Mitchell Koulouris was the wizard behind Digital Music Group, Inc., a digital distribution company, and is now a principal in Gigatone Entertainment, a recording label and entertainment company that works with a number of classic artists, such as Mickey Thomas and Micky Dolenz.
Founded just three years ago to zero-in on digital distribution, it basically it works like this: DMGI acquires the digital rights to music, TV, film and video catalogs and makes them available online.
If you go to iTunes or Yahoo! Music and download Johnny Cash’s “I Walk the Line,” you get the music and DMGI collects a royalty.
Koulouris created the business model, raised money through private equity and started DMGI. The company went public in a $38 million IPO in 2006 and merged in 2007 with another company.
Starting this summer, Gigatone is rolling out a project called My Record Fantasy, a fantasy rock and roll camp that will let fans and music junkies rub elbows with music legends and produce their own albums.
“The campers get a 3-day experience with an artist they love,” explains Koulouris. “Everything from recording, a private field trip with the artist, and a private concert at the end.”
Koulouris knows his way around the music business. He serves on the Board of Governors for the San Francisco Chapter of The National Academy of Recording Arts and Sciences), which sponsors the Grammys, and once worked for Tower records.
He sat down with TheImproper recently to discuss the music business and how he is capitalizing on its changes.
IM: Earlier this year, virtually every record store in Manhattan disappeared (Tower, Virgin, FYE), so, we’ve got to ask with your extensive retail experience with Tower. What did you glean from that experience that you still use every day?
Koulouris: I learned a lot about the industry at many levels. But the knowledge I use virtually every day is about artists, their history, chart success, background and catalog. This type of knowledge has served me very well with my last two companies in being able to connect this history of artists and labels with the changing landscape of the recorded music industry today.
IM: Your 4-year run with DMI (Digital MusicWorks International) was a forerunner of many like-minded companies. Tell us about the genesis of it.
Koulouris: We began in February 2004. It was clear to me that digital distribution in the form of iTunes and other legitimate music services was going to be the next big format change for the industry much like the CD of the early to mid ’80s. But having run a thriving print magazine publishing business in the 1990’s in the tech sector, I immediately recognized the challenge traditional music companies would have in transitioning to a digital business from a thriving physical business.
My publishing company faced these same challenges in the mid ’90s as the World Wide Web rose in popularity and consumer adoption. Suddenly customers wanted their print content online and wanted access to it for virtually nothing. So the cost side of the business rose as we had to suddenly repurpose print content to the Web for a very small revenue stream. It seemed obvious to me that music companies (and later video and book companies) would have a similar challenge making the transition both from a technical standpoint and a profitability standpoint. So I decided to fill that space in the market by creating a company that could get your content to iTunes, Napster, Real, and the rest easily and affordably.
IM: From your vantage point, what’s been wrong with the music business?
Koulouris: I’ve been amazed at how resistant the industry has been to the changing landscape that the Internet has created. Of course, I’m sympathetic to copyright protection and piracy. These are fundamentals that should be protected regardless of industry. The other thing that strikes me as very strange is the level of distrust between artist and label. I don’t know of another industry where the two main parties that do business together are at such odds with each other.
Of course I see both sides — labels want to get the most from their investment and artists also want to make money. But it’s amazing how dysfunctional the industry is in general. I do think that both labels and artists still seem to want to do business together and I’m a believer that the value proposition labels bring to the table is marketing help and in many cases, financing. At the same time, while artists generally speaking want to do what they do without a label, the reality is that most artists just want to be great artists — that is make great music and put on great live shows.
IM: You led the way with the first all-digital, full-service music label. Gigatone Entertainment no doubt had its roots there; tell us where that concept stands now. And where is it headed?
Koulouris: I’ve studied the recorded music industry at a number of levels over the last six or seven years, all of which happens to be during the biggest, most important transition in its history. Every company is different but for us I believe the best opportunities are with established artists that have brand equity. These are often referred to as “classic” or “legacy” artists. Of course “legacy” is a relative term, however, it gets down to artists that have had chart success, a history of hit records, solid fan bases and who tour regularly.
These artists have a connection to their fans that is very powerful and everlasting. Yet these artists are having an increasingly difficult time finding an outlet for new music. From our standpoint, we also are looking to build a company with a number of established artists that have a history of success. Having said that, I’ve really put a lot of thinking and research into creating a business structure that allows the artist to make new music, the label to build and grow its roster and catalog, but also create amazing marketing vehicles for these artists and their projects, as well as achieve profitability faster and more efficiently with as little downside risk for all as possible.
