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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  • identicon
    pete, 14 Oct 2008 @ 3:38pm

    Just one thing to say.........

    MORON!!!

    reply to this | link to this | view in chronology ]

  • identicon
    Bill W, 14 Oct 2008 @ 3:44pm

    What are they teaching these days?

    Really! What does Harvard Business School, Wharton, or any of the other MBA factories teach? I'm seriously posing this question because I don't know. But it seems to me that a change in attitude HAS to start there. Of course, it takes a LONG time for a new MBA to make it to CEO but we've GOT to start somewhere, don't we?

    reply to this | link to this | view in chronology ]

  • identicon
    Eeqmcsq, 14 Oct 2008 @ 4:02pm

    Another quote

    "But when you see all the stores close and you lose half your employees and you can't sign bands to record them because people are stealing, we do things to try and stop it."

    Man, talk about trying to fight the tides of change with an iron fist. That kind of attitude will only alienate potential customers.

    reply to this | link to this | view in chronology ]

  • identicon
    Sean B, 14 Oct 2008 @ 4:02pm

    too much greed

    CEO's are always looking at the bottom line of the company and how to improve their money flow. The problem is, especially with the MTV comment, that they often look at money being made around them and think they can make that money. The truth is they can't.

    Unless Universal wants to start their own MTV, or make their own Guitar Hero games, then the fact that someone else makes money by licensing their music isn't their business. If they don't want that then don't license the music and make the money on the license...

    To ask for more money from companies like Guitar Hero, would be like Nikola Tesla coming back from the grave to ask for money from Sony because their TV set uses his AC power.

    It's plain stupidity.

    reply to this | link to this | view in chronology ]

    • icon
      Mike (profile), 14 Oct 2008 @ 4:20pm

      Re: too much greed

      CEO's are always looking at the bottom line of the company and how to improve their money flow.

      But the very *point* here is that he's *not* actually looking at the bottom line. He seems to have no understanding of the future value of money vs. the present value of money. I mean, this is basic finance 101 stuff. If you can invest a dollar today (or, not accept a dollar today) in order to earn $10 tomorrow, that's usually a pretty good bet -- and VERY GOOD for the bottom line.

      And Morris is saying that it's bad, because even if he earns $10 tomorrow, someone else might earn $15. So he'd rather take $1 today vs. $10 tomorrow if the $10 tomorrow also means that some (non-competitive, but complementary) company makes $15.

      That's not greed. That's not focused on the bottom line. That's just stupid.

      reply to this | link to this | view in chronology ]

    • identicon
      Serbia's Ambassador, 14 Oct 2008 @ 5:51pm

      Re: too much greed

      "would be like Nikola Tesla coming back from the grave to ask for money from Sony because their TV set uses his AC power"

      Great idea! Serbia should ask for money from Sony and Verizon Wireless soon..

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 14 Oct 2008 @ 4:21pm

    It is easy to pick apart this problem and understand it. You, and I, and all of us here, know -- we can FEEL IT IN OUR GUTS -- that we enjoy vastly more value from a richer array of music and experiences thanks to MTV, guitar hero, and the like.

    But the music industry CEOs havent figured out how to capture any of that value for themselves.

    So, they want to destroy it. Scorched earth.

    They are just assholes who don't know when to stop. Maybe they can profit more, or maybe they simply can't and theres no way short of selling more t-shirts for them ever to. So what? That doesnt mean you get to burn it all down.

    Also, regarding t-shirts, today I wore my Mercenary t-shirt which I bought because I pirated two of their cds. I'm not likely to buy cds I already have pirated.

    reply to this | link to this | view in chronology ]

  • identicon
    Lucretious, 14 Oct 2008 @ 6:02pm

    They made music vids as a promotional vehicle and MTV happened to build a business around that. But because MTV was smart enough to make money from it, it then became a "disaster" for Universal who lost no money per se?

    Am I understanding the gist of it?

    I am speechless.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 14 Oct 2008 @ 7:12pm

    how about the promotional boot in the ass?

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 14 Oct 2008 @ 10:02pm

    It boils down to value

    Doug Morris sees WAY more value in his product than just about everyone else. Doug does not see that MTV added value by adding features like VIDEO and in home delivery.

    reply to this | link to this | view in chronology ]

  • icon
    Nick (profile), 14 Oct 2008 @ 10:29pm

    How about the delivery truck companies that made money from delivering CDs? How about the CD duplicating plants that make money no matter how many CDs actual sell? How about the paper companies that sell to music magazines that write about music? What about the employee who works and earns a larger amount of money for the company that what he or she is getting paid? They need to stop being jealous of the business they are not in.

