From: Dave 戈德堡
Sent: Thursday, July 31, 2014 8:58 AM
To: Lynton, Michael [mailto:[电子邮件 protected]]
Subject: Re: Music strategy-confidential

As we discussed Saturday, I thought I would send you a longer email with my thoughts about the strategy, what the risks are with it and the reasons it hasn’t been 做 ne to date. I obviously 做 n’t have access to any internal data but I think Sony is close enough to WMG or EMI (where I have seen the data) to make reasonable assumptions.
If you still want to discuss this after you digest this, I am happy to find a time to come 做 wn to talk about it more. I think this amount of reinvention has rarely been 做 ne inside a public media company and it would be tough for Sony as a company to stomach the complaints from artists, employees and related parties (RIAA budget would be slashed, as an example). We would have to 真实ly decide if it was possible if you agreed with my thesis. I would also want to 做  a lot of actual work prior to implementing to validate the data behind the assumptions and understand the sequencing. I think it is a two-three year project to shrink the company 做 wn to the end state with a lot of noise in 那 period.
Core strategic assumptions:
Music is becoming a purely digital product. A digital-only recorded music company will be a much more profitable one after one-off restructuring costs.  It will have lower revenue and higher margins.  Its revenue will be very stable and grow with the overall digital music market growth.  It will be a much more valuable company with its revenue base solidly coming from subscription and ad revenue.  It will be valued like music publishing companies or cable channels, not like recorded music companies today.  Margins for recorded music should eventually be above 40% on 那 lower but growing revenue base.
Catalog provides 50% of the revenue and 200% of the profits of recorded music.  This has generally been the case for the other recorded music companies when the analysis was correctly 做 ne.  The correct analysis requires including reissues, live albums, greatest hits releases in 太阳2.  Catalog needs to be defined much more broadly to include all music 那 hasn't been created in the last 2 years - EMI used to call the Beatles releases “new music” even though they clearly weren't under a new album contract.  

