Twenty years ago this month, in September of 1997, Capitol Records became the first major label to sell and digitally distribute a single from a well-known artist on the internet, arguably one of the most significant milestones in the history of the music industry. Duran Duran’s “Electric Barbarella,” the second single from the band’s Medazzaland album, sold for 99 cents in the long-forgotten Liquid Audio format. (Check out a screen shot of the original website right here.) But what hasn’t been forgotten is the impact it made on the music business.
The development kicked off a dizzying decade of fast-moving changes and disruptions to the core business model of the music industry. Former Billboard new media editor Brett Atwood reported on the event at the time, and recently revisited his original news coverage from 1997 and reconnected with the woman behind it all — former Capitol Records head of new media Robin Sloan Bechtel, who has since become a successful startup investor and founder of Bechtel Ventures.
Here, Atwood and Bechtel revisit the events leading up to and immediately following the groundbreaking initiative, the often-hostile fallout the label received from traditional retailers at the time and how, ultimately, the release of “Electric Barbarella” would go on the change the very fabric of the industry as a whole.
Brett Atwood: Let’s start at the beginning with your time at Capitol Records. What were you initially hired to do when you started in 1989?
Robin Sloan Bechtel: I’ve always loved music, so after graduating from the University of Texas in Austin, I knew that I wanted to be in the music business. I had recently moved to Los Angeles and was driving down the 101 South and saw the Capitol Records building from the freeway. The building had such amazing architecture and reminded me of something out of The Jetsons. I pulled up then and there and applied for a job, which I got, as an assistant at [record label distributor] CEMA. I didn’t even know what distributing records meant, but I wanted to get into the door. So I started at the bottom making photocopies and answering phones.
Somewhere along the way you discovered that there was an opportunity to merge technology with music. Tell me about the earliest days before the internet — what drove you to experiment with new forms of media, and what impact did that have on your duties at Capitol?
One of the reasons that I initially got hired was for my computer skills, although they were rudimentary; being “computer-savvy” was a rarity back then. A few years later, [former director of marketing strategy and new business development] Dave Goldberg was hired at Capitol and was someone I instantly bonded with. We were both interested in this new thing, multimedia. He invited me to a meeting at a creative studio where they demo’d the first music video made with [multimedia authoring platform] Macromedia Director. I wanted to create something using multimedia, so we made a game that gave our sales force a look at the making and marketing of a new Frank Sinatra album. That was followed by an interactive Bonnie Raitt game that won an award and got some of the first multimedia press.
Digital distribution of music directly to consumers was something that you helped pioneer. What were those first efforts like?
It started with [pre-web online dial-up services] CompuServe and Prodigy. These dial-up services [hosted] games forums, but nothing you could download from a record label or from bands. Screensavers were on the come up, so I created one for the Beastie Boys, and when I uploaded it to CompuServe and Prodigy, overnight people were downloading it from around the world. That was an “A-ha!” moment for me.
Soon after, in 1994, I visited San Francisco and my cousin showed me the web on his NeXT computer. There wasn’t much to see yet, but I knew that my next project had to be a website on the internet. There wasn’t even any internet connection into [the] Capitol [building].
Was it hard to get your peers at Capitol to take your efforts seriously? Did they think you were crazy?
No one knew what the internet was. Back in those days, the marketing was tried-and-true. The album cover was a big deal, as that became all your printed marketing materials. What kind of video to make for MTV. Getting the song on the radio. Getting posters in the record stores. It was about selling the physical CD through the record stores and they had the relationship with the consumer. The internet changed all of that. In 1997, it just wasn’t on most people’s radars or used to market albums.
All of this sets the stage for your work in convincing Capitol Records to trust you with the opportunity to do something that seemed unprecedented at the time. Twenty years ago, you launched the first major label sale of a song by a well-known artist with Duran Duran’s single “Electric Barbarella.” The idea of selling a digital download today is now the norm, but back in 1997 it was unheard of. Take us behind the scenes — how did that come about?
The day we sold the first digital single was the day that the industry woke up to the potential of the internet. It was the beginning of a disruption. This was their wake-up call. The internet was here.
It all started with a meeting with [late Liquid Audio founder and entrepreneur] Gerry Kearby and [former consultant and current Feed Company president] Josh Warner. Gerry had hired Josh as a consultant who could make label introductions and could be the go-between for Silicon Valley and Hollywood culture. I was of the mentality that we should continue to try things to see what we could learn, which is similar today to how I work with startups and their founders. You can make assumptions and predictions all you want, but you really don’t know until you put a product into the consumer’s hands.
During that meeting, I asked if a major label had ever sold a digital single. Everyone agreed that no one had. Duran Duran was about to come out with a new record, so we thought that was perfect timing as we had to try this with a major band or it wouldn’t be a real test. Duran Duran was the right band; they were already music pioneers. Josh remembers that during the meeting when we decided to do this that someone yelled out, “Be sure we tell the lawyers.”
