OK Go’s Damian Kulash, Warner’s Livia Tortella and Jeff Goodby Talk Monetizing Music via Video at SXSW

Would OK Go be a much bigger band today had Billboard’s YouTube-based Hot 100 methodology existed seven years ago? And how does an old-school label like Warner Bros. make a long-term star out of a guy like Baauer, who didn’t even make an official video before inspiring the year’s biggest video meme? Billboard caught up with Jeff Goodby, co-founder and co-chair of Goodby, Silverstein & Partners, Damian Kulash, lead singer of OK Go, and Livia Tortella, chief operating officer of Warner Bros. Records, for an exclusive, candid discussion at South By Southwest Interactive at a panel moderated by Goodby entitled, “So When The Hell Do You Sleep?” The panel included Tortella and Kulash as well as investors Aileen Lee and Bing Gordon, Ideo’s Paul Bennett and LucasFilm’s Ivan Askwith. Here, the trio chats about the shifting economics of the record industry and the newly powerful roles that video and advertising play in breaking and sustaining artists — and why Tortella may soon be hiring Kulash, a former Capitol Records artist, to make videos for her label.
 
Jeff Goodby: How important is it to publishers like you to have people perform live?
 
Livia Tortella: We’re Warner Bros., so it’s very important. It’s flexible depending on how artists come to us. Artists come to us with very different needs and different wants.
 
Damian Kulash: I’m sorry, I don’t know the back story well enough. What does that mean “We’re Warner Bros.?” Is that a more “live” label than others?
 
Tortella: More careers.
 
Kulash: Oh, so you’ve got more people who stick around — not just looking for one hit.

Tortella: Yeah, so the live part of it is very critical. I found it very interesting and kind of sad that, when you were talking to someone at your record company, that you were being talked out of it. Our business has such a low barrier to entry if you had a video that wasn’t $1 million.
 
Kulash: Especially when you had a video that you paid for yourself.
 
Tortella: I was very shocked. There are good labels and bad labels, good managers and bad managers.
 
Goodby: It was also early days in many ways.
 
Kulash: The death of the traditional music industry is like a 19-act play. It just keeps having these phases, and that big phase was people trying to re-establish an image. “Can I still have an image please?” And our label, they did us very well, I had no complaints about specific things they tried to do. But they wound up seeing all these different things we were trying to make as… all these different things we were trying to make. And they still saw them as ads, and that wasn’t a particularly good ad. So it became, if you’re not speaking the same language as your girlfriend, you ultimately don’t want to get married.
 
Goodby: The great thing about [OK Go’s videos] is there’s a confluence of a whole bunch of stuff — humor, dancing. Fun, interesting stuff.
 
Tortella: Can I hire you to make videos though? That’s what I wanna know.
 
Kulash: You absolutely can. You’ll wanna know that the price tag is very high — but yeah.
 
Tortella: OK. We should talk, man! [laughs]

 
Goodby: Are you guys at odds with each other, in terms of what you do?
 
Tortella: For me, when you made your video, I was trying to do the same thing, but differently. What I’m excited about with the business now is that it’s not the old business. The old business was based on owning distribution. That was it. And now the business is you gotta be good — you gotta be good to warrant certain deals with artists, you gotta be good to engage fans to your artists. And that to me is way more exciting than what the business was. So I don’t find that I’m at odds, I find that we’ll figure out ways to partner with each other if it makes sense. If I have something that he needs, and he wants to deal with me, then we have a potential partnership. If we don’t, we don’t. It’s cool.
 
Kulash: I feel like it’s a little bit like asking a big successful ad agency if they’re at odds with a young graphic designer who’s all fiery. You both need each other. We got extremely lucky to get good stuff from the major label universe and get out while we could still make other interesting choices. What you really need labels for is a risk factor. You know that 1 out of 20 bands passed that incredibly high bar to be successful. Now, I’m sure it’s 1 of 100. If I were the world’s greatest musician and working at Starbucks, it would be an incredibly bad idea for me to take the $10,000 I’d saved up and invest in myself, because the chances of me failing are so incredibly high. So you need a system sort of like the major labels. The problem is they still have to make money, they still need systems. And we didn’t work well in that system because we wanted to make stuff that that system doesn’t specialize in.
 
