Company: Napster Inc.
Born: 1953; Fontainebleau, France
Education: San Diego State University, B.A. in telecommunications and film
Career Turning Point: After college, when he got a job carrying cameras around at a CBS affiliate in San Diego
Most Influential People: Bill Gorog, his father
Personal: Three grown sons; engaged to Kathy Taggares
Hobbies: Music, guitar, sailing
Napster Inc. Chief Executive Chris Gorog was born into an entrepreneurial family: His father, Bill Gorog, founded Lexis/Nexis and pioneered online banking. Gorog jokes about his typical day being "a journey through hell" as the world of digital music shakes out, he faces a different competitive landscape every morning. In his downtime, he plays loud blues on his electric guitar, making sounds that his sheepdog seems to enjoy. Gorog runs music-download company Napster with the belief that in the world of digital music, owning bits and bytes of songs is irrelevant. "You own them on your hard drive, but try selling them," he said. He believes the commercial value of music in the future rests in an unlimited access which is what Napster provides. The music subscription business is the legal incarnation of the original Napster, a free-downloading pioneer that got pummeled in a litigation battle with the music industry in 2000. Last year, Napster's subscription base quadrupled to 830,000. The Business Journal sat down with Gorog at his West Hollywood office for a conversation about Napster's challenges and how his personal experiences shape his approach to running a company.
Question: Are you satisfied with the kind of comeback Napster has made from its illegal downloading business?
Answer: Definitely not. I'm very excited about what we have achieved, but we have very grand aspirations. Our vision is really rooted in the original idea in 1999 when this college kid back East outside Boston created this mechanism for anyone to go to their PC and have unlimited access to the world's music catalog. Virtually overnight, the entertainment industry had changed forever. With the new incarnation of Napster, what we've tried to do is basically the exact same thing in a legal environment. The vision is quite simply to provide the greatest digital music experience anywhere on your PC, in your living room, out on the go with your portable device, in your car. This doesn't mean paying a buck for a track or 10 bucks an album, but paying a fee to have unfettered access to the world's music catalog.
Q: Where are you today versus where you want to be as a leader in digital music?
A: It's very easy to say we want our customers to have unlimited access to the world's music. It's very hard to deliver that. And while we can technically do that today, we can improve that experience immeasurably by making it easier. From a business perspective, we have 800,000 subscribers today. We'd like to have 80 million.
Q: How do you familiarize your consumers with a subscription-based digital music experience?
A: There's a leap that consumers have to make to fully embrace the Napster music experience that is, you don't have to own music. Right now, most people's understanding of the digital music experience in the legal environment is, instead of buying a shining disk at a retail store, you buy bits and bytes over the Web and download it to the hard-drive. So for most people, they are still hung up on the idea of owning it. We have a store where you can go and buy an album for $10 bucks, but we don't even promote it. We promote the subscription business. Because if I'm listening to Miles Davis on Napster and I see that other members like John Coltrane, and I click on John Coltrane, I want to hear it. I don't want to have to make a buying decision.
Q: You had a dynamic year, with the acquisition of AOL's on-demand music service and a wide array of partnerships with foreign carriers. When do you expect to cash in on these transactions?
A: Last quarter we became cash flow positive for the first time. We told our investors we would be breaking even or become cash flow positive for the entire fiscal year. We now have close to $70 million on the balance sheet with no debt. The next 12 to 18 months will be critical to our business. In that time, Apple will ship about 10 million iPhones and Motorola, Samsung, LG and all the global telecom companies will ship about a billion phones. Most of these phones will be music enabled and compatible with Napster. Up until now, we've been building this business in the shadow of the iPod. So if we went out and spoke to 100 people, 80 of them would have iPods in their pocket and basically be eliminated as potential customers. That is about to change.
Q: What is your vision for expanding your business globally? Your campaigns in Japan, Germany, and the U.K. were quite extensive this year.
A: We have been more aggressive than one would perhaps think is prudent for a young company in terms of expanding internationally. The reason is really two-fold. We can't slow the world down and ask for Europe and Asia to be patient for digital music for a few years until we get there. If we don't get there, we'll be supplanted by local competitors. The second issue, interestingly, is that Napster is and was a global phenomenon. The brand was originally just as well known in the U.K., Germany and Japan as in the United States. When we resurrected the old Napster, we felt it very important to get into the top four or five music territories in the world as fast as possible.
Q: What is the greatest challenge facing the industry?
A: Our greatest challenge is not being deterred from our vision. There's certainly empirical evidence that strongly suggest that people don't want subscription music and prefer downloads. The greatest challenge facing the industry is having the conviction to tough it out on behalf of the model we know in our heart of hearts is just infinitely better than anything out there.
Q: What songs are on your music-enabled phone?
A: I have very eclectic taste. The new Mark Knopfler album is on there right now. I have a playlist from Napster, called Americana, which is a cool mix of folk, bluegrass and blues. My MP3 player on my phone always has a healthy amount of Mozart because I find it most relaxing when I'm on airplanes.
Q: What is your typical day like?
