Beatport’s Matthew Adell on Shazam Deal, Why Music Biz Is a ‘Disaster Model’

Yesterday morning, two of electronic music-media’s biggest names -- the online dance retailer Beatport and the multi-format name-that-tune app Shazam -- announced a new partnership, allowing Shazam access to the “imprints” of 1.5 million EDM tracks sold exclusively on Beatport.
Though that’s only 6% of the total of tracks Shazam can recognize (around 25 million), dance music represents a disproportionately large amount of the app’s utility -- 31 of Shazam’s top 100 most-tagged songs (PDF) last year were EDM tracks.
To get the lowdown on the deal, spoke with Beatport CEO Matthew Adell, whose roots in dance music go deep—he worked A&R for industrial label Wax Trax! Records, co-founded the influential early ’90s rave zine Reactor with David J. Prince, and ran the mid-’90s house label Organico, before taking on a succession of digital-music positions at Motorola, Napster, and Amazon, and landing at Beatport three-and-a-half years ago, where he’s helped the brand grow in the face of music-retail shrinking elsewhere. About the simmering rumors that SFX is planning to buy Beatport, Adell simply replied, “I can’t say.” That’s nearly the only thing he didn’t have something to say about, though. I imagine you’ve been busy today after the announcement of the deal with Shazam.
Matthew Adell: Yes, that’s a good one. I have a bunch of stuff popping at the moment; I guess that hit the news this morning. It’s only taken us a year to build it, so to me it’s like, “Oh, yes -- finally it’s out.” It took a really long time to get everything sorted and working. Yeah, it took about a year from the time we decided with the Shazam guys that we wanted to do it, to actually make it happen.
Who approached whom there?
Oh, we’ve known the Shazam guys for years. I don’t remember there being an approach so much as, the day I met them, we were both going, “Of course we should do that.” To me, once I met those guys, it was a no-brainer. I met them for other reasons. But it’s a no-brainer. My job, beyond growing Beatport’s revenue, is growing the awareness of great electronic dance-music records. Anything I can do with the Beatport data to help make that happen is part of my mission. I knew from feedback from other people that Shazam wasn’t working well in clubs. I knew right away it was because they couldn’t get the music fast enough, at the same velocity we do.
Is it safe to say Beatport is the #1 online dance-music retailer?
Oh, by far. We’re also the world’s largest community of dance-music fans in any one location online.
What took a year?
Part of it was the tech side: We’re basically sitting on a different technological stack than Shazam, so getting the two systems to talk to each other in an automated way [took time]. We’re not sending them the music we sell -- it’s not ours to send to anyone else. So we had to create the fingerprints ourselves and send the fingerprints over -- the impression of the audio. When it’s on [house label] Defected Records, we don’t own that. I don’t have the right to put it on a hard drive and send it to someone else, and I would never do that. So instead, what we did was we created these little identifiers that would work with the Shazam system and then sent them over to Shazam.
How did you come to Beatport originally?
I was vice-president at Napster. We had just sold the company to Best Buy. When you sell something it’s usually a good time to do something else. I was literally, had just said to my then-girlfriend -- now wife -- “I’m thinking about doing something else. I don’t know what it is yet, but it’s time.” A day or so later, I got a call at my office from a headhunter. The guy says, “Would you ever consider moving to Denver?” I said, “Only to work at Beatport.” And he was calling from Beatport.
The music business is very, very difficult. Selling music to a mainstream customer is incredibly difficult. I’m sure you saw the news today that Apple announced they’ve sold 25 billion downloads.  It just makes me want to cry, everybody storming around the Internet saying, “See? The music business is in good shape.” It’s in pathetic, terrible, miserable, will-never-recover shape. I realized during my time at Napster -- first off, I believe there will come a day in our lifetimes when retail music will no longer exist [for] purchasing. People might pay for access. But this decline in the value of recorded music -- it will surpass zero and start to be negative.
