CEO Nathan Hubbard explains why live venues are leaving
Hubbard says they need his startup Rival, which will publicly launch next year.
Former Ticketmaster CEO (and Twitter commerce boss) Nathan Hubbard is building an âoperating system for venues.â
So: What on Earth does that mean?
On the latest episode of Recode Media, Hubbard explained his new company Rival, which will publicly launch next year. Behind the scenes of live music concerts and sports events, Rival will partner with the teams, performers and event venues to help them lose less money to scalpers â and know more about their customers.
âIf you go right now and search for âHamiltonâ tickets, there are tickets spread all across the web,â Hubbard said. âIt would be the equivalent of searching for a flight and seat 29A is on one site and row 14 is on another site and half of first class is on another. Thereâs no canonical source where you can just go, âWhatâre all my options to go see the show tonight?ââ
He said the venues are losing out on $15 billion in ticket sales every year because buying tickets when they go on sale is âuncomfortableâ for consumers and the shadow economy of secondary sales causes a vicious cycle. The official entertainers canât provide better experiences for their fans because they have no idea who is actually in the audience; Hubbard says Rival will know, and will help spread the word about lesser-known events.
âThey know less than 10 percent of the people who walk in the door,â he told Recodeâs Peter Kafka. âAnd thatâs crazy from a customer-relationship management standpoint because theyâre conducting all their transactions online and mobile. Thatâs like if you had a dinner party and you only knew one out of 10 people who walked in your door.â
âI keep avoiding saying âticketing platformâ because ticketingâs kind of the easy part,â Hubbard added. âTicketing is, how do I get that person in the door. The question is, now that I know who they are, now that I solved that problem of only knowing 10 percent of my guests, now I know 100 percent of my guests, what do I do with it?â
Below, weâve shared a full transcript of Peterâs conversation with Nathan.
Peter Kafka: This is Recode Media with Peter Kafka. That is me, Iâm part of the Vox Media Podcast Network. I am here â like you care â at Vox Media headquarters in New York City. If you like this show, tell someone else about it.
Thatâs Nathan Hubbard murmuring in the background. Hey, Nathan.
Nathan Hubbard: Hello.
Youâre the CEO of Rival.
Former Twitter executive.
The bio here say you were formerly at Live Nation but you ran Ticketmaster.
I was CEO at Ticketmaster, yes.
So people are interested in many parts of your career. They probably cursed at you not knowing who you were for a long time.
Iâm sure of that.
Because they hated Ticketmaster.
Iâm sure of that.
I think that they might curse at you now, too.
Why would they do that?
Itâs a rough-edge business youâre in, the ticketing live event something-something business that you want to disrupt.
I donât think they curse at us, though. I think, I hope, I think theyâre cheering for us.
I was Googling.
Thereâs a Billboard story about you. I donât think of Billboard as someone who writes rough-edged articles.
You know which one Iâm talking about, right?
Itâs pretty snarky for a Billboard article.
Oh. Well, good.
Hereâs the subhead, I guess, or maybe itâs the lead, âMost of what Hubbard is planning has already been done.â
(laughs) Weâll see, wonât we?
Yeah. We should end the podcast there.
Yeah. Was I interviewed for that?
You donât seem to be interviewed.
You donât seem to be quoted in here.
This is the day you announced what you were doing at the Wall Street Journal and also at Recode.
With my colleague Jason Del Rey, whoâs awesome.
Oh, maybe thatâs why itâs snarky.
Oh, because theyâre mad because they didnât get the interview?
I donât know.
Yeah, Iâve written an article or two like that where Iâm a little angry that I didnât get the access.
I donât know anybody over there. I donât think they reached out.
This person was … all right, weâll talk about Billboard later. Letâs back up.
What are you doing?
I am running an amazing company. Iâm having the best fun of my career, running a company called Rival, that my co-founder, Ryan Lissackâs here today. We are building a technology platform for the most coveted live events on the planet. What does that mean?
Is this something youâve been working at for a couple of years.
I heard you tell me about it, but you didnât want to talk about it publicly. I was confused about what you were doing. You announced what you were doing earlier this year, this is May, this article is from. Still confused about what youâre doing, I think in part because you say âtechnology platform for ticketing and live events.â
Yeah. Look, weâre an operating system for venues, but what weâre focused on are those events where the biggest artists, the biggest sports teams in the world are playing, because the underlying dynamics in those environments create the fan shitshow that everybody cursed at me for in some of my old jobs. Right?
Because when thereâs disparity between supply and demand â thereâs only 20,000 tickets to see the Golden State Warriors and thereâs two million people who want them â the experience of selling those, of managing access and inventory and security through that process is, so say the fans, an uncomfortable experience. That two hours when the teamâs on the court or the artist is on the stage, is electric.
People like going to the thing, they like watching …
They like being there in the seat for two hours.
Theyâre willing to pay some amount of money for the thing.
But the experience around it is foundationally broken. If you go right now and search for âHamiltonâ tickets, here we are in New York, right?