Tortella: But Damian, it’s changed because of what you did. That’s what makes me excited about the future because it isn’t the silver disc anymore.
 
Kulash: The old days of throwing money into things and not knowing what the output is going to be. If you give money to a painter, you’re going to expect a painting to come out of it. At some point [OK Go’s] business model [didn’t] fit into it very well because at some point it became “Let’s see what cool shit we can make.”
 
Tortella: The output isn’t what it was yesterday. We just signed Baauer. We don’t know what’s going to happen. We know he’s created a meme video, and this experience online. We know there’s an artist that is starting to still develop, even though this phenomeon happened. There’s an artist there. That’s what’s exciting about the business. But the product is changing. The product is just an expression of the art.
 
Kulash: I’m curious about that, though, because do you know what’s gonna come out of that? Record sales are record sales, but from an institutional standpoint you have to make this decision from profit. What are the revenue streams you’re hoping will come out of it?
 
Tortella: This is just content, it’s not 360, it’s not touring. But video we’ll probably monetize, which is something you started. It’s huge. It’s historical.
 
Goodby: You’re like Buddy Holly with an MBA.
 
Tortella: I remember reading this story in Billboard, and I remember you saying you paid for it, and I remember the label trying to stop it, and I didn’t get it.
 
Kulash: We shot it because of Michel Gondry, who’s our idol. We had heard he had a big dance video planned, and he had this great treatment and he was gonna take it to Kanye West. And, okay, Kanye West was, you know, slightly bigger than us [laughs]. But we were like “We’re the dance band, come on man!” He never [saw] the video at all. All we knew is we got it to someone who used to do makeup for him once. But we did not think we were making a cool piece of art, we were documenting something in our backyard because we wanted to share it with somebody. But when we saw how ridiculous it was we started sharing it with our friends, and they started putting it up online and it got 100,000 views, we started thinking maybe this is a video? Up until this point, we thought it was a piece of shit.
 
Billboard: What do you think of the “Harlem Shake” phenomenon? Because you inspired a lot of parody videos, too.

Kulash: It was a different time. The big fight we had with the label at the time is the clips were embedded, you couldn’t share them. You had to watch it only on their page. And the best way to make money is to make sure as few people see it as possible. [laughs] And now Billboard is adding YouTube to the Hot 100. If they had done that five years ago… The time we spent pitching radio to actually respect us and play our song, like “oh no, it’s a video band.” The people who care about the old-fashioned standard metrics like the Billbord charts, if that had been around five years ago, we’d be in a much different place. By the same token, the only reason we’re here is because we did it five years too early.

Billboard: Damian, you’ve suggested that this next album the band is currently making might be entirely supported by advertising. What might that look like?

Kulash: What we’d like to do is find the right partner or group of partners that allows for 18 months to 2 years of things. You know the value of what our videos are gonna be like and how people are gonna respond to them, so you get to deal with the fun stuff on the side. At this point, viral videos — that’s marketing from five years ago. What rock band is doing something interesting with social media? I don’t mean just promoting themselves, but using it as an art platform not to purely drive numbers and metrics? We can fund a certain number of those things ourselves, but what’s great about working with brands is that in the rare circumstance that it’s right, you can find a non-zero sum game. That’s where what they want is eyeballs and what you want is eyeballs. What they want is a feeling of innovation and what you want is a feeling of innovation. It ends up being “the artist totally sucked that company into doing something,” and maybe you get back to zero, but the Chevy video we did with Goodby is a perfect example of “I would never had had the opportunity to do something I wanted to do.” There’s not a chance a normal ad agency could go commission that. It’s a type of art that could never have existed.