Rob Wells on freemium, Apple Music and life after Universal

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“I’ve been pretty busy, you know. I haven’t just been surfing, despite what anyone out there thinks. Well, I suppose there has been quite a lot of surfing…”

For 15 years, Rob Wells was the digital doyen of the biggest music company on the planet.

Universal’s entire online music strategy was essentially his brainchild, including its unequivocal support of an unpromising little Swedish startup called Spotify.

Yet earlier this year, as careers at corporate super-powers are wont to do, Wells’s tenure at Universal ended with a shock announcement.

Perplexingly, UMG allowed one of the global music industry’s smartest, most forward-thinking execs to slip through its fingers.

Why? Whispers suggested that Wells’s view on the most strongly-debated music biz topic of the year – the ultimate value of freemium services – no longer chimed with that of Universal’s top brass.

This very possibly included his long-time boss and friend, UMG CEO and Chairman Lucian Grainge, who famously and fiercely bashed on-demand freemium in public – as private negotiations with Spotify were taking place behind the scenes.

It is perhaps a mark of the two British execs’ mutual respect that despite this perceived ideological impasse, Grainge was fulsome in his praise of Wells as he left the building.

“I will miss Rob’s professionalism, his sense of humor and his commitment to our artists and labels,” Grainge told Universal staff.

“He leaves big shoes to fill.”

That, as they say, is all water under the surfboard now.

Wells is establishing a new life as one of the worldwide entertainment industry’s most sought-after free agents. A range of intriguing consultancy gigs are already etched into his diary.

Wells has obviously been inundated with offers, but tells MBW that he remains judicious about the companies he’s advising in his post-Universal existence.

“When I left Universal, I identified seven verticals of the business in which I thought there was opportunity,” he explains. “At the moment, they’re all under-served and have big potential.”

Wells says he’s already officially associated himself with five companies, and that a couple more may follow in the coming months.

He’s delighted to have signed on the dotted line with LoveLive, the respected UK-born live music video streaming specialist, on whose Advisory Board Wells now proudly perches.

And then there’s Revelator – the cloud-based music intelligence platform which offers labels and managers up-to-the-minute sales and marketing analytics for a subscription fee.

He’s in good company at Revelator: Island Records founder Chris Blackwell and former SVP of Digital at EMI Tom Ryan are also backing the startup.

You’ll be able to read more in-depth on Revelator and Rob’s involvement on MBW later this week.

But for now, know this: having led the project of building Universal Music’s much-praised Artist Portal – which helps UMG staff and partners calculate when and where to splash money on acts – Wells believes the independent sector deserves something to rival it.

That’s where Revelator comes in.

“This is a dream for me; empowering everybody in the music value chain to understand what is going on as the industry transitions,” he explains. “It’s of major importance.

“When I was sat in my old gig, I looked at what was going on in the press and the huge scale of misunderstanding, eye-rolling, conjecture and the dare-I-say-it lack of knowledge [about streaming].

“That’s no-one’s fault; it’s just the information wasn’t at everyone’s fingertips. Without that level of understanding, you won’t know the impact of, say, pre-release streaming on chart positions or premium conversion rates; these questions that are currently unanswered or answered in an ambiguous way.”

As we say, there’s more to come on Revelator.

(And, we’re certain, on Wells’s other confirmed endeavours, including “a B2C play, a syncronisation play and a programmatic play”.)

For now, it’s time to ask Wells the big questions that really matter across today’s music industry; about freemium, Apple, the major labels – and where the heck this business is headed.

We’re extra grateful that Rob gave MBW his first interview of 2015, because – quite literally –  he has much better things to be doing.

“I’ve been busy, but I’ve taken some time off too; my kids actually know they’ve got a father now,” he jokes.

“I’m enjoying spending a lot of time with my family. But I’m also starting to throw myself back in….”

 

There’s been a whirlwind of debate around freemium this year – and your name has been at the centre of it. Do you think labels can succeed if freemium continues to be offered on-demand without restriction?

I have a long-term view on this and the answer is yes.

All of the debate and positioning that’s been put forward over the last 12-18 months has been about how ‘unsustainable’ freemium is; ultimately, you’ve got to read between the lines of these comments.

What people are really saying is… ‘We’re not earning enough money.’

“People are actually saying: ‘We’re not earning enough from freemium.’ It’s an inevitability that will change.”

Whether it’s artists who have held back [from Spotify] or Chairman & CEOs who have taken certain positions, it’s all: ‘We’re not making enough money.’

My belief is that will change. It’s an inevitability.

Collectively the music industry needs to look towards solutions – empowering technological solutions – to drive up the value of music through freemium services.

 

How so?

Ultimately if we can earn more money from advertising on free, to the point at which it’s a sustainable model, then glory days are here.

 

You’re optimistic that will happen? That freemium will become much more valuable?

I believe there will come a point where brands and agencies that are currently spending their money on traditional media will shift that focus and start spending that money on digital media.

As people cut the cord of broadcast TV and shift from reading newspapers to digital publications, the money will move with them.

The advertising business is a monster compared to all of the other content businesses.

“The advertising business is a monster compared to all of the other content businesses.”

Someone told me last week that the global advertising business is close to a trillion dollars; $890bn of revenue. We only need a fraction of that to move from traditional terrestrial radio into digital radio products.

Then we need to fine-tune ad placements to drive up CPMs on freemium – whether that’s Pandora or Spotify.

If you can increase CPM, more money flows through the ecosystem.

I may be naive in thinking this is just about money, but if it is, then [freemium] is inherently sustainable – that is, assuming we can drive up the value of the inventory in the audio space, which I genuinely believe is possible.

