Universal Music's CEO Gleefully Explains How Clueless He Is
from the truth-in-advertising dept
Of all the major record labels out there, it's been Universal Music, the largest record label out there, that has been the most vocal about its contempt for changes in the market place. In the past, we've mentioned that Universal Music CEO Doug Morris appears to be focused on squeezing every immediate dime out of anyone he can, even if it means destroying the company's long-term prospects. From an outsider's perspective, it really appeared as though he believed that giving up a dollar today was bad business, even if it meant the ability to get $100 in the future. However, it turns out that's not just the outsider's perspective. That's Doug Morris' own perspective as well.In a stunning interview that should have any stockholders of Universal Music demanding a CEO change, Doug Morris happily reveals his ignorance of all things having to do with business, business models, strategy, economics and technology. It's hard to know where to start. When asked about giving up money now to be able to make more later, Morris tells the interviewer that if you do that, then "someone, somewhere, is taking advantage of you." This is the guy in charge of charting Universal Music's future? To further underscore his inability to think long term, Morris gets angry when discussing the fact that his job isn't easy any more, discussing how great it was when he could just sit back, not do anything strategic and just let he money pour in from high-margin CDs. Sure, that must have been nice, but your job as a CEO is to be able to see those changes ahead of time and set a course for the company to navigate them.
Not so, according to Morris. When asked why the recording industry was unable to see the change, Morris says that there was nothing he or anyone could have done (!!!):
"There's no one in the record company that's a technologist," Morris explains. "That's a misconception writers make all the time, that the record industry missed this. They didn't. They just didn't know what to do. It's like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?"So why is it that Universal's shareholders would allow a CEO who gleefully admits he doesn't like to think strategically about the long-term, doesn't understand the forces that are changing the fundamental business he's in and doesn't even know enough to hire people who can help tell him what's going on?
Personally, I would hire a vet. But to Morris, even that wasn't an option. "We didn't know who to hire," he says, becoming more agitated. "I wouldn't be able to recognize a good technology person -- anyone with a good bullshit story would have gotten past me." Morris' almost willful cluelessness is telling. "He wasn't prepared for a business that was going to be so totally disrupted by technology," says a longtime industry insider who has worked with Morris. "He just doesn't have that kind of mind."
To make matters even worse, Morris is so clueless that he chooses the worst possible analogy to explain his position. Lots of entertainment industry execs have thrown up their hands and ignorantly stated that "you can't make money from free." That's wrong, of course, but Morris takes it one step further up the ridiculous scale, with the following example: "If you had Coca-Cola coming through the faucet in your kitchen, how much would you be willing to pay for Coca-Cola? There you go. That's what happened to the record business." Hmm... and what is coming out of your faucet in your kitchen? That's right... water. And how much are people willing to pay for water? That's right, billions. In fact, it's a larger market than (oops) recorded music. Can someone please explain how Morris keeps his job?
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Filed Under: business models, doug morris, economics, long term strategy, short term strategy
Companies: universal music
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Re:
Here is CEO, someone responsible for the business models a company uses, claiming he doesn't have a clue in what kind of business he's in, and not knowing a business model, even if it would drop on his head.
Clearly he's an incapable leader.
And not being able to hire techies, because he wouldn't know whether they were lying to them or not. We have a saying in The Netherlands: "How the bard is like, that's how much he trusts his customers"; in other words, if you automatically think that other people are lying to you, then maybe it's you are not one of the most truthful people. If you think you can't trust anyone, then you are not to be trusted either.
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Re: Re:
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Re:
You sir, are a cock stain.
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They don't have technologists
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Water DOES in fact come from my faucet for free.
However; some companies seem to think people might pay for it...
Coca-Cola, in fact - does actually make money from water. Along with 50 other companies, including Pepsi.
http://www.dasani.com/flash.htm
Oh my!
Again, just because something is 'free' doesn't mean people won't pay for a better quality item.
