“I didn’t want it to be kitschy, you know.” Lyor Cohen is in an expansive mood, talking about his new business — in particular, its name. He’s in the artfully designed living room of his home in Manhattan’s West Village. On one of the walls is an art piece in red neon lettering that spells out in capital letters “TERROR.” The T flashes intermittently to show it really means “ERROR.” Both words seem apt descriptions of the music industry’s decade-long upheaval. Cohen, though, is ready to put those dark days behind him.
The name of his new music company — co-founded with two of his longtime music partners from his Def Jam and Warner Music Group (WMG) days, Todd Moscowitz and Kevin Liles — is 300. The inspiration? The 300 Spartans who fought alongside King Leonidas in 480 BC against thousands upon thousands of Persians in the Battle of Thermopylae.
Cohen may have mellowed somewhat with age and success — he’s 54 now — but his combative and competitive nature is never far below the surface. “It was a battle that changed the way wars are fought,” Cohen says of Thermopylae. “These guys found that if you were well-synchronized, strategic, loyal, with great planning and preparedness, you could do much more with less and be highly effective.”
That’s the philosophy behind 300. On the face of it, this is a straightforward startup label by veteran music executives who have just formally inked a distribution deal with Atlantic Records.
As Moscowitz and Liles join Cohen in his living room, all three insist there’s much more to 300 than an indie label with major distribution. For them, it will be a chance to challenge the conventional wisdom and practices of the music business — one of Cohen’s goals during the eight years he spent at WMG until his exit as chairman/CEO of recorded music in September 2012.
Given the fervent speculation around Cohen’s departure, one question now is, Why is 300 bringing him back there? He left WMG a year after billionaire Len Blavatnik took control of the label group and appointed his trusted restructuring executive, Stephen Cooper, to run the entire business.
Cohen, though, is straightforward about the reasons for his surprise exit. He says he joined Warner in 2004 as a classic “music guy” executive focused on artist development and talent, and then took on more and more responsibilities. “By the time I blinked, I was managing 3,000 people and had become more of a human resources manager than a music man,” he says.
“It was wonderful times at Warner Music — we’ve accomplished wonderful things,” he continues, notably still using the present tense with regard to the company he left 14 months ago. “But every time I’d meet up with Kevin [who left Warner as executive VP in 2009 and now works with artists including Trey Songz and D’Angelo], he just seemed happier, more energized and more engaged with music than I was.
“As you go up the corporate ladder, you go from being served to being a servant,” he says. “My heroes-Ahmet Ertegun, Jerry Moss, Chris Blackwell — never climbed that final rung on the corporate ladder. They stayed as music men.”
If there’s still any suggestion that Cohen’s exit caused some sort of fallout, the fact that the normally reticent Blavatnik offers words of support for Cohen’s new plans should put an end to that.
“Lyor, Todd and Kevin all have well-established reputations as accomplished executives and entrepreneurs,” Blavatnik says of the Atlantic distribution deal. “This agreement will provide Warner with a great source of artistic talent and creativity.”
The last 14 months have been instructive to the type of business Cohen wants to build. But first, during his time off the corporate treadmill, he says, “I became significantly more engaged as a father to my children.”
His next move in the business world was spending more time with digital companies like Spotify and YouTube, soaking up their knowledge.
“I spent an enormous amount of time inside these digital distribution companies, just talking and engaging with them and understanding what these companies now know about our music fans,” he says.
The idea for 300, like in many other areas of the media and music industries and beyond, is to build a business with not only a cost structure better-aligned with the needs of the 21st-century music biz but also the flexibility to tap into the global distribution infrastructure of a major label.
“There’s no capital expenditure in this industry,” Cohen says. “All the investment is spent inefficiently on chasing artists.”
When Cohen preaches success through great efficiency, it has a familiar ring to it. When he talks about his time spent asking questions at Spotify and YouTube, one gets a sense of what 300 could do differently from a label beholden to its own history. “I’ve been engaged in trying to understand the impact of these huge digital distribution networks, and it’s going to fundamentally impact the way we operate,” he says.
Cohen is particularly fascinated by how much the various services know about their users and what that means for breaking new artists. “What’s it called?” he asks Liles. “Geo-targeting? We could identify where an artist is really hot via these services and build out from a given market rather than waste marketing spend nationally.”
