EMI's hit man

David Munns, vice chairman of British music giant EMI, started out in music when bands didn't wear fringed suede vests for ironic distance. It was for cutting-edge fashion.

Since 1972, he's worked with artists such as Kraftwerk, Paul McCartney, Queen, The Cure, Van Morrison, Kate Bush, Bon Jovi, Gorillaz and Pet Shop Boys. Like other industry giants, EMI is trying to figure out how to thrive in the digital world while battling piracy and courting new generations of so-called tastemakers.

Munns, who is also CEO of EMI Music North America, recently sat down with CNET News.com to discuss how record companies are changing, the future of the concept album and how to make a hit.

Q: In the music industry, a lot of people started out very much against digital technology, but now embrace it. What was your own personal moment when you saw that it was going to be a pretty valuable distribution channel?
Munns: We were never afraid of it. EMI had been quite adventurous anyway, and we were very bullish about it. We could see the problem, the problem being piracy. But how on earth are you going to push back that tide? We've been with piracy for 30 years, from cassettes and through CDs. Piracy has been a fact of life since the '50s, really. But this produced a new dynamic, and that part of it was quite worrying. But you could see, I think we saw it very early on, that there were going to be legitimate business models in that place.

We are very aggressive, and we want to see our music in every one of these platforms so the consumer can get to it in as many ways as they want. We just want to get paid. If someone comes at us now with a new business proposition, and we can see a business opportunity, and we think we're going get paid--you know, we check their credit and a couple of things--done, let's go.

What was the reaction of the artists back then? I'm sure some liked it because they had extensive back catalogs.
Munns: It depended on the artist. Really young artists saw much more of an opportunity. Some of the older artists didn't like things like unbundling their album.

They didn't want to think that the record company was taking advantage of them--those days are long gone anyway. I think we got under that. The main issue was, "How is my art going to get treated?"

We actually kept our albums out of iTunes for the first six months of their life for the first year because, listening to our artists, we saw that some didn't want (their albums) to be in track form. And some still don't.

Interesting, so there is an issue about an individual single versus the whole album?
Munns: Yeah...they created this work, and they wanted it to be heard as a work. And it took a little time for them to get over that. In the end we abandoned that--we stopped it after about a year, I think...It's funny you should ask that question because a lot of people never ask about what the artists think.

Well, there's a pace to an album. When it goes from one track to another, there's a certain logic to it and a certain emotion that comes out of that.
Munns: Yeah, there is. And to the artists who create that work, sequencing is very important. On vinyl, when you had to turn it over, it was very important. What came first, what came last, and then what came first on the second side and how you finished it off--those things were very important to the artist community.

And we are a company that has no other business. We're not in the film business or the video business or the consumer (business). We're in the artist business, and we are very artist friendly. We listen to the artists' concerns. And it's hard to get used to stuff, that's all.

Looking at the new business models coming out--subscriptions, buying singles--which ones do you think work the best? Which ones do you think might represent the future?
Munns: Well, the straight downloading business seems have to settled down on fixed lines. It's dominated by iTunes (in the U.S.), but it's not in other parts of the world. They're not, certainly not, the biggest player in a lot of markets. And the subscription has its problems with portability, but I think that'll get fixed.

We are in the mobile game; the further east you go in the world, the more it becomes mobile. If you go to Asia and Japan, it's a very mobile environment. You're not seeing the whole picture if you just look at the American landscape.

Some of (the singles will be) ad supported; there will be lots of variations.

That sounds like it would be kind of annoying, actually, if you had to hear an ad before your music.
Munns: I'm sure your dad told you that there's no such thing as a free lunch. If you want to get the music for free, you're going to pay for it somehow, even if it's (with) your time. My view is: I want to try more. But the consumer is going to decide in the end. The power lies with the consumer, and they're going to either accept some of these or not. And we don't know what they are, so I want to be in all of them.

You know, in the physical world, which is still the majority of our business, we have seven or eight accounts in most countries that account for 80 percent of our business. These are physical accounts--Wal-Mart, Tesco--in 50 countries. Let's call it 400 accounts. We already have 400 accounts in the digital space. Three years, four years from now we might have 3,000 or 4,000, when everybody who's connected to a computer can in theory be a retailer of music.

So you could have fan sites selling music and things like that?
Munns: You know, Coca-Cola's ambition is to replace all of their vending machines with machines that take credit cards, but you know that that means? That means it's connected to a computer. And if it's connected to a computer, it can send stuff both ways. So it could dispense music.

Music will be ubiquitous, really, in the real sense of the word. At the Consumer Electronics Show, there was a gas pump that had a USB port.

What do you think of Microsoft's plan to give record companies a cut of Zune sales?
Munns: They've decided to take a royalty on the player and spread it around the industry. They have a seamless model, downloads through subscriptions, with portable subscription and so on. You get paid differently depending on?how the music is consumed.

Do you think others might follow their lead?
Munns: Yeah, I think it worked particularly for Microsoft because they're in a closed environment, but it's another way of getting paid for your content.

When it comes to piracy, often I'll hear there's an age factor to it, i.e. someone between the age of say 12 and 22 will pirate more music than somebody older. Is that the case?
Munns: Actually, there's some evidence emerging that the young teenager, the pre-teen and the early teenager who've grown up in the last three or four years with their parents being much more aware, realize that it's wrong to steal music, even if you think you can't get caught. The (older) teenagers (and those) in their early 20s (are) where the big block is. And then as people get older, it's a pain in the ass (to find pirated music).

