Why can’t Ministry Of Sound just play nice like everybody else?

Ministry of Sound CEO Lohan Presencer is clock-watching.

Well, he’s Apple Watch-watching, to be precise. (The wristwear’s glimmering presence is ironic in the context of our conversation – ostensibly, an MBW grilling about why Ministry is refusing to license Apple Music.)

Under normal circumstances, MBW would obviously be Presencer’s most important meeting of the day, month, year, lifetime.

But not this afternoon.

Boris_Johnson

Straight after we grace Ministry’s buzzing Elephant & Castle offices, Presencer is off for a personal powwow with London mayor Boris Johnson.

This clandestine meet must be linked to the myriad sheets of architectural designs plastered across one corner of Ministry’s offices – and the fact Presencer grins like a loon every time they catch his eye.

MBW’s always-on earholes pick up Presencer telling another guest. “Forget Vegas. No-one’s ever going to have seen anything like this before.”

May as well ask him direct, then: what the heck is going on? Is your mighty superclub moving?

“Ministry Of Sound has always been very comfortable being an underground business,” he says.

Then he sniggers. Something big’s going down – literally down? – but he’s not letting on.

Back to the matter at hand. Or near hand, anyway: Presencer’s Apple Watch.

And his iPhone 6.

And his iPad.

And his Mac.

If he’s got all the gear, why can’t he just chuck Ministry’s music onto Apple’s service – like pretty much everyone else?

“Look, I’m a huge Apple fan,” says Presencer. “Clearly, I operate completely within their ecosystem every day.

“But we approached Apple very early on and said: ‘We’re a different-shaped business to the major labels. Please help us. Please try and find a way of accommodating us.’

“They said they absolutely wanted to help us and that we were very important to them. They actually used the words, ‘We love Ministry Of Sound’, which was very reassuring.

“We’re not asking for anything more than anybody else from Apple. We’re waiting to hear back, and we’d like things to speed up a bit.”

“Now obviously, they’ve been pretty busy. But there comes a point where words have to turn into actions – and that hasn’t happened.

“We believe there are mechanisms that can work for us [on Apple Music] that don’t disadvantage them; we’re not asking for anything more than anybody else is getting.

“We’re still waiting to hear back, and we’d like things to speed up a bit.”

Those ‘mechanisms’ essentially mean special allowances for Ministry’s one-off structure.

MoS is the fourth biggest record company in the UK – behind the majors – but has a reasonably small albums catalogue.

The success of Ministry’s label business, and it remains hugely successful, is largely predicated on the popularity of its ginormous compilations operation tied to some masterfully put-together hits.

(One of those hits, Sigala’s Jackson 5-sampling Easy Love, is racing up the Shazam charts as you read. Presencer calls the DJ/producer “a bit of a genius”.)

This structure fits rather awkwardly with the streaming revolution, which rewards the biggest catalogue owners and recurrent pop artists on the planet – while fostering a playlist culture that essentially tells users they do themselves what Ministry has spent 25 years perfecting.

No wonder it makes Presencer a bit grouchy.

That is, the established players in streaming – like Spotify, for instance, which Ministry finally and begrudgingly part-licensed (after an obligatory legal battle) last year.

Ministry

Turns out Presencer actually does admire one player in the streaming market: his own.

“We’ve been developing the Ministry radio app (pictured) for about a year and it’s very important to us,” he says.

“It’s programmed by our team who know what they’re doing because they sell lots of records doing it.”

The app, which already boasts a million unique users, offers a combination of genre-based playlists as well as a live feed of Ministry’s own presenter-led radio station.

A new iteration is due for launch in a couple of weeks. Expect some heavy marketing.

(By the way, if a human-fronted, globally accessible music radio station sounds familiar in this post-Beats 1 era, Presencer has a simple answer: “We did it first.”)

“Our soon-to-be-released [wireless] speaker blows the Sonos 5 out of the water.”

Another toy at Presencer’s disposal is Ministry’s upcoming range of high-end home audio products, for which he says pre-orders are “through the roof”.

The Ministry man is typically bashful in his analysis of the competitive landscape.

“The Beats Pill has nothing on us,” he says. “Our medium speaker absolutely competes with the Sonos 3; our big speaker blows the Sonos 5 out of the water.