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Re:
Offtopic maybe, but bottled water is not of higher quality as tap water. In most cases, water goes from tap to bottle to supermarket shelf.
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Re:
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Not exactly "free"
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The water is probably as "free" as the "free downl
49. In The Netherlands, we have to pay for our water usage. Granted it's not much, but still we pay for it. So for us tapwater isn't free.
And I'll bet all these "free" music downloads are obtained using computers and electricity and internet access that also costs money.
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Re: Water is free
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Good read but sad...
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MMMMmmmm...
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If CocaCola was free...
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Ha
All I have to say about Morris is "Wow".
How did he even EVER end up as a CEO, or a manager of ANYTHING for that matter?
Must have connections somewhere.
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A couple of key points
Secondly, his short-sighted approach probably isn't all that uncommon, though the degree of short-sightedness is. Let's face it, most shareholders aren't that concerned with long-term viability. They're concerned with what makes them money today. They don't necessarily care about what makes the the company money 5, 10, or 15 years from now because the odds that they will still own shares that far into the future are slim. The shareholder mentality these days is largely a "generate as much cash as possible now, damn the consequences" because so many shareholders are investing for the short term.
That being said, this guy is a moron. You don't hire "a good technology person" to build your strategy for adapting to the new digital marketplace. You probably hire a couple of different consulting/analyst groups to actually look at the situation and find opportunities. You find these guys by looking at what they've done for other companies. It's not that hard.
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Re: A couple of key points
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Re: A couple of key points
It should be pointed out here that there *are* people, even in developed areas, who are still on well water and/or septic tanks. Until she moved a month ago, my mother was such a person, living half a mile from the largest mall in the state. Even then, of course, you're paying to have the pump serviced/replaced and the tank sucked but the expenses amortize away to almost nothing, and there's certainly no "regular" payment.
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I laughed Till I Cried.
Then I thought... waitaminute. This jackass makes
big bucks while I'm relatively poor. Oh, the
pain, the pain.
Excellent article.
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I love anologies...
They didn't. They just didn't know what to do. It's like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?"
The real way to set that analogy up would be to ask, "If you knew several years in advance your dog would need his kidney removed and you have millions(if not billions) of dollars to find a way to get the kidney removed what would you do?"
His analogy is trying to imply that they did not have the opportunity to prepare for this when that is simply not true. The record industry had years to get ready for digital distribution before it really took off and find a way to turn it to their advantage. But since they decided to continue with their fat cat lifestyles technology has "gotten out of hand" and now they want to cry foul and expect the government to pat them on the head and clean up the mess they let happen.
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the very same Vivendi that once was "Lyonnaise des Eaux" (translate to "Water from Lyon", Lyon being a big city in France).
So basically this guy isn't just clueless, he also doesn't even freaking know anything about his own company is run?
Sad day for Universal's employees, they now have proof that their company is controlled by a complete moron
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the truth at last....
oh, and downloading music kills dog kidneys.
dog kidneys! you bastards!
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Re: the truth at last....
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waah waah waah
On the other hand, the City of Phoenix wanted to put a meter on my well when they annexed our town.
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Green sludge???
Does anybody know where a person might find some green sludge that I can pay for? I can only assume it will be better quality.
Also, if anyone is a plumber out there...WTF is that green sludge coming out of my tap???!!!!
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Re: Green sludge???
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Re: A couple of key points
My water is free. Well, other than the electricity I pay to pump it out of my well.
And secondly, even when I did pay a city or municipality for water, it was not very much. I remember paying $15 per month for water in the 90s. Assuming all the water we use for cooking, drinking, washing clothes, showers, baths, watering lawns, etc... we're essentially getting it for free as the cost per glass is essentially nothing.
But even though I'm getting it for free, and most people get it for nearly free, I and others still buy it bottled. And that's the main point.
In the same reason I buy music from Amazon's DRM free MP3 service even though I could probably find the same music on P2P. I do it because it's easier, my time has value, and the quality is almost always better.
