THE LEFSETZ LETTER: Power Top Ten

1. Steve Jobs

Don't mess with Steve.

Michael Eisner ignorantly came down on Apple's "Rip/Mix/Burn" campaign, falsely declaring it illegal, and didn't make nice with
Pixar and who won, who survived? Steve.

Edgar Bronfman, Jr. and his CEO brethren saber-rattled, stating they needed variable pricing at the iTunes Music Store, and who won? Steve. Every track is still ninety nine cents.

Apple Computer is everything music used to be, before the pricks in the industry whored it out. People BELIEVE in Apple Computer. Not only do they not give a crap about price, they're SALESPEOPLE!

If you haven't been told to buy a Mac then you don't have any friends. It was this same kind of rabid evangelism that blew up music to begin with!

But the reason Mr. Jobs is so powerful is not because of the iTunes Music Store, but the iPod itself.


Bob Lefsetz, Santa Monica-based industry legend, is the author of the e-mail newsletter, "The Lefsetz Letter". Famous for being beholden to no one, and speaking the truth, Lefsetz addresses the issues that are at the core of the music business: downloading, copy protection, pricing and the music itself.

His intense brilliance captivates readers from Steven Tyler to Rick Nielsen to Bryan Adams to Quincy Jones to music business honchos like Michael Rapino, Randy Phillips, Don Ienner, Cliff Burnstein, Irving Azoff and Tom Freston.

Never boring, always entertaining, Mr. Lefsetz's insights are fueled by his stint as an entertainment business attorney, majordomo of Sanctuary Music's American division and consultancies to major labels.

Bob has been a weekly contributor to CelebrityAccess and Encore since 2001, and we plan many more years of partnership with him. While we here at CelebrityAccess and Encore do not necessarily agree with all of Bob's opinions, we are proud to help share them with you.

If you don't believe the iPod is going to break down the Berlin Wall of physical goods I feel sorry for you. People DO need to own totems of their devotion. But that's what the CD has become. EVIDENCE of fandom. As for all you old farts waxing rhapsodic about sound quality…did you ever SEE a teenager's stereo? It's two speakers attached to his computer!

Microsoft will not steal significant market share, but will further legitimize the hand-held music player sphere. Their entry will be akin to IBM's foray into personal computers twenty five years ago. The Apple II was for techies, the fringe, but once IBM got in the PC business was legitimized, it TOOK OFF!

In a parallel to Moore's Law, storage keeps getting cheaper. Hard drive and flash memory prices don't go up, they go DOWN! In other words, people are toting devices with the ability to store MANY TIMES the number of tracks they used to own in the physical disc world. It's not about CD replacement, it's a whole new market. Kind of like cheap-priced DVDs you purchased compared to expensive VHS tapes you rented. Copyright-holders will finally figure out that if music is cheaper, more people will own more of it and they'll make more money. Unfortunately, you can't count on them seeing the light in the near future.



2. Michael Rapino

His power is commensurate with the gargantuan share of the market that Live Nation possesses. But it's more than that. You break acts on the road. And once you're broken, most of your revenue is from the road.

Used to be, not that many years ago, less than a decade, the concert promoter was at the asshole end of the business. Subsidiary to the major labels. The labels built the stars, and the promoters exhibited them for a very thin slice of the revenue pie.

But then the labels couldn't build anybody but the biggest stars. So the promoter had to build the mid-level act. As for the stars?? Most of those the majors erected couldn't sell a concert ticket. And those that did, were flashes in the pan.

This business was built on credibility, and careers. No one knows this more than a concert promoter. Promoters have given up on the MTV/Top Forty model. They want to know about your road history, do you have FANS, who will SUPPORT YOU! They want to build upon this, not on your goings-on in the tabloids.

Rapino is hungry. Because he's young and has got something to prove. God, the labels were killed by being top heavy with old
farts. It's good we've got a newbie, not burdened by the way it MUST/USED TO be done, in charge.



3. The Manager

There are two types. The big ones and those that believe in you. And sometimes the twain meet. Used to be, in many cases throughout the nineties, the label was the manager. But now the guy who ran your career there has been fired and only the rats interested in keeping their jobs are left. You need someone to LOOK AFTER YOU!

Kwatinetz, Azoff, Burnstein & Mensch and Terry McBride bring all their leverage and relationships to the table. They're owed favors, they know where the bodies are buried, it's like playing for the Yankees. But, unless you're Johnny Damon, should you be ON the Yankees? Are you better off playing for a smaller market team? One with few distractions, that will dedicate all its time to you?

The days of garage management are back. It's about having someone you grew up with (kind of like E on "Entourage"), who you know will never screw you over, who will die for you, in charge of your career. Someone who will lift an amp if necessary. And spend time making friends with all the lower caste Live Nation people around the country who are only going to grow in stature.

The executive clientele in this business is going to turn over. Almost overnight. Hell, even Jimmy Iovine ain't what he used to be.

Every savvy, smart, music-loving twentysomething entrepreneur wants nothing to do with the major label. God, he's not that different from the renegades that BUILT the major label. He's got vision, he's got personality, he wants to do it HIS WAY!