“We have packed so much technology and power into these. They have been designed with our own sound engineers – we wouldn’t settle for anything less than top notch.”

Jamespalumbocropped

Whatever you think of Ministry’s circumspect approach to streaming’s explosion, you can’t fault its label’s fiscal robustness.

Still majority owned by a single owner – Chairman James Palumbo (pictured) – it has sold over 60 million compilation albums over the past 25 years.

As we stand, it’s selling around 60,000 compilations albums each week across the globe – its best sales figures for two years.

Meanwhile, its small but carefully-nurtured artist album business – headed up by the respected A&R minds of Dave Dollimore and Dipesh Parmar – could certainly teach the majors a thing or two.

It’s flagship release, London Grammar’s debut album If You Wait, has now sold more than 600,000 copies in the UK, and continues to shift close to 2,000 units every week.

“How many new artists have gone double platinum in the last five years?” Presencer asks in a deliberately pointed tone – and he’s bang on the money.

Talking of money, let’s get back to those Apple negotiations, as well as on air / on sale, Ministry’s A&R strategy – and how the heck Presencer is going to bridge the gap into a streaming-dominated landscape over the next few years.

By the way, if you’re after foul-mouthed rants, we thoroughly recommend our no-holds-barred chat with Lohan from a few months back.

If, however, you’re in the market for thought-provoking opinions about the music biz’s propensity to rush both artists and irreversible licensing decisions to market, read on…


Lohan, do you hate streaming?

[Long pause] No. That would be ridiculous.

What I hate is the way the music industry has approached it.

“I don’t believe enough financial consideration was given to chasing subscription growth using freemium.”

Because streaming offered the music business a new revenue stream, it jumped in feet first without really scoping out what the impact on other revenue streams would be.

I don’t believe enough financial consideration was given to chasing subscription growth using freemium.

The music industry, as ever, has shown short-term opportunistic thinking without considering long-term implications – motivated by bonuses, salary and contract renewals.


But streaming is growing all over the world…

Streaming is growing but globally it’s not making up for the decline in downloads, on which free has had a huge impact.

Over recent years, the industry has gotten over-excited about the new kid on the block at the expense of decent, established business models.

“What happens when the most powerful streaming player wants to negotiate on price to the consumer? Anyone who thinks the subscription price is not going to come down at some point has their head in the clouds.”

Revenues from CD sales are still greater in most major markets than digital. Wasn’t the CD supposed to be dead by now?

It’s typical:  the industry does things and then looks back with regret.

But it’s happened, and you have to adapt to it.

Also, what happens when the most powerful streaming player in the market turns around and starts wanting to negotiate on price to the consumer because it’s hit a plateau on the number of people willing to spend £100 a year on music?


Do you anticipate that will take place?

Of course it will. Anybody who thinks that the subscription price is not going to come down at some point has their head in the clouds.


What about YouTube? Whenever MBW writes streaming analysis and actually looks closely into the volume percentages…

… it’s all YouTube! I know!

We’ve done research on our listeners – and our non-listeners – and absolutely the biggest piece of the pie is not Spotify, Apple Music, iTunes or CD.

It’s YouTube and it’s radio.

“Radio doesn’t get talked about nearly enough in this business. It’s the most popular way for people to discover music.”

Radio, which doesn’t get talked about nearly enough in this business, is still the most popular way for people to discover music. It’s such a critically important part of the mix.

As an industry, we all dove in and embraced YouTube as a promotional platform without thinking that it might be consumption-based.

And make no mistake, it is consumption-based.


Mistake made – how do you, and the wider business, fix that problem?

It’s very difficult.

Do you make a decision not to put your content on there because the revenue streams you get from it are miniscule? And therefore shut off a really important method of discovery?

It’s one of those things that as an industry we look back on with regret. We could have done it differently.


Obviously you love Apple as a device maker. But with your Apple Music deal still unsigned, what do you make of them as a music biz partner?

Apple are the biggest company in the world, they’ll be around forever and they’ve traditionally been huge supporters of the music business.

Arguably, they saved the music industry – they monetised digital music when piracy was rife.

They did a wonderful thing.

“arguably, apple saved the music industry…”

We value our relationship with Apple enormously.

We’re also a great and diversified business that’s lasted a long time. We’re very proud of what we’ve achieved, we think our customers love us as much as Apple’s love them.

