Vancouver Magazine

Business

The Guru - continued

By Chris Cannon published Nov 1, 2008

But if today’s label fears are based on precedents, so is their short-sightedness: home video actually increased profits for the movie industry, just as radio had done decades earlier for the music industry. So while modern peer-to-peer technology is considered a plague by the major labels, McBride feels the solution is to learn how to commodify the technology rather than sue the innovators. “I don’t think it [the music industry] was cut in half by kids ripping,” he claims, referring to steadily declining CD sales. “I think it was cut in half by a business that couldn’t and wouldn’t look at the behaviour of its consumer and understand it and learn how to monetize it. Laws, litigation, legislation, is not gonna solve this issue. What’s gonna solve it is understanding who you’re selling to, and understanding how a consumer consumes.”

It’s easy—even stylish—to point fingers at the corporate monster, but when McBride defends the power of consumer choice, he puts his money where his mouth is. When the RIAA (Recording Industry Association of America) sued a Texas family in 2006 because the children were downloading songs from the Internet, Nettwerk paid the family’s legal fees and promised to pay any damages. Two years into the case, the fight is still on.

Some view Nettwerk and McBride as enemies of copyright holders everywhere, but McBride claims they’re not fighting to win, necessarily; they just want to make the RIAA understand the futility of ignoring the inevitable. “I believe in copyright,” he says. “I believe in the value of intellectual property. Nettwerk’s a member of the RIAA. But this has got to be one of the stupidest things I’ve seen in a long time. Suing your consumer, and all the bad media that comes with it, does not build any goodwill. It doesn’t build up any sort of business relationship. How can you sue someone and maybe six months later ask them to buy a concert ticket?

“ Litigation, or legislation, cannot change behaviour. A few kings have lost their heads to that exact same principle. If you try to tell them what to do, chances are they’ll think you’re trying to do something to them. So it doesn’t really matter in this country, or in America, or anywhere else in the world, how governing bodies decide to change the copyright law. Because the consumer has moved past it. And the genie’s not going back in the bottle.”

While McBride is often celebrated as a champion of the music fan, that doesn’t mean he’s an enemy of the industry; on the contrary, his business model seeks to skirt the age-old animosity between the labels and the fan base by exploiting the tendency of fans to share music with their friends. In the late 1980s, Nettwerk hit upon the idea of micromarketing Sarah McLachlan—its first international breakthrough artist—by paying attention to sales spikes in small cities and then working to build her appeal in those places. By relying on “überfans” to build these local markets, Nettwerk helped McLachlan’s 1993 album Fumbling Towards Ecstasy sell a quiet million, increasing her presence and introducing her to an international audience.

Today Google Analytics and social networking sites have made the practice of micromarketing far more sophisticated, but no amount of technology can replace the fans. “Your überfans, they’re your record company,” says McBride, who organizes fans by city, state, and region, with local leaders cobbling together street teams to promote shows. He points to Brand New, one of the 40-plus acts that boogie under his fingertips. According to McBride, in 2007 the group sold about a half-million tickets to 200 shows—with a mere $1,000 spent on advertising for the entire tour. The secret to this sort of cheap, wide-scale market penetration is involving fans in an artist’s career—running contests, collecting data through the artist Web sites, involving fans in artist promotion. “Every artist [we manage] has a street team behind them,” says McBride, who expanded Nettwerk’s reach by opening branches in New York, Los Angeles, Boston, Nashville, London, and Hamburg. “It’s quite labour-intensive, but it’s worth it.”

Regardless of his command of technology and his devotion to the fans, McBride still confounds the industry giants and even his own artists with his tendency to dive down rabbit holes just to see if there are any carrots to be found. By exploring the potential of Internet downloading—generally thought of as the enemy of hard sales—he has raised more than a few of his peers’ eyebrows. Bruce Allen, who manages artists including Bryan Adams, Anne Murray, and Michael Bublé, says his business model is “180 degrees apart” from McBride’s. “Terry has completely eschewed the old model of doing business,” says Allen. “I agree that the old system is broke, but the biggest acts in the world still go through it. Why? Profile and distribution. Without those two things, a song or an artist cannot reach their utmost potential. Remember, the major monies an artist can earn come via touring. The Internet has not proved that it can drive an act to major headline status.” Perhaps not, but while Allen currently houses four artists who’ve made a fortune from music, McBride has more than 40 who make a living at it.