How did you convince the band and others at Capitol Records to make this happen?
New media wasn’t really integrated into the marketing of each album yet, it was still its own island. So the list of who to convince was short. I remember writing out the reasons why we should do this. The reasons to do it were simplistic. I remember thinking it could potentially be a hassle to drive to a record store someday when you could just download it on your computer in your pajamas.
The proposal read: “Consumer habits have changed. There is a great opportunity for the record labels as a new business model to reach out to those consumers whose habits are changing or have changed. For example, there is a group of people who like music but can’t go to a record store anymore. It can be simply that their lifestyle doesn’t permit it or that there is not enough time in the day. That group of people will purchase online and the music industry should find way to connect with them.”
I added that, because the store is online, it’s open 24/7 and it’s global. With digital distribution, a product never goes out of stock. We’re shipping “bytes, not atoms.”
This was also the very early early days of piracy. I remember in one of your Billboard articles, you wrote that selling the Duran digital single was “a critical early attempt to establish a legitimate alternative to a little-known phenomena of music piracy” [in reference to the MP3 format]. That turned out to be true.
I’m glad you mention that article, because as a reporter I remember the difficulty in trying to translate some of what was going on to the reading audience. Everything was moving so fast and it was all so new.
Yes, sometimes you had an idea to try or saw a new trend happening on the web but it was hard to articulate it, because this was so new and there was no terminology. I was the publicist for my own projects at first, because I was the only who knew how to explain them. And even I had a challenging time. I had to explain it to writers, but you had to explain it to the public.
What did you learn from this experience? Was the project viewed as a success?
What we learned was game-changing. First, we learned the simplest thing: People will buy music digitally. Second, that there was consumer demand to purchase more than just the official single. Back then, you couldn’t really buy rare songs by your favorite artists, only the singles that the labels released. So one of the songs we sold for Duran Duran was a remix we called an internet-only remix to give fans the exclusivity that you bought it online. We sold the official single for 99 cents, but the internet-only exclusive remix sold for $1.99. Eighty percent of the sales were for the internet-only remix. That’s when we realized that there was a strong demand for music that the label had not made available for sale physically. That’s one reason why Napster exploded, years later — it had so much unreleased music.
That really shows why Duran Duran was the perfect artist for this first digital experiment. Duran Duran has such a passionate and loyal fan base — many of whom collect every variation of every song recorded, including remixes, live versions and alternate takes.
But it wasn’t all perfect. What were some of the things that went wrong?
Before we went live, I never even thought that selling a song on the internet could be perceived negatively. It was a global story that was positive externally, but there was chaos internally because we had disrupted the status quo and upset the record stores. The phone was ringing off the hook with reporters wanting to cover the story, so while we had to do all these press interviews and educate the press over and over as to what we were doing, we were also live-selling the single and I had to deal with the website and all the customer service. Obviously, to buy a digital song was new for people, technically, and they needed help as they were on different computers and operating systems, different bandwidth speeds and had different credit cards. A lot of the technical issues were on their end, but we still had to help them so they had a good experience.
The brick-and-mortar retail sector, in particular, was less than enthusiastic. Did you get any push back from physical retailers or elsewhere?
The media coverage was focusing on the fact that this was an industry “first” and that it signaled the arrival of legitimate digital distribution. At the same time, some record stores thought we were setting a precedent by going around them to sell direct to the consumer. Our strategy was not to sell direct to consumers intentionally as a way to cut out the record stores, but the reality was that most of them didn’t even have websites yet — except Tower. So Lou Mann and Joe McFadden [two Capitol executives who dealt with the backlash from the retailers] tried to explain that this was a promotion for Duran fans to hear the song on the internet, which would create awareness for people to buy the album in their stores. Like having a song on the radio, except this was on the web.
To appease the retailers, Lou and Joe delayed the release date of the digital single to be available the same day as the physical single was in their stores. But in retaliation, some retailers boycotted selling the Duran Duran album. I think some of them even went as far as to return the CDs back to Capitol.
Shortly after, Joe had to attend the annual NARM [National Association of Recording Merchandisers] conference. He was the most unpopular person there. One bit of irony was that in the same week that Billboard had a cover story about retailer concerns, there was an adjacent cover story announcing that AOL had signed a deal with [now-defunct technology company] N2K to distribute digital music. So that actually helped people realize how important this development was.
The experience, although rocky, ultimately moved the future up significantly for the music industry. It helped the industry to wake up to what was happening with the internet. It was now more than “geeks in a corner with a computer and we’re not sure what they do.” Immediately after this, record stores got digital strategies and websites.
What about the creative community? Were other artists eager to offer their music online?
Many bands and artists got it and embraced it as time went on, and some were up for pioneering right out the gate. In 1994, I launched the first website for a band, for Megadeth, which I wrote about in [the Medium article] “What the Hell Was Megadeth, Arizona.” It’s a good read for anyone that wants to know about the “wild, wild west” of the early internet days and the music industry. The band had already been into early digital and they got it instantly and jumped right in.