In addition, streaming revenues tend to be more heavily weighted to 太阳2. Pandora and Spotify are probably 65% 太阳2 under this definition. Licensing and synch revenue are mostly 太阳2 as well. Therefore, if Sony Recorded Music (ex-Japan) is 做 ing $250MM in EBITDA today, 太阳2 is probably generating approximately $500 MM and the new release business, which is 98% of the headcount, is losing $250MM per year. The 太阳2 is also primarily generating this revenue off “deep” 太阳2 那 is 至少 5 years old or older. The great classics of pop music are stable earners, much like the consistent songs 那 generate most of the music publishing revenues.
With 太阳2 providing the base profits, new releases need to be cut back dramatically to the point where the new business either breaks even or loses a small amount of money (justified by the long term 太阳2 income stream of those songs). Thus, if the new release business is oriented towards building new deep 太阳2, it changes the entire process from trying to pick big hits to safely getting some good music out 那 has longevity. This will bias new releases to genres like rock and country 那 typically have had strong 太阳2. These also happen to be the genres 那 做 n’t have expensive producers so more music can be created for the same A&R 做 llars. 
The record company needs to act like a music publisher for new releases - putting up very little money but not trying to hold artists for long contract periods or to keep as much of the revenue.  Advances would be $50k with a 40% revenue share after the advance.  Losses in new releases are generally driven by expensive fixed headcount and built-in marketing costs for new releases 那 做 n’t pay off.  The new release business budget, employees and capital need to be ring-fenced from the 太阳2 so 那 it stands on its own with a Lifetime Value assessment of the capital deployed.  Most fixed headcount in new releases will need to be eliminated, artists will need to be paid quickly and transparently, deals will need to be simple and fair and 太阳2 replenishment is the only goal of the new release business. 
Artist contracts 那 have large fixed marketing costs will need to be restructured or sold off as there will no longer be headcount to 做  the work.  New releases will be tested on consumers before added money is spent to ensure 那 it isn’t wasted.  In short, the new release business will become like an independent label. 出版 and recorded music A&R should be combined to ensure 那 all recorded music releases had a combined publishing deal and 那 you can capture the publishing value from the 太阳2 you create.  Not all new publishing writers would be on recorded music contracts but all new recorded music contracts should be combined with publishing.
Physical distribution is going away - it 做 esn’t need to be eliminated prematurely but it needs to follow digital and not drive it.  The record company will want to milk the physical CD business but not worry about supporting retailers with credit to make quarterly numbers.  Jamming product into the channel needs to be eliminated and the digital business needs to be the priority.
Internationally, most local repertoire will probably have to be eliminated.  The record company will want to sell off the local repertoire or spin out the local labels and focus on English language repertoire globally, unless there is some country 那 has managed to be profitable on its local repertoire (i.e.Japan).  This is a huge part of the cost base with very little value.  Digital distributors 做  not need local new release labels to work with as they are all regional or global players.  International local publishing repertoire will need to be evaluated but much of 那 cost and infrastructure shouldn’t continue either.
Digital licensing strategy needs to change dramatically.  The record company and the publishing company need to understand the economics and the ecosystem of the DSPs and work to help them grow profitably but also to ensure 那 there are multiple providers.  Pandora should be incentivized to build a subscription business, Spotify to enter the radio space, new entrants to have an advantage in the beginning and much more international access to digital content.  
The simplest way to start would be to offer Pandora, Spotify, Google, 亚马孙 and others a new three year deal.  This would be a 10-15% premium over their expected payment for the 3 years but they would get unlimited use of the music during 那 period.  This would incent them to heavily invest in growing their user and revenue bases because they would see improved margins on each incremental sub.  Additionally, the record company would make licenses transparent and simple for all new entrants while removing the price setting constructs from on-demand subscription.  If Netflix wanted to pay 200 MM per year to give all of its 40MM subs a music subscription - 那 should be encouraged, not scoffed at.  The goal for digital is for subscription and ad based services to become the predominant means for people to access music.  These services need margin to attract capital to make the investment to grow their user bases.  This should help build more stable long-term revenue streams for both recorded music and publishing.
Publishing needs to extract itself from the tax of the PROs (ASCAP, BMI).  The technology is available today to enable direct licensing of public performances for radio and TV - if the costs of the PROs was shared equally between broadcasters and publishers, this could result in an incremental 7%-9% revenue increase to publishers on the same base of content.  In addition, record companies should be able to get a US performance right for analog radio by pushing hard to move as many listeners to digital radio as quickly as possible.
Headcount reductions will take time but after the restructuring period, it should be possible to run Recorded Music with a few hundred people and the same for publishing.  More investment will be needed in technology for royalties, reporting and licensing content and revenue will certainly come 做 wn on the recorded music side but the absolute and relative margin improvements should make up for it.
It should be easy to 做 uble margins without much change - Warner now has an 18% OIBDA margin on a lower revenue and publishing based compared to Sony’s 11%.  But the goal is to get to a 40% margin on the combined Sony Music business, albeit on lower revenue.  This should be a growth business 那 grows with the digital business and gets a substantial premium on its valuation because of the margin, the stability of the cash flow and the growth.  If the whole business had $587MM of OIBDA on $5.4 B of revenue last year, it should get to $1.6B of OIDBA on $4B of revenue in 3 years.  
This would be an almost 3X improvement in absolute earnings but would be a 4-5x increase in valuation because of the margins and the growth tied to digital.  The new business would be growing 10-20% annually with high margins.

戴夫·戈德堡(Dave 戈德堡)是Capitol Records(现为环球音乐集团的一部分)的前唱片行业主管,是早期数字音乐公司LAUNCH的联合创始人,在领导雅虎音乐时直言不讳地倡导MP3发行。最近,他领导SurveyMonkey,并与Facebook首席运营官Sheryl Sandberg结婚。戈德堡去年死于一场怪胎跑步机事故。


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      要好笑。人们真的认真对待这一点吗?他如何建议您创建未来太阳2收入而不投资新书目,以便将来有太阳2… Wow, just wow.

      这不是’天才的商业模式。但是,如果没有唱片公司投资发展新的艺术家,甚至出版商也将发现自己陷入了蛇吞噬的螺旋式下降’s own tail.

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  3. 保罗·瑞斯尼科夫

    我最近读了一个故事,关于唱片业的执行官(以及现任国会音乐集团董事长/首席执行官)史蒂夫·巴内特(Steve Barnett)在国会大厦的走廊上拆除了所有铂金牌匾和过去所有传奇人物(如甲壳虫)的照片记录。根据这份报告,原因是巴内特认为这代表了过去,辉煌的日子使公司无法有效地向未来充公,释放了明天的超级巨星。


    现在在这里’s one big problem with 那 计划: it isn’t sexy! That’就像出版,没人关心的业务的枯燥面,’就像在ASCAP之类的公司工作。像史蒂夫·巴内特(Steve Barnett)和露西安·格兰吉(Lucian Grainge)这样的人想要更性感的东西!

    是的,他们’re losing, but never underestimate the lure of a sexy business, and how it dramatically skews business 计划ning. It may be a big part of the story here.

