Champagne Superhova: Q&A with BigChampagne’s Eric Garland

In our most enlightening Q&A to date, BigChampagne CEO Eric Garland shares his insight on the issues facing the music and technology business in the last 10 years. It’s a must read for industry insiders in the online and offline world. He recently stopped by RM 64 headquarters to sit down with office janitors Berko Pearce and Scott Sheldon where they also discussed the finer points of Joe Fleischer’s hair.

RM64: Can you give us a little background on yourself and how you got involved in the music & technology business?

EG: I’m a kid from Texas, most of the family is still there and I’m the one that got out. I take great pleasure in turning SXSW into like a three-week boondoggle and visit every distant relative and hang out on the lake. I played in bands unsuccessfully, knocked around Texas, then did the whole fraternity/sorority circuit for a while when I got out of school. I went to work as a management consultant and got the bug, being entrepreneurial, that is to say basically having a paycheck but not having a boss. So when I got really restless at that, I realized there was no less legitimate place to go, you’re already a consultant, so you can only go to unemployment. So I decided to start a company, what would become BigChampagne really. It was sort of set off like everything was in music and technology at that time, with the explosion and popularity of Napster. Napster happened and we thought there has to be an opportunity here for artists.

RM64: Did you use Napster?

EG: Um, I had an occupational interest in Napster (smiles).

RM64: Strike that from the record.

EG: No, no, no, that’s actually a good story, the one part of my personal story that’s worth telling. I was helping out artist friends who had been helpful to me when I was trying to be an artist. One of my friends at that time, a great artist named Glen Phillips who had been the front man for Toad the Wet Sprocket, was starting his second career as an independent artist. I was sort of quasi-managing Glen, helping him a lot and I launched his first website. He wanted to do the whole e-commerce thing and sell his first solo record on his website, this is late ‘90s or early 2000’s. We were sitting around in the bar at Largo long after closing one night after he had done a little solo set, and he said, ‘What do you make of Napster?’ I said, ‘Just between you and me, I think it’s really cool. Does that offend you?’ And he said, ‘No! And that’s my problem.’ Everybody was so upset about Napster. Lars is going on about it, and Hillary Rosen is banging the drum and everybody’s threatening lawsuit. And he said, ‘As a guy who used to be in a band that people really loved, and as a guy who’s trying to draw some attention to what he’s doing now, I just wish I could let those people know that I’ve got a record and that I’m coming to town, or that I have a T-shirt that comes in lady’s sizes.’ You know, and his take was just so different. He was like, ‘I just think for most artists the first reaction should be that this is a community and it should be a tool set for me, and how do I exploit it to my advantage?’ And I was like, ‘that’s kinda cool.’

So I went and found this computer scientist buddy of mine and said, ‘what do you know about Napster? Tell me everything about Napster?’ Just by total chance he had met a group of other developers who had been working in this area of peer-mediated computing. He said, ‘Well, there are a lot of things we could do…’ And I said, ‘I’ve got this artist friend who really wants to find his fans on Napster and let them know what he’s doing now.’ He said, ‘let me think about that.’ Twenty-four hours later he tells me ‘I think I have something for you. I’ll have a prototype tonight at 7.’ Sure enough he showed me this amazing thing that he had very quickly thrown together. It was essentially a search engine that was collecting information about what people were searching for on Napster, what people were downloading and which artists people were adding to a playlist. Then we could segment that for purposes of marketing. So we did this little pilot with Glen Phillips where we approached Toad the Wet Sprocket fans and said, ‘hey, it’s Glen from Toad. I have a new record out and I’m giving away some mp3s, I have a tour calendar, and here it is.’ The conversion rate was unreal, it was getting like 20-25 percent conversions, we sold thousands of his independently released CDs off of glenphillips.com, a website that I was maintaining at that point out of my apartment in Fairfax. We just thought, ‘this is it. This is the future of the music industry.’ Little did we know that 10 years later that would almost be true. We were very eager and excited about what that first 6 months would hold, which was mostly pain and suffering.

RM64: So how did BigChampagne come into being?

EG: We did a few more of these experiments with artists after Glen Phillips. There was this sort of word of mouth thing in the artist community. Along the lines of, ‘these guys are doing this crazy stuff with Napster and online marketing.’ Then we started doing a lot of them. We worked with a whole bunch of L.A. bands, Bay Area bands and we got some press for that, and it was like, ‘hey these independent artists have a different attitude about Napster and they’re working with this technology start up.’ At that point there was still no name for it, you know, it wasn’t BigChampagne. It was just some guys.