If the music industry had gotten off its ass in the 90s, when people started using IRC and USENET to exchange music, and came up with a high quality easy to use service for selling music online, the original Napster never would have had a chance.
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Re: Re: A couple of key points
Your... well. On your land. Okay. Sure. Because, like, digging a well doesn't cost anything. And no permits needed. And of course, you probably didn't buy your land. And you're not paying property taxes, of course.
And you think it's free?
Can I say, that, in comparison, Doug Morris is looking smarter and smarter all the time?
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Re: Re: Re: A couple of key points
Fixed costs. Marginal costs. Might help to learn the difference...
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Who is shortsighted?
I mean, what if I setup a site scraper and hosted *all* the (copyrighted) Techdirt content on my own site - updated daily. The technology exists, and a lot of people are doing similar things. Shoot, I could setup the site so an average user just mashes up their favorite URLs and I would get the ad revenue. According to Techdirt's RIAA drumbeat my scraping should initiate a change in their own business model, make them refrain from sicking their lawyers on me, and force them to figure out why their advertisers are following the traffic away from their site.
The hypocrisy of the writers on this site is comical. Sad that the public is stupid enough to blindly follow suit. Right and wrong are just that - right and wrong.
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Re: Who is shortsighted?
Just wanted to let you know, your straw-dog (with kidney failure) argument conflates issues and is, at best, spurious. Now go away or we shall taunt you a second time.
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Re: Who is shortsighted?
We weren't talking about free downloads. We were talking about the massive shift to digital music online. Part of that is free music, but you think he should ignore the larger implications of it just because it's illegal? That's your strategy? Brilliant.
I mean, what if I setup a site scraper and hosted *all* the (copyrighted) Techdirt content on my own site - updated daily. The technology exists, and a lot of people are doing similar things.
Yes. I'm not sure why you think you're making a point. We've discussed this at length many times before. If you want to do that, go right ahead.
As I've written before: http://www.techdirt.com/article.php?sid=20070412/183135#c612
we have no problem with people taking our content and reposting it. It's funny how many people come here, like yourself, and assume you've found some "gotcha." You haven't. There already are about 10 sites that copy Techdirt, post for post. Some of them give us credit. Some of them don't. We don't go after any of them.
Here's why:
1. None of those sites get any traffic. By itself, they offer nothing special.
2. If anything, it doesn't take people long to read those sites and figure out that the content is really from Techdirt. Then they just come here to the original source. So, it tends to help drive more traffic to us. That's cool.
3. As soon as the people realize the other sites are simply copying us, it makes those sites look really, really bad. If you want to risk your reputation like that, go ahead, but it's a big risk.
4. A big part of the value of Techdirt is the community here. You can't just replicate that.
5. Another big part of the value of Techdirt is that we, the writers, engage in the comments. You absolutely cannot fake that on your own site.
So, really, what's the purpose of copying our content, other than maybe driving a little traffic our way?
So, if you really want to, I'd suggest it's pretty dumb, but go ahead.
Shoot, I could setup the site so an average user just mashes up their favorite URLs and I would get the ad revenue. According to Techdirt's RIAA drumbeat my scraping should initiate a change in their own business model, make them refrain from sicking their lawyers on me, and force them to figure out why their advertisers are following the traffic away from their site.
Yes, that's exactly true. We would not send our lawyers after you. As for our business model, it has nothing to do with advertising -- for exactly that reason. We do make a little bit of money on ads, but it's marginal compared to our actual business (take a look at the site before you make assumptions about what our business model is). As I stated above, if you did that, it would actually tend to drive more traffic to us and help our business model.
However, if you really could present our content in a better more efficient way, then more power to you. Effectively, Google and Bloglines already do this. Most people read this site in an RSS reader, meaning we don't see any ad revenue from them. But, you know what? That's cool by us. Because it means more people read us, because it's more convenient and that helps drive more business to our real business model.
In other words, rather than whining about how they could have interfered with our business model, we set up a business model that takes advantage of the situation. That's all we're suggesting Morris and others do.