We hope that the will is there on Apple’s side to find a way through together [on Apple Music].

It’s just taking a little bit longer than we’d like.


Can you tell us anything at all about exactly what it is you want Apple to offer you?

You’ll appreciate that I can’t discuss commercial terms publicly.

But we hope Apple will come back to the table soon and engage with us properly – and make good on finding a way through that works for both of us.


If you can’t tell us what it is you want from Apple, can you tell us why you did eventually license Spotify?

Once we’d resolved our dispute, we took a look at the service and said: ‘Okay, we don’t own a huge amount of catalogue – this business model doesn’t really make a tremendous amount of sense for us.’

But then the data started going into the charts, so we thought we’d try it out and see how it works.

“Revenues from spotify aren’t significant for us at all.”

The revenues aren’t significant for us at all.

We’re maintaining a watching brief. We’ll test everything. We’re open-minded types, Tim.


You’ll like this one: are playlists and compilation albums actually the same product? Can compilations and the streaming world ever truly co-exist?

No, they’re not.

To answer your second question, we simply want to find a way to place a value on curation.

The subscription business model has been deliberately designed to benefit large content owners.

If content owners and streaming services recognise the benefit that compilations-stroke-playlists – and I don’t enjoy likening them – bring to their catalogue, both in terms of discovery and revenue, they should surely acknowledge there is a value created by the curator which someone should pay for.

“If content owners and streaming services recognise the benefit that compilations and playlists bring to their catalouge, they should surely acknowledge that there is a value created by the curator which someone should pay for.”

That payment could come from a reduction in royalties or a consideration given by the music service.

I think [compilations and streaming] can co-exist. Compilations and [singles/albums] have co-existed very comfortably in the physical environment and Apple, to their tremendous credit, helped us find a way to make them co-exist in the download environment.

Why can’t it work in the streaming environment? It just requires all the interested parties to get round a table and work out a model.

There doesn’t seem to a be a priority or a will to do that – yet.

I know that the major record companies are concerned about it too, but it’s not top of their list.


Does the fact that anyone can create a playlist – and there are millions of user-generated playlists out there – muddy the waters?

Possibly, and I can see why that would lead to challenges. But at the end of the day the people who are best at curating will be the ones who benefit the most.

YouTube has found a way of rewarding its curators; you’ve got very successful YouTubers out there who have built curated channels.

So there is a presidential model in the video environment. Why can’t there be one in the audio environment?


Are compilations under threat?

Just look at the stats: Compilations currently represent around 30% of all albums – real albums, not track equivalent – sold in the British market.

We’re seeing our best compilation sales figures for two years.

There’s still a huge demand for well-curated, mixed – and you can’t get that on streaming services – compilations.

“It’s ironic that the majors are hiring playlist experts. Did none of them talk to their own compilations divisions?”

The irony is that there’s a trend at the moment for the majors to buy playlist companies, or create algorithms, or hire playlist experts.

Guess what: they all had these experts in their buildings already. Did none of them talk to their compilations divisions and ask: ‘How can we do playlists really well?’

The answer was staring them in the face.

Also, none of them have hired radio people to do the job, who understand how to programme music really well. Only Apple have realised that one.


Interesting to hear you say you ‘programme’ compilations. What’s your view on the man vs. machine curation argument: Spotify and The Echo Nest, for example. Will algorithms eventually take over?

I don’t think any programmer or curator or algorithim ever gets it completely right.

But what consumers learn is to trust someone who has consistently got it more right than wrong, for them.

We’re a business that over 25 years has built a huge level of trust with our consumers worldwide which is sort of unparalleled.

“curation is not just bunging a bunch of tracks together. I’m sure radio programmers would tell you the same thing.”

There is a skill and a science involved in putting our albums together; we know how to offer a great musical journey.

We beat match, we get the order right, we mix, we take you down, we take you back up. There is a tremendous amount of care an attention that goes into the delivery of our records.

It’s not just bunging a bunch of tracks together. I’m sure radio programmers would tell you exactly the same thing.

Personally, I don’t think an algorithm can get that.


I’m sure that Spotify would love to welcome exactly what you describe onto its platform: ‘Ministry of Sound’s mixed playlists, brought to you right here.’

I’m sure they would too. They’d have to pay for it.


