more...monday, 11th aug 2008

An Old Rocker Gets Digital

Peter Gabriel, a founder of the rock group Genesis, is today an investor in Internet music delivery systems.

By FRED GOODMAN

Published: August 9, 2008

WHEN Charles Grimsdale, a British investor, started the Internet music venture OD2 in 1999, he had a hard time persuading large record companies to license their music.

But when he approached the rock musician Peter Gabriel about putting his music catalog online, he got a very different response:

Mr. Gabriel was not only willing, he also wanted to take a stake in the company.

Peter Gabriel during a festival in Switzerland. He was an early embracer of digital recording.

While major record companies have spent heavily on the Internet with relatively little to show, Mr. Gabriel and his partners started OD2 on a tight budget,

built it into a digital delivery platform that retailers like Virgin used on their Web sites, and sold it in 2004 for $40.5 million.

“When most labels were banging their heads, he got it and saw the liberating value of Internet distribution to artists, and that’s what excited him,” says Mr. Grimsdale, a partner at Eden Ventures, of Mr. Gabriel.

“He has a very good sense technologically of what’s going to work.”

OD2’s success also catapulted Mr. Gabriel, after decades as a top-selling artist, into a second career as a powerful player in the emerging online music industry,

a move that once seemed more outlandish than the costumes he wore in the early 1970s as a singer for the rock group Genesis.

But Mr. Gabriel, the son of an inventor, keeps devising new ways for musicians and record labels to use the Web to control their work and to make — not lose — money.

His two newest Internet ventures — We7, an advertising-driven music site, and TheFilter.com, which offers personally tailored multimedia recommendations

— have received strong financial backing and positive user reviews in early tests.

As an artist, Mr. Gabriel was quick to embrace new technologies like music videos, interactive CDs and high-definition television.

His 1982 release featuring the popular single “Shock the Monkey” was among the first completely digital recordings.

“He’s very technically savvy,” says Tom Teichman, chairman

of Spark Ventures, which is a partner with Mr. Gabriel on We7.

“He carries all the latest gadgets, understands what the artistic involvement can be and is very clued up on the business model.

That’s an extremely unusual combination, and he does it in a chummy way.”

Those attributes set Mr. Gabriel apart from most musicians and, indeed, from most record executives.

“Technology has always shaped music,” he says, “be it 78s, 45s, LPs or CDs, it changes the shape of the music.

With downloading, the artistic change hasn’t really hit yet.

But it’s turned the economic model on its head.

The major record companies have some smart people looking at digital models.

But the question is, will the people at the top be willing to turn the business upside down?”

Mr. Gabriel is betting that they will have to make that leap, and recent record industry history seems to be on his side.

Since the advent of Napster in 1999 made music file-sharing ubiquitous, the recording industry has been in a downward spiral:

in the United States, from 1999 to 2007, annual CD sales plummeted from $13 billion to $7.5 billion, according to the Recording Industry Association of America, or RIAA.

Though the major record companies succeeded in shutting down Napster, their subsequent attempts to control online music proved fruitless, largely because the labels either lacked the skill or disliked one another too much to agree on delivery systems.

More recently, outside services like Apple iTunes, Amazon.com, eMusic and Rhapsody have succeeded to the point that paid digital downloads

— which also include ring tones — now account for nearly 25 percent of record industry revenue, according to the RIAA.

That’s hardly enough to make up for the drop in CD sales. Moreover, the International Federation of the Phonographic Industry, a trade group, says that freely traded music downloads still outnumber paid tracks by 20 to 1.

But encouraged by the growth of the commercial digital marketplace — and worried about the success a handful of established artists like Radiohead and Trent Reznor

have had selling music online directly to consumers — the big labels are cautiously expanding the kinds of deals they’re willing to make.

And they are trying a wider variety of new online models.

We7, which lets users choose between buying recordings and downloading a free version with a 10-second ad (which expires after a month),

is one of the start-ups trying to ride that evolution to a position of prominence.

Twenty years ago, Mr. Gabriel says, the idea of tying a recording to an ad would have felt sacrilegious.

“Today I have a different view: it’s a way to hold onto income for creators,” he says.

Royalties from downloads on We7 are paid to the record companies, which then pay a portion to the artists.

Though still in its test phase, the company, which is based in Britain, already has a licensing agreement with one of the majors, Sony Music Entertainment.

Mr. Gabriel say the interest from big labels is a welcome change.

“With OD2, it took us 18 months to get a major fully engaged,” he said.

Not all his Web efforts have succeeded.

