product of technology, I think it was the product of a connection between art and an audience. I don't think Kurt Cobain's career was the product of technology.

I mean hip-hop was helped in part by recording technology, the phenomenon of sampling. And multi-track recording was required for hip-hop to then emerge as an art form. But those technical things have been around for quite awhile before hip-hop emerged. And hip-hop was really more sociological to me than technological, in terms of its emergence. It had to do with the post-civil rights generation really integrating pop culture in the generation after they had had legal integration. And I don't think that had much to do with technology, it had more to do with sociology.

A lot of people say Bob Dylan could not, would not exist today, in the current economic record business climate.

Oh, I completely disagree with the idea that Bob Dylan wouldn't make it today. Bob Dylan was going to make it whenever he came along. Not only was he a genius, he wanted to make it. He was an astute person at understanding what the trends were at the time. It was no accident that he wrote political songs when political songs were in vogue, and so forth.

And there are all sorts of new artists that emerge today, not all of them on the first albums. I believe that Bob Dylan would've become an important artist in any time that he emerges.

So you really disagree with this idea that there's this kind of disposable impulse in the business where, you know, you get your 12 minutes, you didn't hit it, or because of Clear Channel you don't get on the playlist, you're toast. It's not really true?

I'm not a pessimist. I think that it is a tough environment compared to the mid-'70s, or the mid-'80s, or the mid-'90s, in terms of the economic conditions of the business. But a good economy doesn't always make for good art, and a bad economy doesn't always make for bad art. Art has its own impulses and life. In fact, hard times often produce some of the greatest art.

I think that there's all sorts of counter-examples when people talk about artists not having a long-term career. I mean Dave Matthews has had an amazing career. It's over a decade old. Dr. Dre has had an amazing career. Snoop Dog has had an amazing career -- 10, 12, 15 years. I mean the Beatles only were together for seven or eight years. …

I think that great artists are going to find an audience regardless of what the media is and regardless of what the big record companies are. There's still enough oxygen in the society to nourish certain kinds of geniuses. The Bob Dylan of the future will somehow find an audience in this era.

And the idea that, for the record business at least, not artistically, but for the record business at least, that this the perfect storm moment, that it's all going to sink?

Well I think that the perfect storm pessimism theory in the record business had a lot more traction in the middle of 2003 than it does in the middle of 2004. I think there was a certain schadenfreude that a lot of people had, who were jealous of all of those of us who got backstage and got free records all these years, and had good expense accounts, where there's a little bit of premature glee on the part of some people in the media thinking, "Oh, this is over now."

Against all expectations, the first couple of years of 2004 sales are actually up from a year ago. Certainly there seems to be some stabilization of sales. There are certain genres, such as those to the older audience, that are, that are doing just fine. You look at a Norah Jones phenomenon and all that.

There's no question that record companies are smaller than they were a few years ago, and they should be. Not only is there not as much money in the system, but technological changes have also meant that you don't need as many people. All these mergers now, you suddenly have 14 retail chains that represent 90 percent of the sales, and it used to be maybe 80 or 90 retailers to reach that same audience.

And for better for worse, you do have centralization of radio station ownership. So it's not so clear that you need 25 people around the country to talk to individual stations. The salaries definitely are down for many people, compared to when the business was booming. That's true of any business.

But the business has not disappeared. And the music as whole in fact is doing fine. MTV's ratings are the highest they've ever been. The Grammys ratings were up 12 percent from 2004 to 2003. The concert business in 2003 was the best year it ever had. And CD sales have stabilized.

So I think there's a lot of individuals who are going to fall off the horse, and who may not be able to keep our careers at the same level as they were at the high point, but the overall business is going to last for many years into the future because there's musicians making interesting music and there's a huge new generation of people my kids age who love it.

And kids will pay for music when they have to. They're not going to pay for it when they don't have to. But that's why concert business is good and why t-shirt sales are fine, and so forth.

I've talked to one set of artists and one record guy who said the fact that there is Clear Channel, Cox, and Infinity, the fact that there's Wal-Mart and Best Buy -- [these] are the thinnest funnel for artistic information to go through. The lyrics have to be different, the economics are different. I mean Best Buy and Wal-Mart, what that's all about is foot traffic to get into the store, to go buy appliances. It's not about artistic delivery of important and [valuable] political information by artists -- Bob Dylans, nascent Bob Dylans. Answer?