So Gigatone addresses all of these key areas — new recording projects, powerful marketing tools, new and previously unavailable revenue streams and a faster path to profitability — all in the context of making a new album with a classic artist fans love and admire. We think it will be a strategy that is not only powerful and creative but practical and responsible. Our strategy really pays attention to the practical reality of the recorded music industry while being creative and forward thinking as it pertains to giving everyone involved the best chance of success.
IM: I think your choice of artists, thus far, is outstanding. Tell us about the decision making process that goes into identifying artists.
Koulouris: Of course everyone on our team has our musical favorites, however, our choices thus far have been driven by a variety of factors — historic success (chart success and record sales), size of fan base, whether or not an artist is touring and ultimately, availability. All of the artists we’ve worked with thus far have had a variety of chart success and so forth.
And their respective successes have occurred in different decades. We do a tremendous amount of research on every artist that ranges from record sales to touring dates and associated revenues, to the size and involvement of their respective Facebook or mySpace fan sites. But sometimes all the data in the world still may not give you a good picture as to how any particular artist may fit with and be successful with a Gigatone My Record Fantasy project.
IM: The Micky Dolenz album, King For A Day, is just an inspired project. Tell us how that came together. And, interestingly enough, the Troubadour live album from James Taylor and Carole King is riding a nice crest right now. A perfect storm it would seem.
Koulouris: It would seem that it would be a perfect storm. When we began the King For A Day project with Micky it was something he always had a vision of doing. We had no idea that Carole King and James Taylor would be doing their project at a time of our release. So we’re obviously gratified with all of the media attention with their project and hopeful that some of this may have a spillover effect on Micky’s project with Gigatone.
IM: The myRecordFantasy concept is just so exhilarating. The super-fan can get right in there; up close and personal.
Koulouris: It brings the super fan in on the making of an album by an artist they love. Not only do they get a sneak peek at the record but can also audition for the artist and producer to actually perform on the album. It doesn’t matter that a fan has experience because myRecordFantasy is all about being up close to the action. So if you sing, play guitar, tambourine, or just do simple hand claps, you can audition.
But the whole experience is in the name of having fun – all in the context of the making of a new album. Everyone gets Executive Producer credit, forever associating them with an artist they love. I came across the concept completely by accident. I invited some of our investors to a recording session with Eddie Money and later to a meet and greet with Micky Dolenz. I was amazed at how mesmerized they were with the whole experience — recording, meet and greet, pictures, autographs, etc. The light bulb went on for me at that moment and that’s when I realized that a fan experience event had to be part of what we do. It’s really captured the imaginations of fans and the media but artists have really been receptive to the concept as well and we have a number of artist announcements we will be making in the coming weeks and months.
IM: is there one record industry exec that you have followed? They seem to be disappearing far too frequently, but that industry has certainly produced some notable examples.
Koulouris: I’ve always been fascinated with Clive Davis. I remember as a kid my brother having his book “Clive: Inside The Record Industry” on his bookshelf. Years later I read the book “Hit Men” and of course Clive is a recurring character in it. I’ve always been fascinated with the trailblazers of the industry such as Clive, Atlantic Records founder Ahmet Ertegun, and Sun Records founder Sam Phillips.
I’ve also been fascinated with record executives such as former Columbia head Walter Yetnikoff. Then, of course, there are the David Geffen’s, Tommy Mottolas, Jay-Zs, and Simon Cowells of the world. Regardless of you think of these guys, all of them have played an important role in the history of the recording industry. I think it’s important to know the history of the industry to be able to make a contribution and impact on it in the future. As Edmund Burke famously said, ‘Those who do not learn from history are doomed to repeat it”.
IM: When Gigatone is running full steam; might you look into new artists?
Koulouris: There are a ton of talented young artists out there. But what I’ve learned in business is that you need to focus on what you do and do it really well before branching out. So for the moment, we’re focusing on what we know and what we’re good at. We’ll constantly evaluate and reevaluate our progress and success and as we gain traction and success in the market, we’ll make certain adjustments along the way. If that is with developing new artists, doing a joint venture, or enhancing our existing business and model remains to be seen. But we always have to be aware of the opportunities that surround us every day.