This is the price to be paid for letting no youngsters into the halls of the major labels. Then again, they let them into the concert promotion companies.

Yes, while the major labels became about "superstar" executives, it was business as usual in the touring world. There were few airs (although a lot of intimidation!) Ergo, innovation is bubbling up there. And it will bubble up in music production too.

As for the label?

Expect a lot of the new managers to BE the label head! Hell, it's not that different from Howard Kaufman selling Jimmy Buffett discs. You're in control of your own destiny and you make so much more MONEY!



4. John Hogan

I'd like to tell you terrestrial radio is dead. That it's been eclipsed by satellite and the Web. But this would be untrue.
Although terrestrial ratings are sinking, conventional radio is where you still go to reach the largest slice of the population. Kind of like you advertise on a TV network to reach not the niches, but EVERYBODY!

Well, not everybody. But, in the car, radio still dominates. Its number one competitor is not the iPod nor the CD, but the cell phone. God, the CELL PHONE has hurt the music business more than P2P. People just aren't listening to radio ENOUGH!

Furthermore, if radio playlists were broader, we'd be selling more music. Most people can't HEAR most of the new music. But last I checked, every car came with an AM/FM radio.

Satellite is stalling. Actually, the two companies are muddying the waters. Not knowing which service to buy, people are buying neither. Furthermore, Sirius fans have to tell all potential subscribers about the dropouts. In a land where perfection is expected, where we buy Japanese cars that NEVER break, to pay thirteen bucks a month and to constantly lose signal DRIVES YOU NUTS!

And that's the catch. The thirteen bucks.

Satellite used to be a club. Kind of like the iPod. But somewhere along the line, it got screwed up. Maybe when Mel Karmazin, the old boss, became the NEW BOSS!

Satellite is not radio. If satellite is radio, you're screwed. Satellite has to be something unique, that you ASPIRE to own, that you must have.

But leaving all the perception and marketing behind, if Howard Stern's fans didn't follow him to satellite, where's the hope? If people won't pay for Howard, if they're willing to listen to someone else in the morning, what about the guy who NEVER listened to Howard? How are you going to get HIM??

Howard Stern is now irrelevant. He's not part of the national dialogue. And despite being the poster child for radio
consolidation, Clear Channel is taking steps to clean up its act. Like airing fewer commercials.

It appears today, that the threat to terrestrial radio is not satellite, but Net in the car. And Net in the car has got copyright issues. And no one invests a ton of cash if they're going to have copyright issues. THAT'S what the RIAA/Napster/Grokster battles taught savvy investors (to the RIAA companies' DETRIMENT, without investment, you've got no PROGRESS!)

So, terrestrial radio still rules. And John Hogan is the most powerful man in that sphere.



5. The Net

Where do we start?

Hell, let's begin where everybody else does, MySpace.

Once again, MYSPACE DOES NOT BREAK ACTS! Most people never look at the homepage. What MySpace does is give you a place to listen to the MUSIC of acts. Usurping the need for a record company. For FREE, you can have your music hosted. Where not only "friends' can check it out, but professionals too.

You can build a buzz. If you're GOOD! Most bands on MySpace are bad. But now EVERYBODY expects EVERY ACT to allow their music to be heard on MySpace! Were the major labels here first? No, they're begrudgingly following along.

I'd like to say that the Web is where everybody discovers new music. But this would be untrue. Terrestrial radio is still number one. But the savvy, the FANS, they're constantly surfing and discovering. Which is why acts should have their music available in blogs, given away free EVERYWHERE! Because if the tastemakers have it, they can spread the word.

We're still waiting for our Google, the killer app, in the music disovery world. It's not Pandora and it's not the iTunes Music

Store. But in the not too distant future, you'll go somewhere to find out about all the new acts, and the owner of this site will be as dominanat and rich as MTV was back in the eighties. And I say more power to them, SOMEBODY'S got to sift through the morass of crap, and it ain't gonna be ME!



6. Marty Bandier

BMG should sell the label and keep the publishing company. THAT'S where the action is. Unfortunately, these continually screwed entities are fearful of being screwed over in the future, and refuse to negotiate reasonable rights fees for new delivery methods.

We've got to go to a percentage. To stay at a penny rate is insane.

But Marty Bandier won't do it. Marty Bandier and his big boy on the block EMI Music Publishing have the record companies by the balls. And therefore, a future that comports with reality seems a distant mirage.

But can you truly get angry with the publishers? I mean can you trust the labels?

Nope.



7. Terry McBride

Oh, he may be a manager, but that's not all he is.

Terry's younger than most of his superstar manager brethren, and it shows. He got the digital memo. He understands the new
marketplace. He's not looking back.

Terry believes so much of what I say here. That an act with a profile should be ITS OWN label.

But Terry is not without portfolio. He has a huge touring and radio presence. He can use his relationships/assets to deliver for a developing act. Will he dominate in the future? It's an open sphere. But NO major player is better placed for what's coming down the pike.