A: A journey through hell. My typical day starts about 7 a.m. in my kitchen with my sheepdog with the L.A. Times and the Wall Street Journal and invariably, almost every single day there's something absolutely shocking that affects our business. My business is so fast-moving that something completely Earth-shattering happens virtually every day. One of my competitors has been bought. One of my competitors has left the business. One of my competitors has a completely new business model that could allegedly turn the industry upside down over night. A multibillion-dollar global company has announced its entry into digital music business. So that's how my day starts. And then you assimilate that and try to make sense out of it.
Q: It's like when the band Radiohead started to market its latest album through downloads where fans can name the price.
A: Yes. I believe long term that that the "owners" of the copyright, be they artists, labels, music publishers, will ultimately set the pricing indeed from free to expensive and e-retailers will then add on a margin above the wholesale pricing. This is how it should work. Back catalog might be 20 cents. A new hot single might be $1.49. An artist like Radiohead or Prince might want to give it away for a period as a promotion. But we don't expect to be impacted too much by this variable pricing for tracks and albums with our model of unlimited access for a monthly fee. Individual wholesale pricing doesn't really come into play with our model.
Q: What do you enjoy doing when you aren't at work?
A: I love playing music. I'm in a band. I have a couple of bands actually. But mostly I play music by myself. I play acoustic in my office or I go downstairs in my home where I have a fairly elaborate stage set up drums, bass, speakers, amps and I'll play some music CD I've burned from Napster and light up my electric guitar. Often times I play very loud.
Q: What type of music?
A: Mostly blues-based rock.
Q: Does your family enjoy your music?
A: I live with my long-time girlfriend. She says she loves it. And I also have a 100-pound sheepdog who really loves it. He comes down and sits and stares at me while I'm playing. He acts like he really likes it.
Q: When you were a child, is this what you envisioned you'd be doing when you grew up?
A: Very much so. I grew up in Ohio but I wasn't like the other kids in Ohio. I loved my friends and I loved the place I grew up but I always had my mind on other things. I was always focused on the media and fascinated with everything related to the media magazines, music, television, movies. I ended up coming out to the West to pursue all of it. I went to San Diego State University with a special major you can invent, which was for me was telecommunications, speech communication and journalism. If you think about that, that's a wide panoply of media. From there, I went to San Diego to work for a CBS affiliate carrying a camera around, then I went to work for Disney, then I was in motion pictures for a long time. I was deeply involved in the music business and then digital music software and now digital music. I've just been extraordinarily fortunate because I've been able to do everything I could have ever imagined simply by having this very broad vision and then going after it without having any expectations except for the thrill of simply doing it. I've had so much fun.
Q: What was your first job?
A: I got my first job when I was 13 as a paperboy. I had at one point in time, four paper routes at the same time. I delivered the morning daily, afternoon daily and the Thursday and the Sunday New York Times in Dayton, Ohio. I was a very industrious boy. It was very important for me to be independent and I equated being independent with making money. If you had money, nobody could tell you what to do.
Q: What was your childhood like?
A: It was wonderful. I was one of six children. I lived in a wonderful, Midwestern community called Oakwood. Lots of friends, lots of chaos with my big family and their big families. It was very musical. I had an eighth-grade band that was pretty good.
Q: What was the best advice you've ever gotten?
A: When I was in my 30s, I found myself moments from closing a management buyout of ITC Entertainment Group, $100 million in equity, $150 million in debt, where I would be the president of this business responsible for more than 200 people. I felt a little overwhelmed because even though I was the architect of the idea, I had never really done anything like that before. So I called my dad. And my dad said something hysterically funny but also very true and helped me find my compass again. He said, "You know, it's not like you were qualified for anything else you've done in your life. I don't know why you're worried about it now." In a funny way, it absolutely gave me the courage to go forward. It was his way of saying, "You'll figure it out; you have in the past."
Q: Who most influenced your career?
A: I'm kind of a clone of my dad in terms of the way I behave and the way he behaves. He was not putting myself in the same category an extraordinary technology entrepreneur. One thing that all of his achievements have in common is a stubborn, resolute vision and an unbelievable passion and tenacity and then, at the end of the day, an accomplishment. My father invented Lexis/Nexis. He was a pioneer of electronic banking. He also designed photo optics systems for the mission to the moon. He graduated from West Point, and then he started a company called Data Corp., which was a vehicle for all his entrepreneurial pursuits. He was monumentally influential in my life. I just didn't know it for a long time because, as a kid, I really didn't see my dad because he was out doing all these things.
Q: What was the toughest stretch of your career?
A: The most unsatisfying part of my career was when I was at Universal because nothing was getting done. And that makes me very unhappy. I was president of business development, responsible for creating new exciting things in the world, but the company was not in an expansionary mode at the time.
Q: What's the best part of being a chief executive?
A: The best part right now at Napster is having the pride of being a part of creating something very special, something that really adds value to people's lives. I really mean that. We're in this new age that's changing the way media is distributed in the world and how consumers enjoy it comparable to the Industrial Revolution. I believe it's really important mostly because I believe it makes people really happy when they use the product.
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