Do you accept that streaming is the future of music consumption?

A decade ago, everyone said the CD would be dead within two years. It’s still 65% of our business. It’s still over 70% of the German market.

Downloads still represent billions of dollars of sales globally: we sold 25,000 download bundles last week in the face of – and I quote – “millions and millions” of people using Apple Music.

“A decade ago, everyone said the CD would be dead within two years. It’s still 65% of our [label] business.”

I think streaming is part of the future, yes. Just as much as downloads, just as much as CDs and just as much as the next method of music consumption.

CD didn’t die, vinyl didn’t die, downloads aren’t dying.

The only format that did die was cassette – but it deserved it, after all the time we spent trying to fix them by winding pencils round and round…


You’ve said in the past that the streaming services suit the major record companies…

The major labels want to put the cat back in the bag after piracy. Streaming allows them to do that.

The deals [with Spotify etc.] were designed by major content owners to benefit major content owners: if you own 40% of the world’s catalogue, you will get 40% of the revenue.

Regardless of what the pence per stream cost is, and what filters down to the artists, you are capturing a large percentage of that revenue.


Are you at all optimistic that streaming payments might one day move to an itemised system where literally what gets played by each individual user relates exactly to share of revenue? That would seem to run counter the agenda you’ve just mentioned.

I think there’s so much hidden under the bonnet [of deals] that I think neither the services or the major content owners want us to see.

And for that reason it’s very unlikely. But, you know, we remain hopeful.


Let’s talk on air/on sale. You’re not towing the line – the UK majors unilaterally agreed to do it.

I’m not sure that’s true. There’s still a lot of stuff int he chart that’s not on air/on sale.

I think [the majors] pick and choose as they go along. There’s certainly some international artists where it’s more appropriate to go on air / on sale.

“All record companies honestly realise the benefit of holding back and building demand for a record.”

But I think all the record companies honestly realise the benefit of holding back and building demand and awareness for a record – particularly on new dance artists.

We have the ability to do what we want. Some records we will make available on air / on sale where it’s appropriate. Some we’ll hold back.


You’ve never been asked about SoundCloud. What’s going on there? Warner have done a deal and Merlin have done a deal – both probably took equity stakes as a result.

I don’t like to be a hypocrite. We should be honest about the way that our labels use SoundCloud and our artists like to use SoundCloud.

So when the Merlin deal was presented to us, we took a look at it and said: ‘Fair enough.’ We’ve signed it.

“The merlin deal was presented to US. We took a look at it and said: ‘Fair enough.’ We’ve signed it.”

Why would we use the service, but then have an issue with it being unlicensed – when the license was there that allowed us to legitimise it?

They are trying to find a way through. We’re not obliged to put content up there; we have the option to put up content and take it down as and when we want to. It’s within our power to control it.


Let’s talk about some music. Can I ask when we’re next going to see London Grammar?

London Grammar are in the studio. It’s going very well. But I’ve been categorically told not to give you any dates!


How is it working with Jonathan Dickins, who took over as their manager last year?

It’s great. I used to work with Jonathan 20 years ago at Warners and it’s nice to be working with him again now.

He’s a great manager and great with artists. I think the band like working with him a lot.

“Jonathan lets the artists do what they want, but understands how everything works outside of that.”

It’s good for us to have somebody we’ve known for so long with whom we can work strategically.

He lets the artist do what they want to do, but obviously understands how everything works outside of that.

It means we can have very straightforward and honest conversations with him.


What do your artists make of your unique business decisions regarding streaming etc. And what makes you different to any other label?

Ministry is one of the most credible independent labels in the UK, with strong like-minded international partners.

We like to think we offer the perfect mix of the attitude of XL with the obsessive hit-focus of a major.

“our approach to A&R is very stealth-like.”

Our approach [to A&R] is very stealth-like.

We always allow artists who sign to Ministry the time to develop and discover who they are without the additional pressure of the industry writing them off before they’ve started.

Because of that, we have a small roster, a small family. Part of which means maintaining a dialogue with artists, managers and lawyers about our strategy.

I actually find those conversations interesting, challenging and worthwhile – because they always make us think and justify our actions.


Last question: Is there anything a major label can do in 2015 that Ministry Of Sound cannot?

Yes – screw it up!Music Business Worldwide

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