 

To be clear: specifically, on-demand freemium services. Are they sustainable?

Having been in the industry for 20-odd years, I went through the pain of the piracy problem.

I really do subscribe to the notion that [with freemium] the industry has now provided consumers with a viable alternative to pirate services.

No-one talks about piracy anymore. The problem has migrated.

“The industry has provided consumers with a viable alternative to pirate services. No-one talks about piracy anymore.”

In the old days, when consumers were on pirate services, there was no exit route; there was no option to leave. You either used pirate services or bought from a download service.

Now we’ve herded the majority of consumers out of pirate services and into freemium services. And there’s a huge exit sign glowing above them which says ‘premium’.

The fact is, people are going through that door, albeit at a rate that’s clearly not satisfying everyone in the industry.

If we can fix the problem of monetising freemium, the opportunity is huge.

 

I’m taking it you watched WWDC live last week. What’s your take on Apple Music?

Eddy CueWell, I loved Eddy’s shirt. That was a gem.

You can never bet against Apple launching an extremely compelling consumer offer – and you never, ever bet against Jimmy Iovine.

But from my perspective as an Apple consumer, I’m slightly confused.

“Never bet against apple and never, ever bet against jimmy iovine. But as a consumer I’m slightly confused by Apple music.”

I’m not too sure if I’ll listen to the radio service; I’ll wait and see.

I don’t know if they’re going to break the stranglehold of my Spotify subscription; I’ll wait and see.

The compelling element of [Apple’s] service is family; I can pay a monthly fee and it can be across mine and my family’s devices.

I don’t think they’re going to make a great dent in the Android user base – to convince [Android users] to go through and subscribe.

But I don’t think that’s a big play and [Apple] are smart enough to recognise that – it’s a bit of a red herring.

 

What about the potential income for labels from Apple Music?

There’s two main ways they could drive up revenues that are coming to the music business:

  • (i) They can recapture the consumers that are no longer spending money on music on iTunes by moving them back from various other elements of the store. They may have a shot of doing that; they may get people back spending more money on music when they’re currently spending it on TV or film products or lives in Candy Crush or eggs in DragonVale – whatever people spend their money on these days;
  • (ii) The other problem Apple has: bringing more people into the iTunes ecosystem. And I don’t think what [Apple Music] offers will fix that problem.

 

What if it had more of a freemium offering? Would that help fix the problem?

Possibly. I don’t know.

What Apple need to do is start selling devices to kids. That’s their core business issue.

I don’t think anyone’s going to be stood in a phone shop and make a buying decision based on the fact there’s an Apple Music subscription service with three months free.

 

Looking at Universal from the outside in, are you optimistic for music rights-holders and their position in the ecosystem as streaming evolves?

Yes. I genuinely haven’t got a bad word to say about Universal. They’re an amazing organisation.

[Music] is an IP business, so to me it’s an inevitability that there will be a future for [labels]. It’s all about the rights.

“I genuinely haven’t got a bad word to say about universal. They’re an amazing organisation.”

That’s the one constant that’s always been true when it comes to the digital consumption of music, books, film or TV; it’s all about the rights. That fundamentally will not change.

Startups will come and go, new models will come and go, but the one constant throughout all of that choppy water is that major labels own rights. And Universal is the biggest rights-owner of them all.

If you own the rights, you own the keys.

 

What are the attributes that you’re looking for in companies you want to get involved with now?

I’m being quite selective: I only have a finite amount of  time and bandwidth. The companies have to fit in one of my seven verticals.

Plus it has to be a good idea – and the people involved have to be smart, nice, friendly and know what they’re doing.

I’m way too old, cantankerous and moody to put up with people I don’t want to work with.

It’s funny, I was involved in the investment side of Universal and my criteria was the same. It’s as simple as that.

I’m too old, cantankerous and moody to put up with people I don’t want to work with.”

There’s a few companies I’m now involved with that tick all those boxes, including a startup that recently popped in based in Santa Monica I’m getting involved with.

There’s the LoveLive guys who are all super-smart and fast moving.

There’s a B2C company that I sit on the board of based out of Taiwan.

And then with Revelator, they were heads and shoulders above everyone in their field.

Ollie [Buckwell, Revelator Global Biz Dev Head] and I did actually go for a surf, so that was a bonus.

 

Sounds like a hell of a job interview.

Ha. Exactly. We just paddled out in Malibu.

 

Can Revelator do things that even Universal’s Artist Portal can’t do?

I can’t really comment on that specifically.

But as anybody who’s stepped out of a corporation of any scale will tell you, the one thing all corporations have – whether it’s major labels or big publishers – is the ability to spend a lot of money on development and building infrastructure.

“I don’t think anyone’s going to be stood in a phone shop and make a buying decision based on three months of free apple music.”

Revelator provides the ability to move very quickly, and develop elements of the platform on the fly.

Whether it’s a new streaming service or another new technology, a company like Revelator can focus [on accommodating change]; they’re not distracted by anything else.

That isn’t just aimed at Universal – it’s any big corporate, whether in recordings, publishing, live, ticketing, whatever.

A platform like Revelator is explosive because every new thing that comes along, they can provide a solution.

 

With all this going on, would you ever want to work for a major label again?

I don’t know. Depends what the job was.

Never say never: I’ve been punished for saying things like that to journalists in the past.

But at the moment I’m genuinely really enjoying myself. The landscape of being outside of corporate life – let alone outside record companies – is pretty exciting. Everything moves pretty quick when you’re your own boss.

But of course, I would never turn down a good opportunity if one came along.Music Business Worldwide

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