Then I got a call from Jim Guerinot. And Jim said, ‘we get it, we think Napster is amazing.’ The Offspring wanted to put out their new record on Napster. That did not end up happening for reasons that had nothing to do with Guerinot or The Offspring, which I’m sure you know. But it started a really good conversation, and we did do some stuff to market and promote not just The Offspring, but a bunch of different bands of Jim’s. And through Jim we met the lawyer, of course. They always march the lawyer in, and that was Ken Hertz. He was effectively my co-founder, in that he was the one that looked at this little experiment of ours and said, ‘let’s turn this into a business, let’s build this. This could really be the path for the music industry with respect to Napster. This could be a better approach.’ And so it is, in a roundabout way, Kenny’s fault that I met Joe Fleischer.

RM64: Now at the time did you know of their (Ken & Joe) work with mp3.com?

EG: I was doing real-time research. I was Googling furiously. I guess this is before Google, so I was Yahooing to try to find out what I had fallen into. And yes, I was aware that they had worked together with varying degrees of success in the past.

RM64: Was this right after mp3.com?

EG: It was, it was virtually the same time. It’s when all these companies were falling through the door, were pouring into L.A., mostly from Northern California. And I will say this, completely unabashedly but also un-cynically, it could have gone so badly for us. This is the thing I think back on more often than anything else, you had a couple of smart geeks that had an idea and a little bit of technology. We basically showed up in Hollywood and said, ‘does anybody want to buy a watch?’

In hindsight, we could not have done better. We sort of fell into this little Largo community, where people loved music, were passionate about art and were all friends and invested in one another. That was great and really lucky. Then we caught the attention of slightly more powerful people in the business. During that time we sat down with everybody. And they were dazzled and wowed by the possibilities. It was cool to be knowledgeable and valuable to these people who were legendary. Who were we? We were somebody who knew something about Napster and that was a real currency, the elevator definitely got off on the top floor.

RM64: Let’s go back to Joe Fleischer for a minute.

EG: He’s Joe Fleischer. We met a lot of guys who were similarly impressive and we didn’t know who Joe was, so I don’t think in any way it was a forgone conclusion that we would work with him. We presented the opportunity to a short list of individuals, but when we offered the opportunity to Joe, he leapt over the desk and gave me a huge embrace. I couldn’t get the words out fast enough for him, he was already saying yes.

RM64: Has BigChampagne’s ‘mission statement’ changed over the last 10 years? If so, how?

EG: When people ask us ‘why are you still here?’ – usually in that spirit of why haven’t you gone away, I think the truest answer to that is what you just said. We’re only here because we had a really strong stubborn vision for what we wanted to do in building the company, and despite being given plenty of reasons to change that ‘mission’ at points along the way, we never have.

In my first conversations with artists 10 years ago, the vision was somebody should really provide insight and connectivity to these new internet audiences. At the time we were looking at Napster, but we knew there would be many more. The one element of the original proposition that I think was really just thwarted by big-business’s response to Napster, was the two-way communication aspect. The idea was about connecting artists with fans in a push and pull relationship. Now most of what we do is passive measurement, collecting information and insight rather than the marketing piece. That’s because for so long the legal squabbles made it impossible to communicate with fans. Napster had to disable all their communication tools. Setting that aside, 10 years ago our idea was to provide insight, analysis and measurement in this space that companies like Nielsen have always provided offline. Somebody has to do that online and we should be that company. We’re still here and basically that’s still the mission.

RM64: When broadband is fast enough, will music be streamed instead of downloaded? And what does that mean for the future of P2P networks?

EG: Increasingly it already is. By far the fastest growing mode of enjoying music is net-connected online streaming. There are a lot of variations on that; looking at things like Spotify, which is now caching temporary downloads. I think Spotify in a way is a turning point because it’s such a damn good product. It is in that rarified iTunes state of just working really well, it’s so clean and word of mouth is going to be unbelievable because it’s really that good.

RM64: So if the practice of streaming music is increasing, does that mean downloading is decreasing?