    I heard the same stupid argument by a person considering hiring a PR company. The guy was actual concerned about the PR company gaining notoriety in the PR community because of the good work that they might do for him as a client, and that this might somehow take away from the services that he would actually be obtaining.

    reply to this | link to this | view in chronology ]

  • identicon
    Jake, 14 Oct 2008 @ 11:07pm

    I think Morris just gets a kick out of screwing people over, and considers any financial outlay towards his... hobby, vocation or however the hell he thinks of it, as an acceptable price to pay.

    reply to this | link to this | view in chronology ]

  • identicon
    Dave, 15 Oct 2008 @ 6:04am

    MAybe he's not so wrong on this one?

    He's saying that they created MTV by creating a huge industry of music videos and that he didn't see a huge boost in his revenue. He got a short term continuance of sales levels relative to the population growth.

    Now MTV is a giant that doesn't play music anymore, only "hip" TV shows. So, he invested huge amounts to help create a media giant that no longer helps him in any way. Hundreds of millions of dollars creating a music video production system that did no more than radio promotion did previous to MTV's existence.

    Not only did they give MTV their product for free, they invested millions to do so. Now MTV is worthless to them and worth millions to others. All on the backs of the music production companies.

    I'm no fan of Universal or any of the other dying giants. I'm just saying that he may not be stupid here and you're all to fast to kick him as a convenient target.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Oct 2008 @ 6:12am

      Re: MAybe he's not so wrong on this one?

      Gee. I can't imagine ANYONE discovered new music on MTV back in the day. I'm sure that none of the bands featured on MTV benefitted from being there, and I'm equally sure that those same bands would have been just as popular if there never was MTV. After all, MTV didn't add any value. In fact, that MTV doesn't even PLAY music any more and it's still fairly popular proves that... uhm, it proves... actually, I guess it proves that the appeal of MTV is something OTHER than the music. Maybe, you know, that whole edgy attitude thing that appeals to a certain generational age bracket. Maybe MTV would have been popular even without music videos back then, but the addition of music content made it easier for MTV to draw an audience and at the same time gave extra exposure to artists who wouldn't have had it otherwise.

      Just a thought.

      reply to this | link to this | view in chronology ]

      • identicon
        Dave, 15 Oct 2008 @ 7:18am

        Re: Re: MAybe he's not so wrong on this one?

        In the beginning, MTV played almost exclusively video. It was Music TeleVision. Over the years it added other content and took heat for it as it's mandate was music, not entertainment.

        A lot of people found new artists that way but only top 40 type music. Alternative artists (and R&B/Urban) were never played at the beginning.

        reply to this | link to this | view in chronology ]

    • icon
      PaulT (profile), 15 Oct 2008 @ 3:56pm

      Re: MAybe he's not so wrong on this one?

      "Not only did they give MTV their product for free, they invested millions to do so. Now MTV is worthless to them and worth millions to others. All on the backs of the music production companies."

      That argument only holds water if you think that the labels received no benefit in return, which is an utterly ridiculous assumption. MTV revolutionised the music industry and, along with the introduction of the CD, ushered in a wave of new music that steadily increased sales for nearly 2 decades. Without MTV would, say, Michael Jackson, Duran Duran, Madonna or any other artist who defined that era have sold anywhere near as many albums? I doubt it. Whether using the format to generate controversy, create art or simply fill time, the music industry absolutely benefited for many years with even the fashions shown in the videos being copied by the same teenagers who bought the albums.

      Now that MTV doesn't really play music any more, you have to ask the right question: why is that? Is it because MTV made so much money they no longer depended on the music industry? Or is it simply that the output of the record labels is no longer relevant to their target audience. I suspect the second answer is closer to the truth, and for that they only have themselves to blame.