The record business, yeah, it is a captive, to a certain degree, of other bigger businesses. And Best Buy's big business is not selling music, it's selling high-cost electronic appliances, big screen TVs and so forth. And yet they are one of the biggest retailers, if not the biggest retailer, of recorded music.

Clear Channel's in the radio business. They're in the business of getting ratings, and dealing with the government, having to do with regulation, and yet they own the most radio stations, which is a big exposure medium. So we do have to navigate through these gigantic other businesses to do our business, and we are affected in part by those trends.

But I think it was always very difficult. Again, in the '60s, which is the golden age, you only have three TV networks. Now you've got cable at least, you've got MTV. There was no other [televised music broadcast then]. The Ed Sullivan Show, that was it. You got on The Ed Sullivan Show or you didn't. There were two radio stations in New York for all formats. WMCA and WABC, and it was Top 40, and that was it. …

And so it's not like that was such a great time in terms of diverse art. Now at least you have more media, and what happens is the audience wants certain things. And if you don't get it through the mass media, the audience creates an alternative media. That's where Rolling Stone came from, was that the big magazines weren't covering this rock culture so Jann Wenner recognizes the audience and he creates Rolling Stone.

Hip-hop was not endorsed by any of the big radio stations, by MTV, or by the big record companies. They all hated it for the first 10 years of hip-hop. So hip-hop emerges from clubs, from street promotion, from underground media that those of us who weren't in it couldn't even quantify and suddenly becomes over the course of years so big that then MTV has "Yo! MTV Raps." Then suddenly there's a Hot 97. Then the major labels start hiring people from Tommy Boy and from Def Jam, and from all these other labels, and bringing them in house. But the business was created despite all of that corporate resistance to the genre.

So I have to believe that if Best Buy and Wal-Mart don't like a certain genre, a certain kind of lyrics, and if the public there's a public that likes it, there'll be ways of finding them. It's just not that hard. Technology is a two-edged sword. It has created these centralizations, but it also creates the ability to easily make CDs, to easily do mail-order through Internet. The Internet is a plus, you know, in finding audiences that are underserved.

And if you have to make your numbers at Best Buy, you have to make your numbers at Fox television, or at MTV, you're tending to look at what's popular. And as much as you may tell those congressmen that you're going to change the morality, guess what, Clear Channel dropped Howard Stern, Infinity kept him, and behind closed doors the people at Infinity are giving each other high fives and the people at Clear Channel are saying, "What do we do to get the ratings that Howard Stern used to get?"

What is the idea behind Artemis? Why did you create it?

The idea behind Artemis was that with the centralization of the major companies there was room for a mid-sized company in the tradition of what I had observed in the '70s and '80s, companies like A&M, Island, Chrysalis. Very profitable businesses and had a certain distinctive culture because of their independence and smaller size. And as those all got bought up by the majors, as did Virgin, it seemed to me that there was room for a company like that. And I was lucky enough to be able to find the financing to start it.

What I wanted to do was to try to go after artists that the majors did not want, because I didn't want to get into the bidding wars that they get in to, because we were an independent company and didn't have the catalogue of old recordings that could pay our rent and phone bills. ...

We're trying to focus in a strategic way on things that the majors don't want, which sometimes is very interesting art, and sometimes isn't. But I'm quite pleased overall with what we've done our first few years, and I think there's room for a company like ours. Where we're focusing on genres such as classical, we've bought the Vanguard Classics catalogue, and by reintroducing that we've doubled what it was doing in the last few years of its business.

I think there's a lot of independent companies, and artists that can be aggregated into a mid-sized company and maybe could fill the role that in the past was filled by companies that now are divisions of majors. There's been a huge contraction of the number of labels. Even DreamWorks, which was the great tiffany independent label the last five years, has now been bought by Universal.

And so if you look at A&M, Atlantic, Elektra, Chrysalis, Island, Motown. These were all independent labels, and now they're part of big labels. And I understand why the big labels did that, but I also think it creates an opportunity for a few new independent labels to carve out the kind of business -- and culturally it's kind of fun because you can make a little bit more of a precise statement at a mid-sized company than at a supermarket.

When all the others have been absorbed, when Island, Def Jam, Chrysalis, Motown, DreamWorks go inside, what happens to them?