The hypocrisy of the writers on this site is comical. Sad that the public is stupid enough to blindly follow suit.
Again, I'm confused as to how this hypocritical. You made a bunch of claims about what you thought we would do, but you were entirely wrong. We are not being hypocritical at all. If you want to scrape, go ahead. It only helps us.
Right and wrong are just that - right and wrong.
Sure. Then will you admit that you were incredibly wrong in your post?
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Re: Who is shortsighted?
Fail. No where in this post -- or any TechDirt post for that matter -- is it suggested that it's OK to illegally download music.
"According to Techdirt's RIAA drumbeat my scraping should initiate a change in their own business model, make them refrain from sicking their lawyers on me, and force them to figure out why their advertisers are following the traffic away from their site."
Fail again. The only TD topic that I can think of which relates to your "scraping" example is linking to news sites like Google News. The thing is, Google News doesn't scrape the entire site. They have a short description of the news story and a link to the original source.
"The hypocrisy of the writers on this site is comical. Sad that the public is stupid enough to blindly follow suit. Right and wrong are just that - right and wrong."
Fail hat trick. Perhaps you should actually read the TD articles you rant against before you rant.
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Re: Who is shortsighted?
Already been done. They are called Portals. They do exactlly what you're proposing. Business model revenue stream is just that, the click-through sub-cents add up.
As for Doug, don't believe everthing you read.
He's probablly a moron, but I'm also sure it's a load of bull.
Someone did risk analysis and decided it was cheaper to use the lawers, get the government to help them out, pick up side moeney on DRM solutions embedded in devices... than to just sell music.
They figred they could get all that and still punk the digital revenue stream various ways.
Come on, this junk is all talk to blow a smoke screen around the truth. It keeps the media off talking about the dumb CEO while the company rakes it in...
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If you look at his lot in life vs. your own, I am pretty sure he comes out on top.
What were you saying about being clueless again?
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Jimmy and Doug's Farmclub.com
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No technologists?
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Re: No technologists?
That would be like me saying because I have a hammer in the garage I'm an architect.
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Last time I looked...
But a good point, nonetheless.
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this article is priceless...
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An explanation at last !
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I'm the dawg
That being said, can anyone recommend to me a good technologist to help me launch my on-line dogs-without-kidney's search engine/portal?
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Re: I'm the dawg
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Re: I'm the dawg
So, I heard this story from a friend of my brother about how dogs are waking up in a bathtub full of ice and their kidneys have been stolen by a record executive. Horrible! Won't someone think of the dog kidneys?
(Slurm!)
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WOW
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Who did he blow?
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Ugh..
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Speaking of hammers...
It's a play on words meaning that I only hate [individual] people who are stupid, but when [a group of] people get together their collective intelligence ends up lower than that of the least intelligent individual among them.
This guy however is genuinely stupid. Even more stupid to be admitting to how colossal of a screw up he is in an interview with a member of the press who's boss he doesn't own.
Also, it's nice to see that some one out there actually understands the issue of why the music industry has to adapt to the fact the music itself is now without monetary value. Kudos Mike for noting the water "industry" makes money even though the water itself is free (IE it's the distribution and quality control that people pay for).
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Re#28 Chris Brand
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I'm wrong - but not the only one
Just as I like to stir the pot, I also call bull**** on the "techdirt never suggests illegal downloading" vein that others tend to post. This is the typical wink wink argument. Let's review the essential theme in Mike's recent article: http://techdirt.com/articles/20071115/150246.shtml
"First of all, it doesn't matter that the music is the most important part. Breathable air is the most important part of living, but we're not paying for it, because it's abundant."
So the abundance of free air is an accurate comparison to the tremendous talent and effort required to write, record, and produce music? The resulting product of which should be free? Did you really write that?
Gee, it doesn't sound at all like this is a tacit approval of illegal downloading. Let's see, people are accessing it for free now anyway (illegally) so Mr Music Industry, you must embrace various ideas of making it free as part of your *yet to be proven* business model...Even within the entire context of the piece, this is very much a broken idea.