EG: The expectation was that with the proliferation of broadband and with more and more music being available to you wherever you go, and for free, that proportionally people would just stream more and download less. And we are seeing that increase, but the curious thing, or what we didn’t expect is that there are two things happening right now in tandem. One is the volume of music people stream rather than download is growing dramatically, the other is the volume of music individuals are downloading is also growing dramatically. That sounds a little counterintuitive because you think those two practices might be competitive, but in fact I think the growth of both is being driven by similar forces. New technologies don’t just affect the quality of streaming media, they affect the quality of downloaded media. And it is simple now.

The example that springs to mind is with The Beatles. It is simple now to click once and download and permanently own an unauthorized, free, uncompressed copy of the entirety of The Beatles re-released re-mastered stereo catalogue. I think it clocks in at several gigs worth of data and it is probably easier to click once to acquire the complete work of The Beatles that way, than it is to purchase it. It’s certainly easier than purchasing all those CDs, feeding them into a drive and ripping them using iTunes. So what we’re seeing is people are clicking once and downloading vast stores of music, and the kicker is more and more of it they never even listen to. More and more evidence suggests that people are hoarding and streaming. Storage is so cheap now that people are just grabbing everything and creating local libraries that they might not even listen to. It just all speaks to the point that whether you call it streaming or downloading, music is becoming so commoditized, it’s becoming so cheap. I don’t mean cheap in terms of 99 cents vs. $15 dollar CD, I mean in our minds and estimation. Music is just everywhere, its not scare, it’s cheap.

RM64: Does streaming affect BigChampagne’s business or how you look at things?

EG: It doesn’t. Our mantra is music-is-music-is-music, data-is-data-is-data. I remember very clearly being asked 10 years ago, almost to the month, are you guys going to be affected by the shuttering of Napster? What does this mean to your business? And my response then would be my response now, which is that as long as people continue to consume media online and off, there’s a lot of work to be done for companies like us. Because what we’re trying to do is create a manageable and comprehensible distillation of an increasingly complicated media landscape. It used to be pretty simple, you could listen on the radio, watch on MTV and buy a disc. They were effectively tracking all the key metrics that affect the business. Now you and I could sit here and get into a discussion about dozens of things that we would agree are key metrics now. Social networks, streaming, paid download, free downloads, etc… it goes on and on and on. So I think it’s always our goal and our mission to stay on the leading edge, to know about Spotify before anyone else knows about them. To continually incorporate new information early about music on the next social network, the next platform, the next retailer, that is our business. We don’t have to be overly concerned if it goes in the direction of streaming or downloading, whether proportionally more music becomes paid for or vice versa, we’re focused on the audience and how are they engaged and how are they consuming.

RM64: With tens of thousands of records being released each year, in many forms, filtering seems to be more and more an important concept. Can you speak to that?

EG: It’s the future of the business if there’s going to be a real viable and lucrative opportunity for what I call the ‘middle men,’ which is sort of an ugly but accurate way to describe all of us who sit between artists and fans and try to carve out a living. If there’s going to be a role for the rest of us, it has to at some level be tied into creating value along a filter. We’re now at the point where we all experience this personally; you don’t have to look at data to appreciate this. There’s just more information than we can deal with. It’s so hard for me sometimes at 3:15 in the morning to slap close the laptop, because the flow of information is still coming! We can’t manage what we already have in front of us, and that is already heavily filtered. We’ve gone to great lengths to filter and still it needs a filter. I think more and more as a music fan, not even someone thinking about it in a professional capacity, I wish I had better tools for helping me get to the stuff I really like. It still happens to me in that wonderful but accidental way all too often, when I come across some new music and it’s like wow! But the thought that follows right on the heels of that great feeling is ‘why didn’t I know about this?’ Why didn’t the many systems that I’ve put in place hip me to this? It’s all about the lack of a truly great individualized and personally tailored filter.

RM64: In your mind what is the simplest, smartest, most effective solution for people to have music in mass quantities, while at the same time having it monetized so artists can get paid?

EG: It very much depends on what you think needs to be fixed. If you ask music fans, most of them would probably tell you ‘it ain’t broke’. I as a music fan have never been happier than I am right now in my decades of being a music fan. Because there’s so much great music, so many ways to discover it, fall into it and share it with friends. A lot of artists will tell you the same thing. The many evolutions in technologies and culture have really benefited the bands and the fans. But I suspect what you’re asking is, how do we get so much of the money that was in the category and has now gone out, back in the category.