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      • 保罗·瑞斯尼科夫

        Well then, let them 做 it! That might support 戈德堡’关键是,与破坏新行为相关的巨大成本是 ’为一个实际的生意值得。对于寡头的娱乐时间虚荣心?绝对是

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        @RobF。我觉得你’重新成为问题的核心。坦白说,我’我听过不多的时候听到过这种销售方式的不同版本。它是硅谷文化的标准组成部分。看起来,每当一家公司聘请昂贵的专家作为顾问来建议他们如何将其原有的实体业务转变为现代数字领导者时,就会出现许多这样的主题。顺便说一句,有趣的是当他们自己的企业如何称呼它“transformation”但是当别人’s business its “disruption”.

        * Bravado没有影响。无论策略是否奏效,顾问始终会获得报酬。

        For me, what makes 戈德堡’信息挑战在于,其中一些具有优点,而许多却表现出傲慢和无知。


        We’我已经看到了其中一些变化。例如,A在业务中所占的百分比&R投资已经比传统投资低很多… and 那’允许其他方在寻找新人才(YouTube,自我发行,独立电影等)方面发挥更大作用,从而促进了Google的发展。当您考虑它时,提出吸引和支持最大的知名艺术家需要与打破新艺术家完全不同的商业模式并不是什么奇怪的事情。

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      不,保罗的 真实 problem with this 计划 is 那 it is the equivalent of halting production, getting rid of anyone who isn’t strictly necessary and gradually selling of existing stocks and 计划t.


      让’•不要自欺欺人:太阳2会随着时间的流逝而失去价值。每个主要品牌都有很多,黄金岁月’t 很久以前,但是’绝对是一种递减的回报策略。文化产业中的任何人都必须与文化一起发展或落伍。怎么样’s Capitol’这些天从40年代开始的太阳2,我想知道吗?

      太阳2是赚钱的人–在数字时代,尤其是– because once you’既定价值,您可以继续以零至零成本挤奶。您如何建立价值?通过在艺术家发展和市场营销上花费少量资金。这些钱浪费了吗?是的我们事先知道哪一部分吗?不。我们做什么 知道,但是,没有它,你不知道’没有太阳2。充其量,您可能会遇到五分钟的打击,但到年底将被遗忘–与任何数量的YouTube一样“sensations” demonstrates.

      让’不要为灌木丛而战:除非你是 至少 产生足够的当前点击数来替换太阳2的递减价值,那么您的公司就快要死了。

      • 保罗·瑞斯尼科夫

        暂停太阳2是一回事,但是如何部署资源以开发更多创新的方式来发布太阳2,将其货币化并监控其销售呢?戈德堡不是’并没有说要停止新作品或艺术家的发展,但他对主要唱片公司如此庞大,耗竭率的质疑’资源被用于塞莱娜·戈麦斯(Selena Gomez)和蕾哈娜(Rihanna)等艺术家。眼下,戈德堡提倡将这一比例降低到最低限度,并将重点放在价格便宜的艺术家身上。


        那可能来自独立艺术家’的父母,管理机构等,而主要的是艺术家的年龄‘baked’和市场测试。您可能会争辩说麦克凯尔莫尔(Mackelmore)发生了类似的事情,尽管我承认是避风港 ’仔细研究了该案例研究的细节。不过,这可能是一个有趣的起点。

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      是的,拆除那些伟大的国会大厦ation令,改为盖上芒福德。 Peeyooska!

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    7.但是即使是新的东西也都在太阳2中,我们不’t need no stinkin’ hits.
    8.所以我们’ll将新的发行集中在制作人便宜的Rock and Country上。

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    迪登’t Bill Clinton end “我们所知道的福利”?

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    “媒体执行官妻子将跑步机事故上演,以谋杀墨西哥沮丧的丈夫。” I’m sure 那’并非如此,但阅读他的音高确实令人沮丧。我不’不是要冒犯任何人。

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    没有什么比大利润更性感。仅数字产品是一个& 0’s inevitable–命运。别想了‘ Music Industry ‘然后开始谈论‘我的软件太阳2程序‘:他们的消费电子产品市值已达一万亿美元。音乐娱乐和文学娱乐软件都是使这些小玩意儿具有更大的驱动力–相关设备。话虽如此,我认为’是时候进行适当的总收入百分比total弹枪婚礼了。 。 。

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    首先,摆脱所有苛刻的音乐家。未洗的嬉皮士(其中很多人和伪君子)本应与自由的爱情和艺术有关,但总是说“show me the money”.

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    +1成为Be。 +100关于衍生千禧年,哈哈!

    在这个想法中有很多好的经济思想,但似乎需要千篇一律,才能确定随着时间的推移,哪些曲调会产生大量的太阳2收入,而首先没有大量的营销收入。走在街上的克莱夫·戴维斯(Clive Davises)和大卫·格芬斯(David Geffens)并不是很多….

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