There are tickets spread all across the web. It would be the equivalent of searching for a flight and seat 29A is on one site and row 14 is on another site and half of first class is on another. Thereâs no canonical source where you can just go, âWhatâre all my options to go see the show tonight?â
As you know, the on-sale process is still a painful experience for people and thatâs because when two million people want 20,000 unique SKUs at 10 a.m. on Saturday morning, thatâs actually a kinda super hard engineering challenge to solve and a consumer experience problem to solve.
Thereâs still billions of dollars that leaks into the secondary market. $15 billion this year will go into the secondary market on the backs of teams and artists because they simply donât understand how to price their product properly.
At the end of the day, itâs even worse for teams and artists. Theyâre losing that money on some of these largest events. They know less than 10 percent of the people who walk in the door. And thatâs crazy from a customer-relationship management standpoint because theyâre conducting all their transactions online and mobile, but they only know 10 percent of their customers. Thatâs like if you had a dinner party and you only knew one out of 10 people who walked in your door.
Weâre going to back way up. So, first of all, who is your customer here? Is your customer me or is your customer Madison Square Garden?
So thereâs a two-sided marketplace, right? We are fundamentally enterprise software that helps these teams and venues and artists run their bank.
So, your customer is the venue and/or the act.
Thatâs right. It starts with the team and the venue, really, because in these large venues, itâs that anchor tenant, the sports team, that makes the decision about what platform theyâre going to use.
I keep avoiding saying âticketing platformâ because ticketingâs kind of the easy part. Ticketing is, how do I get that person in the door. The question is, now that I know who they are, now that I solved that problem of only knowing 10 percent of my guests, now I know 100 percent of my guests, what do I do with it?
But, I want to keep backing up. Right? Because the frustration that I have as a consumer about itâs too difficult to buy tickets, or I canât buy tickets or I donât know where the seat is. Part of that, you could improve and maybe that would make me happier and maybe Iâd be more likely to spend.
But it also seems like, from everything I can tell, most people are going to a couple of these events a year, theyâre going to the event because they want to go to that event and whether theyâre treated poorly or not, they want to go.
The thing theyâre fundamentally unhappy about is they either canât buy the ticket or the ticket is too expensive. You canât fix that, thatâs a real estate problem, thatâs a basic supply-demand problem. You canât make more NBA games.
You canât make more Springsteen on Broadway.
So you canât fix any of that.
Thatâs right. And I think, in my old job as CEO of Ticketmaster, I think Ticketmaster takes bullets and gets unfairly blamed for limited supply, and Iâll let them tell you about that. Now thatâs not my job. But I would argue two things. One is, the live event business continues to grow low-double digits year over year. Thereâs a huge opportunity to continue to grow that, because when you look at other onsite experiences and the way they monetize those customers, the live event industry is just starting to scratch the surface on ways to do that.
So thereâs ways to take the customer base thatâs already said, âI want to pay x amount of money,â or, âI want to pay something to go see something live,â even though weâre in a world where everything gets streamed, the value of seeing something live is maybe even more important to me than it ever has been.
And you say we can extract more value out of that demand.
Absolutely. If teams only know 10 percent of their customers today, if the venue only knows 10 percent of the people walking in the door or 20 percent of the people walking in the door, there are sort of a force multiplier you can put on the number of customer relationships you have and the experience you can provide to that person.
If I donât know you in the same way that Amazon knows you extraordinarily well, it can build a great online experience, these venues should know you intimately well to be able to provide a great experience for you.
I gave some of them my credit card, my email, they know that. Right? Maybe I sold the ticket but …
Sometimes, but if you bought it through anonymously, if you bought a piece of paper through a marketplace like StubHub, they have no idea who you are. For those high-demand events, thereâs tons of activity in the secondary market. And suddenly, they donât know these people walking through the door, which, again, is crazy from a customer-relationship management standpoint, itâs also crazy from a security perspective.
If we need to know everything about 100 people getting on an airplane, maybe we should know something about 100,000 people walking in a stadium.
Right. So the pitch is, Iâm going to make you more money, Iâm going to make this thing safer, and/or Iâm going to reduce liability for you.
Yeah. Rival makes teams more money, it introduces them to all their fans and it keeps everybody safer.
I talked to your old boss, Michael Rapino, for a podcast like this a couple of years ago. It seemed to me â and he was talking about the push he was trying to make both Live Nation and Ticketmaster more consumer-focused companies. It seemed to me that that sounded good, but also kind of beside the point. Because again, if I want to go see the Warriors play or Springsteen play, I donât care where I get the ticket from, I donât care whether itâs a good experience or not, fundamentally.
I disagree. The Warriors? You might be right. But the Sacramento Kings? The New Orleans Pelicans? Theyâre having to hustle to sell tickets.
The things I donât want to buy, I still donât want to buy. If you make it easier for me to buy, then maybe, but itâs like a Groupon. Right? Like, if you give it to me half off, sure, maybe.
Hereâs what I would say: We are chemically wired to be together as human beings.