      To put it another way: MTV started to decline thanks to the cookie-cutter and highly unimaginative content of 90% of the music videos. They were then forced to take control and concentrate on the original content (animation, reality shows) that were overtaking the music in the ratings. Again, taking that view, it's not hard to see why the CEOs of the music companies should take the blame, especially given their later mishandling of everything digital that's led to further channels being made profitable without their help (and often despite their sabotage efforts), from video games to digital distribution.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Oct 2008 @ 7:03am

    Future Profits are meaningless to most large corp CEOs

    "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"

    It makes very little sense to any CEO today, since Enron anyway. Becuase they can no longer record the profits of the deal, until they actually realize them, they are no longer interested in anything that will not improve thier business (and therefore thier bonus) THIS quarter. Who the hell knows where they will be next year, come on guys you understand the modern american coporate dynamic better then that.

    reply to this | link to this | view in chronology ]

  • identicon
    J-Digital, 15 Oct 2008 @ 7:35am

    The problem with writers on these topics is that they would like other people to subscribe to a business model they themselves would never engage in. Major record companies are in the business of generating revenue from the ownership of copyrights. This is a constitutional protection. Yes record companies did benefit from the exposure MTV lent them but recognize his point. They received free content and then charged someone else to advertise around it.

    Contrary to popular belief artists are also in this business. The same individuals clamoring for changes in the business would bark any threat to their livelihood as well. You would be hard pressed to argue otherwise.

    If things should be free simply because a group people want it to be free then why not allow American Express to advertise on Techdirt for free? I think Wired Magazine should be free but they won't allow me to go the news stand and take a copy and walk away without being compensated? Nor would any publication that criticizes the music industry for protecting its revenue streams allow a retailer or distributor to simply benefit from their content without being compensated.

    These are businesses and not charitable organizations.
    Does the music industry need to evolve? Yes, but there is some logic to what the man saying.

    reply to this | link to this | view in chronology ]

    • icon
      PaulT (profile), 15 Oct 2008 @ 3:40pm

      Re:

      Wow, that's a load of crap isn't it?

      No offence, but I was wondering when the usual "why don't Techdirt give things away for free?" (they do) and "it'll never work for independent artists" (read about 500 posts on this blog proving they can) crowd would turn up.

      "They received free content and then charged someone else to advertise around it. "

      So, you expect them to pay the record companies for the rights to show the music, then let people advertise on the channel for free? How would the bills get paid? They wouldn't, of course, because TV stations at that time depended completely on advertising. Face it, the only problem here is that MTV came up with the business model first then reaped the rewards, just as every other innovation of the last 30 years - creatively or otherwise - seems to have happened without the direct input of the labels.

      As for the artists, they have many more options than they had when MTV was founded, or even a few years ago. It's down to them to decide which way is best for them, and it's no longer the major labels for most.

      reply to this | link to this | view in chronology ]

  • identicon
    nipseyrussell, 15 Oct 2008 @ 10:13am

    dave what are you talking about "Alternative artists (and R&B/Urban) were never played at the beginning"
    back in the day 120 minutes and Yo MTV raps was what i spent the majority of my MTV-time on (add in headbangers ball and thats like 90% of my teenage tv-watching time)

    reply to this | link to this | view in chronology ]

  • identicon
    NYC, 15 Oct 2008 @ 10:38am

    I don't think Morris' approach has anything to do with MBAs or traditional management methods. His attitude strikes me as more 'street'-oriented, as in post-Depression Brooklyn style. As in, "There's six of us and only two pieces of bread. Your loss is my gain." In short, he's old and from a different generation. He's tough, stubborn and does not understand the concept of a win-win situation. He will not be around forever.

    reply to this | link to this | view in chronology ]

  • identicon
    John, 15 Oct 2008 @ 3:53pm

    Playing the devil's advocate

    Let's play devil's advocate for a minute.

    Let's assume that you're the CEO of Universal and a new video TV station is starting. You invest millions in it and your artists produce tons of music videos. It's all promotion and you don't charge for it because you know you'll make money when people see the artists and buy the music.

    Now, fast-forward 20 years and we have MTV, MTV2, MTV3, VH1, VH1 Classic, VH1, and so and so on. And what do they channels show?? Mindless, dumb "celebreality" TV shows with people who want to be stars, but whose only claim to fame is that they know how to get their own show.

    So, as a CEO who invested in a music channel (and who spent millions), how would you feel if the channel you supported no longer plays any music videos of any kind!

    That's like spending $1 today to get $5 tomorrow and nothing at all next year. In other words, don't invest in tomorrow: get the money now, while you can, because who knows what will change in 10 or 20 years.

    reply to this | link to this | view in chronology ]


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