It would be nice if someone at Techdirt would own up to their own "sharing" activity or at least stop trying to come off as unbiased. The system is broken - but at least start from a place of full disclosure when you take aim at the scum in the industry.
Thanks for lumping me in with what you perceive as people trying to say "gotcha". But I'm just trying to point out inconsistencies for your merely mortal readers. And as your aim isn't only on me (as part of the gotcha crowd), my aim isn't only on you (as a card carrying member of the "writers against the music industry" crowd).
Yes I think DRM is stupid. Yes I think the industry missed the boat, held on too long, and probably won't ever recover (not entirely a bad thing). However, your repeated analysis is too shallow and demonstrates a sophomoric understanding of the industry as a whole - and most specifically the economics related to all the moving pieces.
I guess soon I'll be reading that anything stored in bits should be free, as a basis to sell some related merch...or attendance at a big conference event / expo.
(standing over the cauldron)
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Re: I'm wrong - but not the only one
I appreciate that.
But of course my right/wrong statement wasn't referencing the nature of accuracy - rather, the moral and legal aspects of copyright.
I've already discussed this in great detail:
http://www.techdirt.com/articles/20061115/020157.shtml
It's not an issue of morality at all if you understand the economics. If the economics say that everyone can be better off, then the moral issue doesn't even matter. So why not focus on how everyone can be better off and forget the lame moral argument. The legal argument is even more pointless once you realize everyone can be better off by not enforcing the laws.
Just as I like to stir the pot, I also call bull**** on the "techdirt never suggests illegal downloading" vein that others tend to post.
But you are wrong. We do not support unauthorized downloading. Never have, never will. The position we always take is that the *producer* of the content should understand the economics and how they can benefit from them. That's got nothing to do with whether or not it's okay to share unauthorized content.
So the abundance of free air is an accurate comparison to the tremendous talent and effort required to write, record, and produce music?
Way to take my statement out of context. If that's the best you can do in stirring the pot you really ought to find a better hobby. The statement concerning the abundance of air was to make a simple point: that *value* does not equal *price*. That point stands.
Gee, it doesn't sound at all like this is a tacit approval of illegal downloading. Let's see, people are accessing it for free now anyway (illegally) so Mr Music Industry, you must embrace various ideas of making it free as part of your *yet to be proven* business model...Even within the entire context of the piece, this is very much a broken idea.
You seem to be reading what you think I'm saying and not what I'm actually saying. It is not at all a tacit approval of unauthorized sharing. I am NOT saying "people are accessing it for free now anyway (illegally) so Mr Music Industry, you must embrace various ideas of making it free." I am saying look at the basic economics. Look at the supply and the demand... and then understand how you can take advantage of that. The key is to recognize that you can do much better by embracing those economics rather than fighting the scarcity.
And your claim of "yet unproven business models" is laughable. For nearly a decade we've pointed to many different cases where the business model is beyond "proven" but it's a huge success for many artists. What is unproven about it?
It would be nice if someone at Techdirt would own up to their own "sharing" activity or at least stop trying to come off as unbiased. The system is broken - but at least start from a place of full disclosure when you take aim at the scum in the industry.
What is there to disclose? I do not download or share unauthorized music. Period. End of story. I buy CDs if I want new music. I would probably consume a lot more music if the industry learned to take advantage of the tools that are available, but I will not break the law or the wishes of short-sighted industry execs.
For you to assume that I would is a pretty weak argument. I do not. I have not. I think that the industry would be better off embracing them, but again, I am speaking from the industry's perspective -- not the users. I do not encourage anyone to share unauthorized music and I have made it clear many times in the past that I think people are risking a lawsuit if they do.
Just as above, you have made a bunch of assumptions that are very very wrong in trying to paint me with a brush. Have you learned yet that you should learn a little about someone's positions before you rush to tar them with the wrong brush?