RM64: Yes

EG: We love paying for things. This is the thing that is so nuanced that I think a lot of businesses, especially those with a long history of selling something in a particular way, struggle to appreciate. It is not difficult to separate Americans from their money. We hate being aware that we’re paying for things, we hate thinking about paying for things and contemplating whether or not we want to pay for them. We spend so much money passively on things that are fleeting in our conscience but very real in terms of our pocketbooks. Gym memberships, premium cable, car payments, etc. and once something becomes part of your monthly nut, it sort of disappears and the only thing you’re tracking are changes to that nut. The hardest thing is to get someone online to reach for his or her wallet. Even Amazon doesn’t do it, they get you to do it once and ever since they’ve been trading on the fact they have the information and you don’t have to reach for your wallet. The toughest thing is now we’re at a point when individual unit value of music is terrifyingly diminished, the lowest it’s ever been. When you start doing qualitative research on this, people value music not at a dollar a song, but something more like 10, 15, 20 or maybe 25 cents a song. So that’s terrifying, we can’t eat, we can’t live, but the category has greater value than it’s ever had. So I think the trick is to find more and more ways to passively monetize music. And that’s consultant speak, because it’s easier said than done, and what does that really mean.

RM64: So are we headed to an all-you-can-eat music ISP music subscription system?

EG: I think this was an idea that traditional music companies were really resistant to for a long time, for all the reasons we talked about. Particularly not wanting to devalue music or create a low per-unit price for music. Increasingly though music companies are excited about this concept, but the problem or challenge is very much in the details. The carriers or those who would actually be implementing these additional charges for so-called all-you-can-eat music downloads, don’t necessarily have the same vision as music companies do. I’ve sat in the room many times when you’ve got on the one side ISPs and on the other side traditional music companies, and there’s just this vast trench, this huge gulf between the two sides. I think partly it has to do with the fact that music would be just the beginning, so people who maintain the networks are concerned that their networks would be so burdened with additional intellectual property that it would be too much. Suffice it to say, I was and remain a huge proponent of the notion that we have to find ways to collect money for intellectual property and not just use it. However when my feet are really held to the fire, I’m hard pressed to find an easy path to implementation of that broad concept. It’s not by any means an easy fix.

RM64: What is the thing that makes it most difficult?

EG: One word answer—fear. I just think that the incumbents, the traditional businesses that were built on selling music in a very different way, are wart about what that will do to the bottom line. Remember, we all, they all, bet wrong several times in the last 10 years. Thinking okay, at the expense of this traditional business that has been so good to me, I’m going to start laying the groundwork for something new, transition. Those transitions have been unkind. Every time we let go of some of the business we’ve known and done so well by, we lose another step, we lose ground. So what you’re talking about is sort of the ultimate transition, dramatically away from the notion of music as widgets that we purchase one by one and stack on a shelf, to music as water or air.

I think because the last 10 years have been so unkind to some of the biggest businesses in music, they’re terrified of that. Having said that I think it’s inevitable, because it’s already a present day reality. Music does move that way, it is not scarce, people consume as much of it as they want and in as many different ways as they want. They are exploring independent music in an unprecedented way, and people have more exposure and access to a greater variety of music. So that’s not forecasting it’s not the future, it’s the present and in fact it’s the near term past. We’ve been living in that world. I think because of that, it can only become the economic platform that changes, there’s no other outcome. However, it’s still at this moment very much at odds with the business objectives of some of the biggest and most powerful music companies.

RM64: You mentioned that music would be just the beginning in this scenario. In what ways do you see it spreading to other forms of intellectual property?

EG: The fascinating thing about this question of why can’t we do it this way, is that we already engage with so many different kinds of content in this manner. I recently got back from the International Television Festival in Edinburgh Scotland, and there we sat and talked with an industry that is just starting to entertain these questions that are kind of long-standing questions for the music business. These guys are like babes in the woods, they are just starting to think about what happens to their business, which has been a great business for a long time, when all of this internet stuff comes crashing in. There were a lot of people who are just TV viewers in attendance at the conference raising hands and asking versions of the question we’ve been discussing. ‘Can’t I just pay a little more to what I already pay for so I can just watch the shows when I want and put them on my phone, etc?’ It was exciting in a way to watch these deer in the headlights, these executives contemplating for the first time how far apart their traditional business and the wants of the consumer are. So the good news for music is that we’re veterans, we’re inching closer to this. Other industries like film and television are not even beginning to appreciate how profoundly all of this that has already happened to music, is going to affect them in the future.

