Corner Office: The Orchard's CEO Brad Navin on the Perils of Streaming and What Sony's $200 Million Acquisition Means
When distributor and marketing house The Orchard spent $4 million at the 2015 Sundance Film Festival to outbid competitors for the quirky romantic comedy The Overnight, executive producers Jay and Mark Duplass compared the company to their own career ethos of "doing things our way." Said Mark Duplass: "The Orchard is a group of young, smart pioneers who blew us away with their bold, passionate approach to taking this film into the world."
It’s a statement that CEO Brad Navin, 44, takes to heart as the company celebrates its 18th year in business and a just-closed deal with Sony Music, which first invested in The Orchard in 2012 and acquired the rest of the company for $200 million in mid-March. Chief among the innovations he has helped introduce are digital initiatives that allow clients (which include Daptone and Frenchkiss Records among more than 2,000 distributed labels) full transparency of the company’s transactions as well as third-party access to The Orchard’s roster.
Navin, a native of New York state’s Hudson Valley and father of three young children, worked as an agent and manager before he found his niche at the intersection of music and technology at former Irving Plaza owner Andrew Rasiej’s Digital Club Network in 1999. In 2003, he moved on to The Orchard, then housed in a ramshackle building on -- naturally enough -- Orchard Street in Manhattan’s Lower East Side. Today, the company is headquartered in a capacious two-floor office in the East Village where 200 of its 250 staff members are based (50 percent of The Orchard's business comes from outside the United States). Decorated with a personalized, pun-filled drawing of a monkey by iconic underground singer-songwriter Daniel Johnston, Navin's office serves as a minimalist idea hub and sanctuary.
Distribution isn't the sexiest of music industry sectors. What is it about The Orchard that attracts creatives?
We have a level of services that I don’t think anybody can touch. Orchard clients can walk through our product and engineering department -- which has a stage in it -- then go into a full-blown recording studio, then talk data in another room -- all on one floor.
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What opportunities come out of the Sony deal, and how does The Orchard fit into such a large multinational corporation that already owns an independent distribution company?
The intention is for us to be a wholly owned subsidiary. We’ve been handling digital fulfillment for Red [Sony’s indie distributor] for a few years now, and a lot of international Sony offices have been putting film and music through us for a couple of years. The opportunity is to continue as a stand-alone business with more continuity on more content coming through, and helping to solve some of their supply-chain or territory-by-territory issues, because ours was built from the ground up around digital. We can help bring music and other products to market in a streamlined way, where they can still control it and do what they do as Sony Music.
How has streaming affected your business model, especially now that you’re moving into film distribution?
Putting it simply, [these days] it’s natural for consumers to listen and get exposed to more music but then not think about paying 99 cents or $1.29 for it. In streaming models, we see the independent sector and our share being much stronger than in downloading models, because consumers will dive deeper and listen to more repertoire. We want to be a good partner and deliver as much as we can, while negotiating the best rates and deals, and protecting our client’s assets in the marketplace.
When signing labels and bringing on films, what do you look for?
With labels, are they going to grow their business with us -- like catalog labels that haven’t put out a new record in 30 years but have 30,000 tracks. On the film side, it’s really about new films and setting them up months and months in advance of their releases. If we just stick to distribution, we can pick up high-quality, finished, scripted-with-talent films to represent and release.
What percentage of your revenue is music versus video, and do you -anticipate that will change?
It’s 90 percent music. If it didn’t change, we wouldn’t be in the business. Video crosses a lot of lines because of YouTube, and on the film/TV side of the business, we formalized it more this past year ... I want to bring more continuity: In the action sports category, can we put some booming track into one of our films, and could the filmmakers help bring music they want into The Orchard for distribution? That’s a real opportunity.
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What other niche areas are you identifying for future growth?
RoyaltyShare, the royalties processing business we just announced. We want to turn the data we’re getting from retailers into usable, accessible business intelligence to help empower our independent labels and film clients to work in conjunction with us to drive marketing and sales opportunities.
How did you first get into the music industry?
I was sitting in a pre-law class, still an undergraduate at Loyola in Maryland, and I came across a Pollstar agency guide -- the kid next to me had it because his father was in the business. I was like, "What is this? All the bands I love are listed in here, and these people represent them?" So I found out about agent training programs -- also known as the mailroom -- and I interviewed for all three of the agencies that mattered back then: ICM, Creative Artists Agency and the one I ended up working for, William Morris. I worked for [agent] Cara Lewis -- she’s massive in the hip-hop world and an absolute shark. She was great and taught me a lot, but it wasn’t music that I wanted to work around. Later I went to [a management company] called Invasion Group and learned that I’m not built to talk to artists every day.
In the internal staff memo announcing the Sony deal, you said it would be "business as usual." Does nothing really change?
Nothing changes from a staffing perspective. The conversations are really about things like, "How do you shore up opportunities around a healthcare and benefits package with a large multinational company like Sony?" We’ve got a small finance and data analytics team; they’ve got a larger one. But we’re going to continue to sign labels and films.
What’s the biggest challenge facing the music industry today?
It has been the same thing for a long time: We’re still in a format change, and generally speaking, consumers are still confused about it. We haven’t ever lived in such an aggressive period of technology advancement impacting how consumers listen, and once paid consumption hits critical mass, we won’t be talking about an industry that’s being challenged by that as much. There will be a new challenge. As for what that is, that’s a Nostradamus question. If it’s still streaming in 20 years, we’ll all be packing it up, I guess.
This article first appeared in the April 11 issue of Billboard.