That’s not to say the music business isn’t healthy, because there are other things besides selling recordings. But selling recordings is what I’ve always cared about: One, because it’s always been my job, and two, because even more than live shows I’ve always loved records. But their consumer value and getting people to actually pay for them is absolutely plummeting. And it is not going to stop.
When I was thinking about leaving Napster I was thinking about getting out of the music business. Every time I change jobs, I think about it, because the music business is a disaster. I was thinking video games would be interesting. Entertainment is important to me. I genuinely believe that most people’s lives are difficult and if we can -- and I don’t mean distract them in some shady way -- but literally bring people a little bit of joy in their day, it’s worth doing.
I knew of Beatport and thought Beatport had an interesting opportunity in the coming decade, because DJs have needs that are different than that of the mainstream consumer. I thought Beatport had a more interesting market position than almost anyone in the retail music space. So for me, there were two different choices about it. One, I thought they had a good niche that I could help grow. And two, going back to dance music, this was like returning to my high school girlfriend or something -- my first love. It wasn’t just that dance music’s my first love. I believed in the Beatport consumer being special enough that that was a defensible business for a longer period of time than other kinds of music businesses.
What’s shifted the most since you got there? Obviously, things are changing every minute.
Since I got here we’ve gone from a million visitors to ten million visitors a month. That’s the biggest noticeable thing. Those are not customers who buy music, [or] DJs. Those are fans of DJs who come to Beatport and use us like a media property, which is fantastic. If you just use that as a view, the market’s ten times bigger than it was three years ago.
Do those visits translate to sales?
Frequently not, which is OK. We sell songs for, sometimes, $3.50. The mainstream consumer is not going to buy songs for $3.50. But no one can make money selling songs for 99 cents -- or 69 cents, as Google does sometimes. Apple doesn’t give a sh-- about making money from the music, or even music -- and I’m holding my iPhone in my hand right now, which I adore. I love it. However, the iTunes Music Store solely exists to make this device more convenient. It’s a loss leader to make this device more fun and exciting to use. No one makes money selling songs at 99 cents, period -- you can’t do it. You have to give 75 cents back to the label. If somebody only buys one song, you have to give 10 cents to the credit card company. So it’s  a disaster model. We’re competing with people who are devaluing music to make their hardware more sustainable -- which, by the way, is how the entire record-label business started back in the ’50s. It’s not surprising we’ve come full circle. But there was a time, in the heyday of the ’60s and ’70s, where people actually made money selling recordings. Those days are never, ever, ever going to come back.
Some of those fans -- we can transform them into becoming aspirational DJs, bedroom DJs, and some of them will become professional DJs. So when we can amplify someone’s creativity like that, we can make them a customer, because $3.50 is not a lot to pay for a great-sounding file that’s going to blow people away in a club. But I would imagine many, many millions of those fans who come to see us are more interested in DJs than the actual tracks or producers that the DJs are playing. So we are seeing some of those fans buying DJ mixes from us. That’s a growing market for us. But I don’t really expect that mainstream fan -- and by the way, how old do you think these new fans are?
Teens and early twenties is my guess.
They don’t have credit cards.
Are clicks as important or more important than sales at this point?
We have different business units, so it depends on the business unit. In the music section, our focus obviously is just sales and revenue. We do other things, [such as] our Playplatform, which lets aspirational producers remix famous tracks -- we had “Cooler Than Jesus” by [My Life with the] Thrill Kill Kult for Halloween, for instance. We give away the content for free there; anyone can download the master tapes. There’s an Avicii track up there now. That platform is paid for with advertising. We give the music away for free; we just want people to participate and be creative. In that channel of our business, visitation and clicks are what’s important.
Has there been a rise in sales of sample packs and stems?
Yeah, it’s exploding for us. We have a business unit called Beatport Sounds that we have grown ten times in two years. We got into the business by buying a very small retailer in the space and growing it. We’ve taken them from $600,000 a year to $6 million a year in two years.