In 2004, he and the musician Brian Eno proposed a cooperative, Mudda (for Magnificent Union of Digitally Downloading Artists), aimed at creating a Web site for artists to deal directly with listeners.

The idea found few takers.

“People were shy of upsetting the record companies,” he says.

If Mudda proved a failure, it still enhanced Mr. Gabriel’s reputation with other musicians.

“Peter approaches business the way he approaches his music: it’s not digital, it’s organic,” says Thomas Dolby,

a musician who has enjoyed his own business success as the co-designer of the Beatnik ring-tone synthesizer, a utility included in more than a billion Nokia mobile phones.

“I am impressed that he’s achieved so much in the business world.”

MR. GABRIEL, 58, was born in Cobham, a town in the English county of Surrey.

His father, now 96, worked for Rediffusion, the pioneering British commercial television company, and was an early proponent of on-demand programming.

But “his company never believed people would pay for television,” Mr. Gabriel says.

And while Peter inherited his father’s interest in exploring new technologies, he credits his maternal grandfather with his investment activities.

“My mother doesn’t like me to say this, but her father was a bit of a gambler,” he says.

“If you feel like you’re riding a wave that hasn’t hit before, that’s a great feeling.”

Friends and business associates say Mr. Gabriel has always been entranced by the lure of new ideas.

“In the early days, we’d go skiing together and Peter would have an idea every 30 seconds,” says the British entrepreneur Richard Branson, whose Virgin Group includes more than 200 companies.

“We’d be sitting on the lift with me scribbling madly in my notebook, trying to get everything down.

He’s worse than me.”

As a recording artist, Mr. Gabriel has always been hard to pigeonhole.

Beginning his recording career with Genesis in 1968 while attending Charterhouse, the English boarding school,

he and the band had theatrical, experimental twists and their albums were marked by lengthy and sometimes elaborate compositions.

Departing the band in 1975, he embarked on a solo career (sans such costumes) that has proved successful.

His compositions often draw on ethnic and popular music traditions, yet the recordings themselves reflect state-of-the-art technology.

Early in his music career, he showed signs of being keenly aware of the business of being a musician.

“He was the one that used to tout the tapes around and conduct the meetings with the agents, managers and record companies,” recalls Gail Colson, his former manager.

“He seemed to be able to see the future of music and technology at least a decade before anybody else.”

Ms. Colson saw that Mr. Gabriel’s interest in technology could pay dividends when, in 1982, he signed with Geffen Records and, in contravention of typical practice, insisted on paying for his videos and retaining ownership.

“At that time, no one knew how important videos and MTV were going to be,” she says.

But when a dizzyingly creative video that Mr. Gabriel produced for the hit song “Sledgehammer” in 1986 —

using stop-motion, collage, clay animation and other special effects — became a popular and ultimately imitated piece of work, it also proved quite valuable.

“He used to sit and tell me how he saw the future,” Ms. Colson says.

“We filmed a concert in high definition when there was hardly anywhere to show it in all its glory.

He experimented with 3-D and foresaw the time when the public would be able to take music and mix it the way they wanted to hear it.”

Michael Large, an astrophysicist by training and a former lighting and studio designer for the BBC, is one-third of Mr. Gabriel’s current business management team, which also includes his lawyer, Michael Thomas.

Mr. Large was hired to build a recording studio for Mr. Gabriel in 1984 and went to work for him full time two years later.

Mr. Large also helped Mr. Gabriel with two of the projects on which he flexed his entrepreneurial muscles:

Real World Records and Womad, the World of Music, Arts and Dance festival.

Womad, a pioneering Western showcase for world music begun in 1982, currently presents annual concerts and workshops in Europe, Australia and New Zealand.

Real World’s expanding catalog of 150 albums from around the world also includes Mr. Gabriel’s “Passion,” the soundtrack he created for the film “The Last Temptation of Christ.”

“The mission became to take the music and content from artists without access to the Western music industry machinery and set it on an equal footing with Peter’s own catalog,” Mr. Large says.

“It grew from that in terms of our own career into wanting to own as much of the industry as we could. It’s very important for Peter to have control over his own destiny.”

In 1995, Mr. Gabriel bought half of Solid State Logic, or SSL, a leading maker of high-end recording studio consoles. Mr. Large once worked for the company.

After that came OD2.

The success of OD2 led directly to Mr. Gabriel’s investment and involvement with Mr. Grimsdale in We7 and TheFilter.com.

So far they have invested $8.5 million in The Filter, which uses technology developed at OD2 to provide music, film and video recommendations based on user preferences.

“I don’t believe in the death of the major record companies,” Mr. Gabriel says.

“But as an artist, I’d love to see them reinvented as service companies.”