Thanks for lumping me in with what you perceive as people trying to say "gotcha". But I'm just trying to point out inconsistencies for your merely mortal readers.
You have yet to accurately point out an inconsistency.
However, your repeated analysis is too shallow and demonstrates a sophomoric understanding of the industry as a whole - and most specifically the economics related to all the moving pieces.
You have yet to demonstrate a single problem in the economics I have described. If you could, that would be great, but you have not.
I guess soon I'll be reading that anything stored in bits should be free, as a basis to sell some related merch...or attendance at a big conference event / expo.
Nope. Again, you have misread what I have said and made more bad assumptions (notice a pattern yet?). I do not say things "should" be free. I say things *will* be free because someone will learn how to embrace the economics of infinite supply -- and those that won't will then have a very big business model problem on their hands.
Again, please, please, please stop just trying to stir the cauldron and maybe take some time to actually read what I have written. So far, you are doing a pretty poor job stirring the cauldron. You simply are making yourself look quite ignorant.
I don't deny that there are some people who take the positions you are ascribing to me, but it shows pretty poor research on your part to not understand the differences between their position and mine.
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Did Anyone Read the article?
The article also has some bad things to say about Steve Jobs, but you wouldn't expect to hear about that around here. (Why do I always feel like I'm reading pro-Apple/IPod propaganda when I look at these sites?)
Anyway, I get the impression most comments come from people who don't read the original articles which are so conveniently linked to the story. The links are what validate Techdirt, people should read them.
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Re: Did Anyone Read the article?
The post wasn't about Universal, but about Morris. And the article pretty clearly suggests that the "pro-tech" moves you claim are ones that Morris was forced into in his quest for short-term profits over long-term viability.
The article also has some bad things to say about Steve Jobs, but you wouldn't expect to hear about that around here. (Why do I always feel like I'm reading pro-Apple/IPod propaganda when I look at these sites?)
Right, because we've never written negative articles about Apple... except all the times that we do:
http://www.techdirt.com/articles/20070905/115922.shtml
http://www.techdirt.com/articles/2007 0925/120322.shtml
http://www.techdirt.com/articles/20071003/193239.shtml
http://www.techdirt.com/a rticles/20071023/160028.shtml
And that's just in the past two months.
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why
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Dog Kidneys
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On the other hand, the analogy as you said it is certainly more accurate to reality. Tap water is "good enough" if you are thirsty, but people will pay 30 cents a gallon for better tasting, healthier drinking water. Pirated mp3s are good enough for a lot of people, but many of those same people would pay more for something better, if the record companies would just offer something better, rather than compressing the audio out the wazoo to make it louder, thereby making them sound no better than low bitrate mp3s, and riddling their stuff with DRM, trojans and rootkits, which make them less safe and less valuable than stuff you find on p2p.
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change?
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Business 101: Understand Your Customer
Funny to see all the quibling about the cost of water. CN is spot on, there is also a cost for "free" MP3 downloads - phone/cable access, ISP charges, equipment etc. Depending on the plan you're on, it can even be more expensive to download an album as it would be to buy it.
It really doesn't matter if water is really dirty in some places or prohibitively expensive in others. There are plenty of places in the world where water is just as good out of the tap as it is in bottles (and sometimes better) and its cost is so negligible per glass that it is considered to be free (just as there are many places where downloading an album is as good as free). Yet these same places support very healthy sales of bottled water.
The author's point that this highlights the inability to identify opportunities is correct.
There are many reasons why people do download and a surprising number of them will actually purchase some of the music/movies they've downloaded. There needs to be much more understanding of WHY consumers download, WHAT makes them purchase and HOW the industry can adapt to profit - and much less of the instant assumptions that consumers are criminals all because they want convenience.
I don't know any business that has done well out of demonising its customers. And it's not just the long term forcast, that lack of insight is hurting his shareholders now. Me thinks they should be spending a little less on lawsuits and lobbyists and more on market researchers and strategists. I suspect that will have a far better return on investment.
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