Oh I think the culture of a company when it's bought by a major changes. There are some very brilliant, talented people inside the majors. I mean Lyor Cohen at Warner Music, Jimmy Iovine at Interscope, are people that are entrepreneurial-minded and real artist people. And Clive Davis, despite the fact that he spent his life in big companies is somebody who picks songs, and picks artists, and has a very personal vision. So, it's still about individual human beings running the companies, not the structure itself. But the structure itself of the bigger companies demands shorter-term thinking, and quarterly profits.

In an independent company you're trying to build an asset. Your incentive is to look three to five years out. There's a certain type of music that you're going to focus on that would be ignored by the majors. That's always been us. And that's why with all the consolidation the independent sector is still 20 percent. All the consolidation has been among majors, but it has not reduced the independent sector. Because a certain kind of music just isn't going to originally be nourished and inculcated by companies that think about the next quarter. ...

When I go out, and I talk to lots of artists, they complain about the fact that they're circus performers in the circus has been disbanded. Labels are a thousand artists now, they got lost all the time, they're making no money, there's no middle class rockers, that if they're lucky they make $80,000 dollars a year. There's just nothing in it anymore, that the art of the music business, and commerce of the music business, where the artist have gone away. [What do] you say?

I don't think the music business was ever available to everyone who dreamed of being in it. Not every kid who dreams of being on the Lakers is going to be on the Lakers, and not every kid who dreams of being a hip-hop star or a great singer, is going to make it. These are professions that have a lot of aspirational people who want to get into it and they can't all get into it. In the movie A Star Is Born the woman gets to Hollywood and they say, you know, only one out of a million make it in Hollywood. And she says, "But I might be that one." But that means 990,000 and so forth didn't make it. It's always been that way. ...

[Describe recoupment.]

There's a tension that I think is always going to be there, between how to motivate someone to invest in something, and what return they're supposed to get later on. So at the beginning of any artist's career they'll say, "Gee just let me make a record. You know, let me pay my rent." And then they want you to publicize it, they want you to manufacture it, so there's an investment required.

Well, it's not so easy to get people that are investing in records. Little easier to get them to invest in oceanfront real estate or some other things a little more reliable. And so the people who take those risks, you know, want a return. And the return means that when there's success, they want a lot of the money.

Now sometimes you have a situation where you have excess greed, and venality on the part of the record company, who literally keep the lion's share of the money from success, and the artist really doesn't get very much if anything. And that's immoral, and many times illegal.

Other times you have artists who, the minute they do well, say, "Why should you make anything? You know, now I'm a star." And you have to say, "No, no, we invested a couple of million dollars last year. We have a right to make money for the next several years without which we never would've invested the money that got you where you are today."

So there's hundreds of different variations of the relationship between artists and labels. And there are some egregious examples of artists who've really been screwed, and there are many examples of artists who made a lot of money, and also other people who worked with them who made a lot of money, and everything in between. So I wouldn't generalize about it.

I would say generally it's better for artists today than it was 30 or 40 years ago, because there's a much more educated class of lawyers and accountants and advisers, and the artists themselves have read up about the business. But there's still some terrible, terrible examples. But I think that the biggest struggle is to become successful. …

Tell me about David Crosby -- there's another Woodstock denizen who's still standing after all these years.

I think David Crosby's one of the most amazing careers of anybody in my lifetime. His first job was in The Byrds. I recently got the Monterrey Pop DVD and as bonus footage it had four Byrds songs with a young David Crosby singing "Eight Miles High" and "So You Wanna Be A Rock 'n' Roll Star." And then he forms Crosby, Stills, & Nash. They become the biggest group in America at that time, and do their third or second gig at Woodstock festival and become one of the key emblematic moments of that.

They have many more hits. He then goes into this tailspin of self-destruction and drug use and many people thought he was going to die, and he's jailed. And then through some cosmic impulse he decided not to die. And gets healthy, and gets clean, and, has a son, Jango, and apparently is the biological father of Melissa Etheridge's child. And continues to make great music, and it's really 40 years of creativity and of having a lot to do with the culture. He's been part of countless benefit concerts, political activist, and is really one of the great creative people of the last century. ...

Are there new careers for guys like Crosby and Jackson Browne and all that? Is there a new impulse in this society, as we baby boomers start looking for things to buy again, or download again? Is it going to give new life to these guys?

