People Interview: Paying the Piper
Andy Schuon heads a record industry-backed effort to head off peer-to-peer Internet music swapping
By CHRISTOPHER KEOUGH
Staff Reporter
Andy Schuon finds himself at a crossroads in the music industry. The president and chief executive of subscription-based Pressplay, the new Internet music site backed by Sony Music Entertainment and Universal Music Group, Schuon is leading an effort to legitimize the transfer of music over the Internet. Pressplay and its main competition, Musicnet (owned jointly by Warner Music Group, BMG Entertainment, EMI Recorded Music and Zomba Records), are the recording industry’s subscription-based answer to peer-to-peer file-sharing services that allow Internet users to trade files for free.
Schuon started in the music industry by sending a postcard to radio station KOZZ in Reno when he was 15. A guest DJ spot and an internship followed. He went on to program radio stations in Seattle and Denver and at KROQ in Los Angeles, where he claims morning men Kevin and Bean as among his successes.
After serving as executive vice president of programming at MTV and VH1, he was president and chief operating officer at Jimmy and Doug’s FarmClub, Universal Music Group’s now defunct Web site. Pressplay has four membership levels, ranging in price from $9.95 to $24.95 per month, that allow users to download between 30 and 100 songs monthly.
Question: What makes you think people are going to pay for music files, especially kids who don’t have a lot of money?
Answer: Well, we didn’t create Pressplay thinking about the short term. We’re thinking about this business as a long-term shift to acquire music online. They aren’t just doing it because it’s free. They’re doing it because they want the content. It’s the way their computer is the center of entertainment the ability to, in a flexible fashion, create a library of music and organize it online is something that people want to do.
Q: Who is your target audience?
A: We’re starting out knowing that the illegitimate services are out there and are dominated by young people. We started out targeting 18 to 34 year-olds, skewing a little more male than female at first. A lot of them, from our research, are passionate music fans who haven’t had time to monkey around with the illegitimate services.
Q: Haven’t most passionate fans tried the illegitimate services?
A: We definitely think that people have tried the Napsters we know that a lot of 18 to 34 year-olds have. But we have the potential, if we do our job right, to be a service that is really part of someone’s life. It’s gonna be here tomorrow, and next week and next month, and always with something new content and the new releases. And it’s a legitimate business.
Q: Have you used the illegitimate services yourself?
A: Definitely. It’s what we looked at in developing our service.
Q: Other than for research purposes?
A: I’ve been involved in this process for a long time. Before I started at Pressplay I was president of FarmClub.com, which was an online music company as well, owned by Universal. We had our own online music destination and we had thousands of our artists and were developing subscription services.
Q: What’s going to be the difference between Pressplay and the illegitimate peer-to-peer services, like Kazaa? How do you say to users of the illegitimate services “this is better?”
A: Over time we believe it will be harder to get music from the free services. We have to expect that people with copyrights want to get paid. They want to support businesses that respect their copyrights, track them and monetize them. This is what Pressplay does. The reason record labels charge for music is they’re the bank that funds the recording and markets the artist to the point where you desire the song in the first place.
The other part of the argument is you get what you pay for. You get the ability to get a download as fast as your connection on the other side. The consumer is just now starting to figure out what on-demand streaming is about.
Q: Who’s making the money?
A: Well, Pressplay makes a little, and a large portion of the money is turned over to the content companies who pay for the publishing and they’re paid for the copyrights, for the actual songs and the artists. So it’s artists, the labels, the publishers, Pressplay, and then people who provide our bandwidth and things like that.
Q: How much of a dollar does Pressplay get?
A: I won’t break down any financials.
Q: Is it possible to ever protect music files on the Internet? Once they’re downloaded, is it possible to protect them through encryption?
A: We send along a license that basically says here’s what you can do with it. And you can put it on two computers. You can choose the song to burn. If you stop paying, the song won’t work after a certain grace period, things like that. It has worked for us so far. Could I predict whether or not there’s someone out there who can crack any Digital Rights Management software? Who knows? That’s a question for Microsoft.
Q: What does Pressplay need to do to succeed?
A: It’s a subscription business model. We wouldn’t rule out the possibility of doing key strategic marketing things in the future, or some advertising. But for the most part we are not selling advertising on Pressplay. It’s a paid service. We’re not selling you anything but the world’s music online. We think that’s a real advantage. We make our money selling subscriptions. We definitely need more than we have now to break even and be profitable, but that’s how we’ll do it.
Q: Do you know how many you need?
A: Yes.
Q: Can you disclose that?
A: No. We haven’t disclosed any of our financials.
Q: Without legitimate services like Pressplay, would record sales have gone down?
A: As long as the illegitimate file-sharing services are out there, those services will make it difficult for Pressplay to go about it legitimately, in a broad sense. The ability for services like Pressplay to add on to the already robust record industry will be greatly hampered by those services.
Q: But will illegitimate services affect record sales?
A: Absolutely.
Q: Has there been proof of that to date?
A: The proof we look at is in people’s behavior and in the industry reports we’ve seen. They show people are trading songs at record amounts and not paying for them. And the record industry is actually down this year.
Q: Part of the appeal of the illegitimate services are the bootlegs and outtakes that are available. Is that a feature that’s going to be available as well through Pressplay?
A: There will be certain things that you can’t license legitimately, that there aren’t the rights for. If someone takes a performance off of television that ends up on an illegitimate service half an hour later, we can’t compete with that.
Q: Is it true that certain artists and their management have ordered that their content not be provided on Pressplay?
A: You’d have to talk to the labels about that. We get kind of a blanket content deal and whatever the label gives us we put into the service. We make requests for content and it comes into our service. I’ve read in the paper about different managers and artists, managers more than artists, who had some issues with their record companies (licensing content to online services) and hopefully they’ll resolve it.
Q: Do artists on your play list have to be signed to either Sony or Universal labels?
A: No. It can be anybody. In our case we already have the music of Sony, Universal, EMI and 10 independent labels as part of our service.
Q: Who loses from the success of Pressplay?
A: There is no loser. We’re talking about people who are passionate about music but maybe aren’t able to go into the record store as often as they once could. So there’s a lot opportunity for found money there.
Q: What about the radio?
A: Radio continues to derive its revenue from advertising. I can’t see that stopping.
PROFILE:
Andy Schuon
Title: President and chief executive
Organization: Pressplay
Born: Ann Arbor, Mich., 1964
Education: High school diploma, some college at University of Nevada, Reno
Career Turning Point: Taking a job as programming director at KROQ
Most Admired Person: Father
Personal: Engaged
