Universal Music CEO Still Doesn't Believe In The Promotional Value Of Music

from the how-does-this-guy-stay-in-charge? dept

A year ago, we were fairly shocked at an interview with Universal Music CEO Doug Morris. The guy gleefully explained how clueless he was about technology, and said that he didn't even know enough to hire people who could properly guide him to understanding how technology was impacting the music industry. Furthermore, he displayed an ignorance of basic economics and basic finance at the same time by insisting that any sort of promotion that might pay back tenfold at a later date was bad business because it meant someone was "taking advantage of you." Yes, apparently, the idea of spending a dollar today to make back ten next year makes no sense to the CEO of a large company. We wondered how Universal's shareholders could possibly let someone so gleefully clueless continue to run the company.

Apparently, he's still at it, and still not afraid to open his mouth and expose his ignorance. In Morris' latest interview he insists that the company doesn't believe in promotions, but wants to get paid for every single use of its music:

"We don't look at anything as promotion. Take a look at MTV. It turned out to be a disaster for us. We sold some records, but they built this huge company and we gave them our (music) for nothing, and what did we get?"

If this sounds familiar, it's probably because fellow big record label boss, Edgar Bronfman recently used the same fallacious logic in claiming that video games like Guitar Hero and Rock Band were getting all the benefits from Warner Music's bands, without giving anything in return. In both cases, you have content providers who are significantly overvaluing the content, while significantly undervaluing the way that content is used. In this case, notice that Morris is admitting that MTV actually did help Universal sell more records. So what's the "disaster"? It's that another company, MTV, also got big. As we recently explained, this psychological phenomenon is seen throughout the big record labels. They care less about their own absolute success than they do about their relative success compared to others. They would prefer that they actually bring in less money for shareholders, as long as it means other companies do even worse.

I guess I can understand that, as a record label boss, you might overvalue the content, but to insist that there's no value in promotions -- even when there's increasing economic evidence that such promotions can greatly expand your market (at a time when your old strategy has resulted in a rapidly diminishing market) screams of corporate malfeasance. It makes you wonder what Universal Music's parent company, Vivendi is thinking. Are Morris' bosses just so impressed with the fact that Morris once wrote the song "Sweet Talk Guy" that they let him sweet talk them into letting him continue to run the company into the ground?

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Universal Music's CEO Gleefully Explains How Clueless He Is

from the truth-in-advertising dept

Of all the major record labels out there, it's been Universal Music, the largest record label out there, that has been the most vocal about its contempt for changes in the market place. In the past, we've mentioned that Universal Music CEO Doug Morris appears to be focused on squeezing every immediate dime out of anyone he can, even if it means destroying the company's long-term prospects. From an outsider's perspective, it really appeared as though he believed that giving up a dollar today was bad business, even if it meant the ability to get $100 in the future. However, it turns out that's not just the outsider's perspective. That's Doug Morris' own perspective as well.

In a stunning interview that should have any stockholders of Universal Music demanding a CEO change, Doug Morris happily reveals his ignorance of all things having to do with business, business models, strategy, economics and technology. It's hard to know where to start. When asked about giving up money now to be able to make more later, Morris tells the interviewer that if you do that, then "someone, somewhere, is taking advantage of you." This is the guy in charge of charting Universal Music's future? To further underscore his inability to think long term, Morris gets angry when discussing the fact that his job isn't easy any more, discussing how great it was when he could just sit back, not do anything strategic and just let he money pour in from high-margin CDs. Sure, that must have been nice, but your job as a CEO is to be able to see those changes ahead of time and set a course for the company to navigate them.

Not so, according to Morris. When asked why the recording industry was unable to see the change, Morris says that there was nothing he or anyone could have done (!!!):

"There's no one in the record company that's a technologist," Morris explains. "That's a misconception writers make all the time, that the record industry missed this. They didn't. They just didn't know what to do. It's like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?"

Personally, I would hire a vet. But to Morris, even that wasn't an option. "We didn't know who to hire," he says, becoming more agitated. "I wouldn't be able to recognize a good technology person -- anyone with a good bullshit story would have gotten past me." Morris' almost willful cluelessness is telling. "He wasn't prepared for a business that was going to be so totally disrupted by technology," says a longtime industry insider who has worked with Morris. "He just doesn't have that kind of mind."

So why is it that Universal's shareholders would allow a CEO who gleefully admits he doesn't like to think strategically about the long-term, doesn't understand the forces that are changing the fundamental business he's in and doesn't even know enough to hire people who can help tell him what's going on?

To make matters even worse, Morris is so clueless that he chooses the worst possible analogy to explain his position. Lots of entertainment industry execs have thrown up their hands and ignorantly stated that "you can't make money from free." That's wrong, of course, but Morris takes it one step further up the ridiculous scale, with the following example: "If you had Coca-Cola coming through the faucet in your kitchen, how much would you be willing to pay for Coca-Cola? There you go. That's what happened to the record business." Hmm... and what is coming out of your faucet in your kitchen? That's right... water. And how much are people willing to pay for water? That's right, billions. In fact, it's a larger market than (oops) recorded music. Can someone please explain how Morris keeps his job?

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