Data mining and data management will be crucial skills for potential employees as the new label staffs up. The goal is to recruit 25-30 music veterans in areas like radio promotion and marketing alongside younger staffers who sleep, eat and breathe digital, according to Liles.
“We want entrepreneurial people, industry veterans that are loving the opportunity of the change to the here and now,” Liles says. “We also want people from outside the industry — chief content officers, chief consumer officers.”
Former Warner Bros. president Moscowitz calls 300 a content company instead of a label. “We’re deep believers in the record business,” he says. “But we feel artists should also be rewarded for the risks they take.”
Moscowitz and his partners argue that modern artists are out building buzz and taking more risks themselves with platforms like Twitter, Instagram and YouTube, as well as performing in clubs. In this scenario, where an artist has developed his or her own multimedia brand, the 300 founders argue that a traditional one-size-fits-all recording contract wouldn’t fairly reflect what the artist is bringing to the table — even some of the 360 deals that Cohen and Liles championed at WMG.
Moscowitz says 300’s contracts would include joint ventures and profit-sharing relationships across a range of services.
Most of all, as Cohen repeatedly emphasizes, his new company, career and legacy are dedicated to the artist. “For me, this is all about the artist, the music. This is a really exciting era where it doesn’t have to be feast or famine.”
The company hasn’t revealed who its first artists will be, but Billboard has learned it has already signed at least one act with another in the wings.
Cohen, who made his name in hip-hop at Def Jam, expanded his reputation to become a jack-of-all-trades at Warner. In addition to growing Warner’s share in R&B and hip-hop (a relatively low hurdle to surmount in 2004), he stepped up the label group’s game in pop with stars like Bruno Mars, Ed Sheeran, fun., James Blunt and Trey Songz breaking through.
His impact was noticeable. At the end of 2004, WMG’s total overall album market share was 16.3%. At the end of 2012, it was 19.2%. During that period, the company’s rap market share increased from 9.9% to 23.2% in 2010, before it fell back down to 13.6% at the end of 2012.
As a result of Cohen’s strong track record, an unlikely mix of investors from different backgrounds emerged to help him get his new business started.
Google is the most surprising name on 300’s list of investors. The technology giant’s corporate unit, rather than its dedicated Google Ventures team, has made the relatively modest bet of around $5 million, according to a person familiar with the deal. Interestingly enough, Google doesn’t have a specific strategic interest in the investment, the person says, and simply wants to back Cohen’s vision for a new type of label.
Some of the other names on the investor list include investment firm Columbus Nova, which burst onto the digital music scene in September when it took a significant stake in Rhapsody. Cohen has also called on a couple of old friends: Israeli-American hedge fund billionaire Noam Gottesman’s Toms Capital, whose offices Cohen has been working out of since soon after his Warner exit (300 is on the hunt for its own office space), as well as former Warner digital chief (and in-law of Bronfman) Alex Zubillaga, whose digital investments include FanBridge and Chartbeat. Another investor is Andres Santo Domingo, co-founder of Brooklyn-based Kemado Records and a son of one of Colombia’s richest families. (Other investors have declined to be identified.) The investment agreements were assembled by veteran media investment banker Aryeh Bourkoff and Ori Winitzer of LionTree.
For Atlantic Records, it was a “no-brainer” to back a re-energized music man like Cohen, according to co-chairman/COO Julie Greenwald.
Greenwald, who regularly name-checks Cohen as a mentor, says she’s excited by the idea of all three of her former Warner colleagues involved in the same venture. The deal itself is an uncomplicated, traditional distribution agreement. 300 will be a self-contained unit handling its own marketing, radio promotion and A&R.
But for Greenwald and Atlantic co-chairman/CEO Craig Kallman, the potential of Cohen’s stellar skill set with artist development, combined with a more nimble label model, is particularly exciting.
“I’ve seen them out there again, on the hunt for new artists,” Kallman says. “I’m really confident in them, knowing the A&R talent of the three of them.”
Greenwald says that it will be like having a front-row seat to a great new experiment — one that will try a different business model around which to break and develop music talent. She says lessons will undoubtedly be learned for the entire company.
“Craig and I have no shame in jacking their model if we see it’s working,” she says with a laugh. “We’re both humble enough to learn. Every day we try to think of ways to be a better distribution system and to provide the best suite of services to our artists.”