I think certain artists can have very long careers. I think Jackson Browne and Crosby are among those who can have very long careers, because number one, they're really brilliant people. They're not just doing their old songs, they're also creating new material that's really important, and relevant, and touches people. And those particular people were part of people's lives and I think there's a large audience that's always going to listen to a new Jackson Browne record and Crosby or Crosby/Nash. …

There are these ebbs and flows in business trends, there are ebbs and flows in artist's creative output, but I do think that for the so-called baby-boom generation bonded to music in a very intense way, and certain artists who initiated their careers during the '60s and '70s, are always going to be welcome in the lives of my generation. Not only now but for the next 20 or 30 years until they send us all off. ...

There's a band we're a following called Velvet Revolver, which is a hybrid of some guys from Guns & Roses--

Yeah Scott Weiland, yeah.

Does the world need a genetically engineered new rock 'n' roll band?

Well I signed Stone Temple Pilots when I was at Atlantic, and I've been a friend of Scott Weiland's ever since then, and I'm a big Scott Weiland fan. I don't know the other members of Velvet Revolver, but there is no more authentic and personal artist that I've ever met than Scott Weiland. He is really in his own world. He really comes from the heart in everything he does, and if he believes in this band I believe in it.

Will it sell records?

Well, it'll depend on the record. I haven't heard the record. If it's a really good record, if it touches and inspires people, it'll sell. If it doesn't, it won't. It's going to get played on the radio, it's going to get press, it's going to get marketed. So it's going to depend on whether or not the core audience for it, which is rock fans, like it or not. And without having heard it I just don't know.

But I would never bet against Scott Weiland. He's never been the favorite of critics, he's always been sort of in his own path, but his talent for reaching the rock public has been quite extraordinary over the years. So I would never bet against Scott Weiland, but I don't know the details -- I haven't heard the record.

So as a business decision though, if you're Clive [Davis] and you've never really had a rock 'n' roll success, in that way, and you've got this band there's a bidding war going on out there in the business, do you make that bet?

Well first of all my wife is one of the lawyers for Velvet Revolver, so I think it was a brilliant deal on everybody's part. Secondly, Scott Weiland's my friend so I think it's a brilliant deal on everybody's part. So that's all I'm going to say on the matter.

And when the world says, as the world has to us, "Wait, 20-year-olds make rock 'n' roll music. Not 40-year-old's who want another bite of the apple."

You know, it's not a business where people always wish their competitors well. I think that there's a lot of bickering and jealousy that goes on in the business, but all that matters is what the public likes. There's all sorts of people that have done very well, that the so-called smart people in the business bet against. And there are people that everybody thought was going to do well that didn't do well. All that matters is how the public feels about the record. It doesn't matter at all what people in the business think about it.

We're following a young woman named Sarah Hudson, Mark Hudson's daughter. S-Curve is the label. David SimonÈ and others that are managing her have manufactured slightly her character, a singer-songwriter. It'll be very pop. ... You haven't heard the record I'm not asking you to comment on that. What are Sarah's chances, what's ahead for her, what's likely?

Well again, you're dealing with people I know, personally. Steve Greenberg who runs S-Curve is a very close friend of mine. … I think that Greenberg has a kind of old-fashioned notion of pop music that requires an acute talent on the part of the executive.

And I think he has that talent. Hanson's "Mmmbop" wouldn't have happened without Steve Greenberg. "Who Let The Dogs Out" would've bombed and wouldn't have happened without Steve Greenberg. These are two gigantic hits that he A&R'ed, and I wouldn't bet against him. If he's excited about Sarah Hudson, you know, I'm awfully interested in hearing the Sarah Hudson album.

Is that generally going to be the case? You've just articulated a pedigree of a certain kind of thing. Is that how this business works?

There are very few people that have the talent to pull together singers and artists. Clive Davis clearly has that talent and he's proved it again and again and again over the years. And Steve Greenberg I think has demonstrated that talent. Not that he's always right, everybody has strike outs who also hits home runs, and he's no exception. But he's been involved with two major, major hits in the past, of doing that. He signed this Joss Stone. He was smart enough to pick up Fountains of Wayne. And he's one of the people who would be the kind of person, with an artist like Sarah Hudson, who could be very successful.

And I've good heard things about Sarah Hudson. Again, I haven't heard the finished record, but I think that people in the business are going to have a lot of respect for the record because of who's involved with it, and will give it a listen. After listening to it, the record has to stand on its own two feet and it will be based on the record itself. But the combination of people involved, particularly Greenberg, is going to make the radio programmers, the people at MTV, and the people in the press listen to the record carefully when they first receive it. …

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posted may 27, 2004

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