RM64: We recently mentioned the TEDx music event that was held here in Los Angeles, and I know you participated in that. Can you tell us how you got involved and elaborate on the focus of these events?

EG: Like everybody, I’ve been a fan of the TED organization and a student of the TED presentations online for a longtime now. I was lucky enough to attend some of the events in the past, but I’ve never been involved as a presenter until recently. The reason we were invited to present is we now share a wall with TED in one of their offices they’ve opened up in Los Angeles. So we came to know them and they came to know a little bit about what we do. What you know about TED if you’ve watched any of the videos of the presentations that they sponsor is that they’re all intended for the rest of us. What you usually get is a conference full of neurosurgeons and one of them will get up and speak to the rest about a new technique in neurosurgery that’s frankly lost on anyone outside of that room. And we do that too. We get together and have a conference to talk about narrow issues that are very inside baseball and it would not be interesting to anyone outside of the industry. TED’s rule is essentially, you know something that maybe other people in the world don’t, explain it to them. Not to your colleagues, explain it to the rest of the world, as you would have to at a cocktail party with none of your work friends there. So what they asked us to do is explain the impact of all these new technologies on traditional entertainment media, both in terms of a short history lesson about what has happened over the last 10 years and the implications for the business going forward. So it was kind of a cool talk for me because it forced me to be very disciplined about not taking anything for granted.

So we got together a couple of weeks ago, I did this broad-based presentation, most of the people who were in the room found it remedial because it was very broad, but the people who will be watching at home will appreciate that part. And then we just had a really open discussion about issues in the business and tried to create a climate where anybody could talk about anything they wanted. And the format for this particular gathering called TEDx, which takes place outside of the TED conference, worked really well. We had a couple performances and an open discussion forum and then chalk talk. Ken Hertz who hosted it decided he wants to repeat it and make it a regular event.

RM64: What was the main reason behind holding an event like this?

EG: I think the TEDx event was partly a reaction to what a lot of us view as pretty uninspiring recent gatherings of people in the music business in particular. It feels like a lot of enthusiasm and imagination has gone out of the room, not without good reason. It’s a tough time for the business, people are focused on fundamentals and not as dazzled by new ideas, but at the same time it’s really important that the conversation stays alive and new ideas are generated. The goal was to try and create a conversation in a venue people are a little more excited about and not the same old scenario. And I would say on that point we did okay, we all left with a lot of clear ideas of how we can do better. As long as that remains the goal, it will be an event worth repeating. As soon as we’re just getting together because it’s been 60 days since the last one, we’re in trouble. Right now I think everyone’s really focused on how to create a regular gathering with a rotating group of people, and a forum where people come in and out and get a lot of new ideas. For the moment we’re feeling really optimistic about what we can do.

RM64: Is there an ultimate event or change the music business is heading for? If so, what do you think it could be?

EG: I think the singular event is the mirage in the desert, and I’m speaking as a guy who has been crawling toward it for a decade now. We used to explicitly talk in those terms, ‘next year will be the year’, as if something watershed were coming, but I think that’s now been definitively proven, at least to me, to be an expectation that is only in our heads. What we’re talking about is a continual change-over, things are evolving and changing in small ways over the hours we’ve sat here talking. They’re not always and in fact they’re almost never easy to visualize. iTunes was a big deal that everyone can point to. There are very few things that have been that way over the last 10 years, and in fact even iTunes in hindsight was a very gradual evolution. They’re now the largest retailer in the market, but it took a long time getting there. I no longer think there’s a point on the timeline where something catastrophic or monumentally revelatory is going to happen. For better or for worse, we’re just talking about sands running through hourglasses or whatever bad visual metaphors I can employ here. The likelihood is that we’re going to wake up at certain points along the way and appreciate in subtle ways how much the business has changed when we weren’t paying attention or appreciating the gradual change. I don’t think you can say its next year or 3 years from now. It’s now, its right now, the business is changing dramatically. Companies will rise and fall, but not all on the same day and there probably won’t be a really satisfying moment. We used to talk about the bang, then we talked about the whimper, and now I don’t think it’s either. I think it’s really just the ever-evolving story.

RM64: We couldn’t think of a better line to end with. Thanks for sitting down with us today. It was a lot of fun.

EG: Any time.