Music will be ubiquitous, really, in the real sense of the word. At the Consumer Electronics Show, there was a gas pump that had a USB port.

People come out of college and university and get a job and get a bit more money, and then it's like, go to Walmart.com or iTunes. So what we're seeing is that, despite the increase in broadband, which we would think would drive (pirated peer-to-peer) traffic a bit more, the traffic actually is pretty flat. The heavy users are probably using it more than they used to, but the number of households actually engaging in illegal file-sharing is not really growing, certainly not growing like broadband is growing.

These are American numbers, but that's what we're starting to see now.

I think a lot people think that because a music file isn't physical, it isn't stealing. And they think: Well, it's 99 cents, what's the big deal?
Munns: A newspaper is pretty disposable: You read it, throw it in the bin, you pay your 50 cents. OK, it's a physical product, but it's the most disposable of them all.

By the way, how is it different now to build an artist? Back in the '70s, a hit would come out like Led Zeppelin and the record companies would say, "OK, go get me some heavy metal bands with no shirts."
Munns: Back in the early '70s, you put a single out, and then you worked it. Maybe three weeks later Radio 1 added it or Radio 3 in Holland, and a few weeks later maybe it became a hit.

Now, you work it and then you put it out. You go on the road, you build up a fan base, you get a MySpace page. You do this and you do that. Then you'll get some radio play, maybe. Radio is starting to use the Internet as a sort of research program as well.

You're working those taste-making communities and trying to get to some attention there. You don't go to radio straightaway. And then when you've got your record somewhere up the chart, you come with your album. It certainly used to be the other way around.

So is MySpace is the big taste maker people say it is?
Munns: We look at all of those (social networks), and then we start to get to a picture. It's allowing you to see the consumer directly, consumer response directly, the good and bad. So the marketing techniques are switching from sort of mass market to a more fragmented approach.

Not every artist we have "works," and not every record we have "works," so it's enabling us sometimes to find out more what the consumer and the taste-makers think about our music before we spend a lot of money. That in itself it will act like some kind of filter.

But the reason we love this business is (that) you don't know. You can play me a record that I think is absolutely the most wonderful thing in the world, and it won't sell a copy. And you can play me a record I think is crap, and it'll sell a million. Do we have some idea that we've got people who are good? Sure, but it's not an exact science.

Is radio still influential, or did the companies sort of over-program themselves? As a kid, I seem to remember that stations played a greater variety of music.
Munns: I think radio is still pretty important. But in some countries, it has got itself too narrow-cast, and it's too worried about what the other guy is doing. Some radio stations, some radio programs are better than others on that front... They're migrating some listeners to satellite or digital radio or online radio, which is perhaps even more adventurous, but still radio and its concept isn't going to go away.

We touched a little bit on this earlier, but what happens to how music is released in the future. Will this become a singles business or will albums still be around?
Munns: The singles market and the album markets coexisted very comfortably all through my life. So the concept of the single, hearing your track in isolation on the radio, buying a track on its own, taking a track off YouTube--the concept of the track business has always been there...There's nothing wrong in an artist having a huge hit all around the world and not repeating it.

What I actually meant was, is the concept of an album gone? Do people think about putting out collections of songs as a cohesive whole or as singles?
Munns: Well, I can say I'll just a put out a track every month for a year and release an album at the end of it. It will be more flexible like that. But at the end of the day, most artists I know--pretty well all the artists that I know--their dream, their oil painting, is an album.

You get 40 minutes long, 60 minutes long... Some of the Beatles records weren't even 35 minutes long. That's what they want to do. And if it gets sliced and diced in different fashions along the way, it will happen. Some of it will be under our control and some won't.

With digital, are you seeing greater sales of older albums, the whole long tail thing?
Munns: We certainly see opportunity there and in a lot of cases we are seeing so. Dark Side of the Moon is in the top 30 at iTunes this week. We sell lots of greatest hits. There is unlimited shelf space in the digital world.

We have a program now--it will take us some years--but I want to go right back to 1898, to the first record we ever made, everything we owned, and put it up.

Record executives haven't had the greatest reputation, for good or ill, for a lot of years. Is it changing, or is the culture changing inside the companies?
Munns: It's very unfair now. A lot of that comes from the early days, the pioneering days, the postwar era of music industry, where it was all owner-operated labels and there were some sharp practices. We've been a public company for 30 years. Come on, you don't steal from artists. Don't be ridiculous. We wouldn't be in existence; we wouldn't have shareholders. There is the moral obligation, corporate governance and God knows what, and I take great exception to people saying that we have any underhanded practices.

Having said that, we also argue with people over how many pennies in that dollar you should have or I should. Of course we do. But the thing about EMI is, I can argue with the artist only so many times about who gets how many of those pennies in that dollar bill because if we don't generate that dollar bill between us, none of us get paid. Give me that record, and I'd better sell it. If I don't sell it, I've got no income and you've got no income. So let's argue about the dollar later, and let's just get on with the business of you make the art, and I'll try and sell it.

Do you still hear of it? Do you think the public feels that reputation?
Munns: They don't say that to me... But I think the kids out there, the artists and the creative community, love to point a finger at the noncreative people. Most of the artists whose records didn't sell, they'll never say to me, "I guess it was my album." They say, "You up the marketing."