Warner Music exec: We finally figured out free

Michael Nash, Warner's outgoing digital chief, says you bet the industry stumbled at times in the digital era but it's pointed in the right direction now: toward the cloud.

With one foot out the door at Warner Music Group, Michael Nash doesn't try to sugarcoat the music industry's history of the past 10 years.

Michael Nash Warner Music Group

Nash has been the digital chief of Warner Music Group for four years but has been with the company for over 10. He started when Napster was just hitting the music scene--hitting it like a sledge hammer--and this month Nash announced he's calling it quits.

Nash said he came to Warner Music from the start-up community and joined because he knew the Internet would transform music. He wanted a role in changing the industry as it existed back then; the labels were built around the CD, the bundling of songs, and forcing fans to buy discs when they only wanted one or two tracks.

"That strategy was based on tricking people into buying an album that may not have been very good," Nash said in an interview with CNET last week. Consumer backlash to that was very much part of the digital revolution , Nash said.

He acknowledged that when it came to digital, the sector made mistakes as it tried to navigate "a perfect storm" of change. It's taken its toll on the labels' digital strategists, a fact that is reflected in the high turnover during the past four years. EMI for example went through four digital chiefs, including Douglas Merrill, a former Google exec, and Cory Ondrejka, co-founder of Linden Lab.

But that's all in the past. Nash says he's leaving Warner Music, acquired in May by businessman Len Blavatnik, with the prospects of the company and the entire recording sector richer than they have been in a decade.

"Free didn't work before. It was once used to drive engagement with ads. What we're looking for now is for free to drive engagement with subscription services."
--Michael Nash

Overall music sales were up slightly in the first half of the year. Cloud music is coming. Social-networking sites are helping music fans discover songs. Internet piracy is waning. Digital music is now a fundamental part of the sector and moving it there was one of Nash's primary goals.

"At this point, 50 percent (of U.S. revenue comes from) digital music sales," Nash said. "We're 35 percent digital worldwide. We have accomplished the digital transformation, certainly with respect to recorded music."

He knows there's still a ways to go. So, what does Nash think is going to be the bedrock on which the sector builds?

• On Apple's new iCloud : "From what we've seen of the beta version, it looks like a great service. Apple may extend their lead."

• On music services that offer unlicensed tracks before they attempt to negotiate deals: "I think infringement as a negotiating strategy, a point of trying to drive a licensing discussion, doesn't have a great track record. That's why companies such as Turntable.fm are talking to everybody. That's the posture you're going to see in the future."

• On Spotify, Rdio, MOG, and other services that offer free music: "The industry has finally figured out free. The recent announcement for all these free offers is from a licensing standpoint the right approach...Free didn't work before. It was once used (by such defunct sites as Imeem and Spiralfrog) to drive engagement with ads. What we're looking for now is for free to drive engagement with subscription services."

Greg Sandoval/CNET

What about Warner Music's reputation as a foot dragger on digital? The label often appeared to be the last to sign deals and was said to hold out signing until it got the terms it wanted. Nash said that's just not so.

"We did the first YouTube (licensing) deal, before the Google sale," said Nash, who declined to say where he's headed next. "We were first to enable models like Lala , which eventually became the foundation of Apple's cloud strategy. We were first to license iTunes way back in 2003. Yes, we have a history of course correction. We worked long and hard on the Spotify deal as we thought it best to reset the economics. But our posture has always been to put licensed services in front of consumers that they love."

 

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