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Los Angeles
Friday, May 27, 2022

INTERVIEW—Downloaded



David Goldberg


Title:

Co-founder and chief executive


Organization:

Launch Media Inc.


Born:

Chicago, 1967


Education:

B.A. History and Government from Harvard University


Career Turning Point:

Leaving a consulting firm and taking a job as a consultant for Capitol Records.


Most Admired People:

Many, including Richard Branson, Martin Luther King and Peter Gabriel.


Hobbies:

Music, skiing and travel.


Personal:

Single, no children


David Goldberg, co-founder of Launch Media, is now watching his online music source hit its next iteration as a unit of Yahoo

The ranks of online music businesses are thinning as the industry consolidates seemingly by the day. No one knows that better than Launch Media Inc. chief executive and co-founder David Goldberg.

His Santa Monica company was one of the latest online music businesses to be swallowed by a giant. Yahoo Inc. announced in late June that it would pay $12 million in cash for Launch, valuing the company’s outstanding shares at 92 cents, some 50 percent above their trading range at the time.

Goldberg established Launch as one of the scrappiest start-ups around. The use of personalized online radio stations, music videos on demand and music news attracted 6.5 million users and some big-name advertisers not enough, however, to take the company to profitability or to raise the additional capital that it needed to go it alone.


Question:

After the Yahoo deal, some industry observers decried the end of the media start-up era. Is it?

Answer: There’s always room for media start-ups. They have to be done differently than they have in the last few years. They’re not going to be financed by VCs who want to get an instant return on their investment. They’re not necessarily destined to be public companies. The way they’re financed will be by existing media companies, by individual investors or by scrappy entrepreneurs who will bootstrap them for a while.

Q: Has Wall Street been unfairly hard on Launch?

A: We realized that there isn’t really an investor base for small public media companies. We went public because technology investors were willing, for a short period of time, to invest in Internet companies of any type.

Q: Now they’re running from Internet companies of almost any type, especially ad-based ones.

A: There are bad advertising-based business models that were created in the Internet space, but they’re not all bad. Some of the biggest and best companies in the world make most of their profits from advertising. The bigger problem with the public markets is that the technology investors quickly realized they didn’t understand media companies.

Q: What about media investors?

A: Media investors only invest in really big public media companies. We met with a number of institutional investors along the way who said they liked what we were doing and the opportunity, but said “call us when you get to a market cap of a billion and a half.”

Q: What is it about the media business that people don’t get?

A: It’s fairly easy to understand a technology company like Intel. They sell a processor. They make a certain margin on it. They have certain fixed costs. They sell more processors and then they make more money. Media businesses are a two-step thing. You can get more users but if you don’t sell more advertising, those users can cost money in the short-term.

Q: Do you have any regrets about taking Launch public?

A: It was a good thing for Launch to go public at the time because we were able to raise a lot of capital very inexpensively. It was never something that I was particularly excited about. It was never our goal to be public. We never got the value from being public that we wanted, such as the ability to raise additional capital.

Q: Is the consolidation in the online music business being caused in part by the lawsuits filed by the Recording Industry Association of America on behalf of the record labels?

A: No. There have been some legitimate copyright infringement actions against things like Napster. People were clearly stealing music. In other cases, it’s not clear that it’s about copyright infringement.

Q: Is the RIAA’s suit filed against Launch one of those other cases?

A: The lawyers don’t want me to comment about our lawsuits. I do think that the courts are not the best place to figure out about the future of the way music will be delivered to people. The courts are not equipped to use past rulings to figure out new stuff. If we do that we’ll end up with some of the wrong answers. The consolidation has more to do with the capital markets and the advertising recession.

Q: What are some of the lessons you’ve learned since starting Launch in 1993?

A: We realized very early on is that you didn’t want to be in an adversarial relationship with the record labels.

Q: But you are.

A: What we’re trying to do shouldn’t put us in that adversarial position. We are in some ways helping them to connect with the consumers. They don’t have any way to build a relationship with a large base of consumers because the consumers don’t know and don’t care about labels. There needs to be somebody in the middle space.

Q: What’s it like now at Launch with the Yahoo deal nearly closed?

A: It’s been an exciting couple of months, sometimes a little too exciting. Now that the deal is done we can get back to focusing on the business and not worry about the deal or the stock price. We’re working on closing the transaction by the end of the quarter. In the meantime, we’re doing a lot of planning on how we’re going to be integrated. It’s going to be different than the way Yahoo has done transactions in the past. With Geocities, for example, they got everyone to move up north and they didn’t keep anyone in L.A. We’re staying here and keeping our team in place.

Q: Yahoo is known for insisting on major cuts at the smaller companies it acquires. Is that a possibility with Launch?

A: When the deal closes we’re going to make some changes and move people around. I can’t really say there will be no layoffs. There probably are some overlapping positions. But we’re not anticipating large numbers of layoffs. That’s not why Yahoo bought us.

Q: Yahoo or not, these are still uncertain times for online media companies. What are the biggest risks?

A: We have a big opportunity to win the music space as Yahoo. The good news about there being a lot less capital is that there’s a lot less competition too. Unfortunately, many of the risks are associated with having to convince the record labels to do something they should do anyway.

Q: How has your vision of the music industry changed?

A: I had the original idea for Launch eight years ago. It’s kind of ironic that Launch is older than Yahoo. Not as big, but older. I think the opportunity that we saw back then is still there in a much bigger way than we guessed it would be. It’s closer to being realized. The technology, while it has taken off dramatically, is still not quite there. But at least now we can really see how it’s going to get there.

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