Terry knows it's first and foremost about the fan. And the system is just a tool to get to him. And, that the fan doesn't believe in the system, but the ACT!

Isn't it interesting that Terry put out MC Lars' "Download This". And is defending a trader against the RIAA. If you're not willing to break ranks, you're not going to be playing in the future.



8. Eric Garland

In an effort to get paid, Mr. Garland's words no longer have the brittle edge of yore, he's trying to HELP the content providers.

But thank god he's still trumpeting those P2P numbers in every publication known to man.

P2P demonstrates DESIRE! Go to the 99 cent store. There you'll see endless products that nobody WANTED! People want music. They're breaking the law to get it. Legalize this acquisition. To do otherwise is to ignore reality. And to leave money on the table that can't be recaptured.


9. Jay-Z

I thought he was retired!

Jay-Z is the poster boy for rap. And despite how you feel about the sound, people believe in this music more than any other genre today. Sure, the lyrics might be cartoons, but so many of the players have gotten shot there MUST be some truth to their thug life words.

When black music was smooth and a joke, Russell Simmons entered the picture and took a street-level art form and blew it up based on its credibility. We all live on some street. Unfortunately, the white media thinks it's Sunset Boulevard, where all the vapid TV stars party. But no, it's a place where the media is not looking. Where life is rough but you've got hopes and dreams. Where you want to do it YOUR way. That's what rap represents. Rock no longer represents this.

Don't count hip-hop out. It's built by street level entrepreneurs, not the usual suspects. It's not only about music, but lifestyle too. The key is not to decry it, but to embrace its tenets. Which is you've got to respect the fan, make him feel like he's part of the party. And that if it weren't for hard work and some luck, you'd be right down there with him.



10. The Bonnaroo Team

In the middle of nowhere, out of whole cloth, these guys created a festival that its attendees talk about all year.

That's the way it used to be. Every year, the band put out a new record and toured. Like clockwork. And during the intervening time, you waxed rhapsodic to all your buddies about the show.

People are gonna be talking about Bonnaroo 2006 up until, and even AFTER, Bonnaroo 2007.

Unlike traditional concerts, the fan at Bonnaroo feels respected. And that he's part of something. And by traveling halfway across the country to attend, he's evidencing his dedication.

Bonnaroo is the double album of yore. Something unique, that you savor. It's not about remixes, but evanescent moments of magic.

Bonnaroo represents hope. And rebirth.

The audience exists. You've just got to respect people. And deliver something GREAT!


Not On This List:



1. Jimmy Iovine

The old days of wooing hot bands to blow them up via the big entertainment media are passe. People don't want marketing
extravaganzas, rather something they discover and help build. Master manipulation is through.



2. Mitch Bainwol

With the "Wall Street Journal" and "New York Times" rebutting every inane press release with the P2P figures of Eric Garland and
BigChampagne, Mitch's pronouncements are whimpers. He's a lobbyist. Paid to put a sunny face on the efforts of his crook members to save a dying model.



3. "Rolling Stone" and the Print Press

"Rolling Stone" died when it imitated "Blender". There shouldn't be SHORTER articles, but LONGER ONES! This concept of today's kids having short attention spans…CRAP! Ever see them play Halo all night? If they're INTO something, there's no limit to the time they'll dedicate. "Rolling Stone" was magic because it went on forever about stuff that only you thought was interesting. Now it's playing to Madison Avenue. GOOD RIDDANCE!

As for the other magazines in the music genre. Aren't they all featuring hot actress babes on the cover?

As for newspapers… They've completely lost it. Trying to appear hip they're reviewing indie releases, championing the left field… Newspapers must be mainstream, that's their only hope. But, with the info available instantly on the Web, with attitude, the younger generation doesn't give a crap about the printed page.



4. Clive Davis

Someday Clive is gonna die. And we won't even miss him. Kind of like Burt Reynolds. Whoops, Burt's still alive?



5. The Rolling Stones

They're not in the music business, but the Rolling Stones business. It's kind of like visiting a museum. Hell, Keith Richards LOOKS embalmed.



6. Eminem

Do you believe that? And it's not like he made a Billy Squier pink video or something. It's just that… In a fast-moving landscape he should have put out a continuous stream of product instead of pursuing the album cycle he did. Because once you hit a dry patch…you're forgotten. Hell, it's not like you hear his music on the radio anymore!



7. Amoeba

So you like to go hang out in your jeans with your old fart brethren buying discs. Hell, there are people addicted to flea markets too.

Amoeba is the Disneyland of record stores. If there was a Disneyland in every town… Whoops, there's one in Paris, FAR from Anaheim and Orlando, and it's constantly losing money.



8. Best Buy

If you think they care about music, you've never asked a question of one of their employees. They're just waiting for another loss leader product to hit the stage. They're married to CDs like you're married to your nursery school sweetheart. They're gonna outgrow them, and not even look back FONDLY!



9. IMPALA

If this is the future of the record business, I want out. These crybabies are handed their future by techies in Silicon Valley and they rail against the OLD system.

You know they're screwed when even the "Los Angeles Times" comes down on them.

Related Post