Radiohead was a no-brainer to innovate with. They loved to stir up the pot. In 2000, the industry was still against putting too much music online as they thought it would cannibalize CD sales. No label had streamed an album. Piracy was now upon everyone. We streamed the full Radiohead album, Kid A, for weeks before the street date, and the physical album debuted at No. 1. It was also a huge press story that hearing music online drove CD sales.
I remember writing story after story for Billboard about the intense race to standardize the preferred music format for digital delivery. Liquid Audio was only one of many competitors at the time — and Apple wasn’t even in the running yet when you worked with Duran Duran. There were many legitimate companies aiming to partner with the music industry, and yet there was also the mp3, which many labels were terrified of. What do you remember about the decision-making process that helped to determine which formats — if any — to embrace?
There was a contradiction between what I personally wanted to do versus what I was allowed to do at a label. I did not want to sell “secure” music, because in reality there wasn’t such a thing. It just made executives feel good, but the consumer didn’t want it; it made it too hard for them technically in the 1990s, before iTunes. That’s one reason why the mp3 format took off: It was easy to download and it worked across all computers. From the earliest days talking to fans on the Megadeth website and on CompuServe and Prodigy with the Beastie Boys screensaver, you could understand what the consumer wanted. Back then the industry was listening and catering toward what the record stores or the radio stations wanted. So I knew that whatever we did on the internet had to be easy for the consumer. There were just so many hurdles at that time.
As piracy increased, the mp3 format was the clear consumer choice, but I could never get approval to sell what [the label] deemed as the format of piracy. Years later, when I was at Warner Bros. Records, I convinced [then-WBR executive] Tom Whalley to let me sell an mp3 file; we did it for Madonna and it was controversial. Then it broke singles chart records.
Later, I worked with Apple to launch iTunes [in 2001], and at that time piracy was king. Most albums would leak onto the internet before street date. Music was free to the consumer, [so] why would they now pay? It was actually not cool to pay for music. Record companies had a bad rap with the consumer, they were seen as ripping off the bands. Right before iTunes launched it was still the same question that we had in 1997: “Are people going to pay for music digitally?”
Apple changed that perception. Steve Jobs made it cool to buy music again. Apple had the iPod and ran a hip ad campaign. The iTunes platform made it easy to download music legally and Jobs wanted a seamless price of 99 cents for the consumer.
As a reporter covering this beat in the ’90s, I remember understanding how historically significant so much of these developments were at the time. When you look back 20 years later, what are your thoughts now about the historical significance of this Duran Duran digital download?
I can say now that the idea did age well: Consumers did want to buy music on the internet. The industry did end up selling direct to the consumer. The status quo was disrupted, the records stores are now out of business. Piracy significantly impacted the industry.
After Capitol Records, you went on to become senior vp of Digital and New Businesses at Warner Bros. Records before founding Bechtel Ventures, where you’ve invested in several successful startups, including a very early stake in Uber. Are you still working directly with the music industry, or has your work broadened to other types of technology companies and startups?
I work solely with tech companies and startups now. I love the spirit of the entrepreneur and helping them with their next stages of growth — as either an advisor, helping them raise capital, making high-level introductions to key people who can grow their business or even brainstorming on press or marketing strategies.
As a startup investor and advisor, my background in both tech and entertainment is unique to entrepreneurs and startup founders. They have a daily hustle to execute their vision and to keep pounding the pavement. Like me, they are constantly having to to sell people on new ideas — I help some of them fundraise and articulate their early pitches. There are so many parallels to what I did back then and what they do now. [In] the culture in Silicon Valley, startups are celebrated for trying things and, in some cases, failing, so that they can get onto what works [and] that leads to their success. I’ve invested in startups where I believed in the founder and their vision, but their core idea has morphed over time as they’ve tried things, gotten customers and then listened to them.
I’ve done a few things in music since; I oversaw Britney Spears’ digital strategies for a few years and took her and her managers to Silicon Valley to partner her with startups. These partnerships got Britney great tech and business press. I connected Snoop Dogg’s team to Philz Coffee while they were fundraising and he invested and has become a great partner for them in taking the company mainstream.
Robin Sloan Bechtel is the founder of Bechtel Ventures and is an angel investor in Uber, Everlane and Philz Coffee. The valuations of these companies combined is over $70 billion.
About the Author: After leaving Billboard in the late 1990s following a stint as a reporter and editor, Brett Atwood worked with several technology startups in their early days, including Amazon.com and RealNetworks. He later shifted to academia and currently serves as an associate professor and director of the Integrated Strategic Communication program at Washington State University’s Edward R. Murrow College of Communication in Everett, Wash. He also continues to work in the technology industry at Linden Research, Inc., maker of the social VR platform Sansar and the virtual world Second Life.
This article originally appeared on Billboard.
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