So many of our daily experiences now are being confined to these individual, solo â look, staring at my phone â mobile, solitary experiences.
So, the move from things to experiences is as much about cultural/generational stuff as it is about continuing that human interaction.
But again, I either want to go to the thing and be around people or I donât. You making it, reducing friction, making it easier, those are all nice things to have, but if I want to go the thing, I want to go to the thing. You saying, âThis thing you didnât want to go to? Iâm going to make it easier for you to attend.â I donât see the upside there.
I think, and Michael probably spoke to this when he was here because heâs the smartest in the world about this, there are a wealth of fans out there who have no idea about the events that are happening. Thereâs a massive awareness opportunity.
Coldplay came to town, somebody didnât know. Thereâs a Yankees game tonight, Yankees play the Red Sox, three-game set this week, people didnât know. So, educating those consumers on whatâs happening, but also enticing them to come out, part of the friction in getting people out, I disagree with you that you either absolutely are in or youâre absolutely out.
There are people who are looking for things to do. Eventbriteâs about to go IPO based on this exact premise, right? Which is that people want to get out and do things. So A) you can increase awareness, but B) thereâs a ton of friction in going to and experiencing that event.
Now, with these buildings like Madison Square Garden, like Barclays here in New York, like all the massive arenas and stadiums around the world that have been built in the last decade with consumers like you in mind saying, âHey, I want you to come out.â This is more than just sitting in a plastic seat for two hours and staring at whatâs on the court. This is a set of experiences, itâs food, thereâs all kinds of activities you can do, thereâs family-oriented things. So theyâre sort of creating mini theme parks almost to get people out to those experiences.
I think there is a big, big swath of customers who are casual event goers, who, if you eliminate that friction to going, you can grow the market tremendously.
So, Iâve got you all peppered up, youâre in sales mode, you go to the Warriors, you go to Madison Square Garden, you go to Michael Rapino, you say, Iâm going to improve this business for you. Arenât they telling you, âWell look, our business works great. Weâve got great vendors or we are the vendors and, by the way, this is a real estate business, thereâs only one person who has access to this amount of real estate and thatâs us. Thanks, but no thanks.â
No, I think what theyâre saying is, âWe see the opportunity to get to know our customers, we know the kinds of offers and opportunities weâd put in front of them if we got to know them. If we had the underlying enterprise software to do that, weâd be thrilled. Can you help us?â Thatâs what we hear.
If youâre successful in making this sale, do you have customers?
We do. Our first client, which is still confidential, will launch next year.
Launch next … calendar next year?
Who are you displacing? When people are writing the check to you and saying youâre in, who are they removing?
Existing ticketing companies that power their platform
Could be, but people ask about that competitive piece all the time. The thing thatâs different about Ticketmaster versus all the other primary players is Ticketmaster has built up and has â and Iâm super proud of the work that theyâve continued to do â an amazing consumer-facing site.
Every other ticketing company doesnât really have a … Ticketmaster competes with StubHub for the customer, competes with Vivid Seats for the customer. What we are is really a back-end platform that lets the team or the venue manage their inventory, manage access and put â and the second piece of this, and we can talk about this because this is some things I worked on at Twitter, push that inventory to wherever they want to sell it.
Using the Rival platform, ostensibly, somebody could sell through Amazon, through their own sites, through StubHub, through Ticketmaster, if that integration took place. I think the back-end piece of what we do overlaps with some of the things that Ticketmaster does.
When we say the people, itâs really Live Nation/Ticketmaster, right? Thereâs a handful of players who …
Thereâs hundreds of millions of tickets.
Three-quarters of baseball is not on Ticketmaster. The Staples Center in LA, LeBronâs old home in Cleveland, the O2 Center in London, which is this Madison Square Garden equivalent in London, not on Ticketmaster. So thereâs a big world out there.
So, two different categories, so two different questions. One is, is your business is the idea, âWell, weâre going to the places where Ticketmaster isnât because we canât get in where they are. Or we legitimately think we can live in a world where we work with Ticketmaster.â Because it seems to me that Michael Rapino would say, âThat all sounds great, but we would like to own more of the business, not less. We have technology, used to work for us, we can do this stuff that you say youâre doing.â
Well, that remains to be seen. I think that they are as much a partner for us as they are competitor. We look at a whole world out there where they arenât. We look at a whole bunch of tickets that are sitting on platforms that are far inferior, I think, to even the standard today. And we go get them.
This is an interesting business that youâre in because you mentioned Eventbrite, theyâre going to IPO, and Iâve heard the folks at Live Nation say for years we think these guys are real, genuine competitors for us. I wouldâve thought, well, if you keep saying that, at some point youâre going to buy them or squash them. So they managed to make it through and they built up a business thatâs big enough to be an independent ticketing company
Most of them donât. Most of them fail, get bought, get squashed.
I disagree with you on that.
I think the e-commerce for live events in more vibrant than it ever has been. StubHub is a multi-billion dollar company. Vivid is a multi-billion dollar company. SeatGeek just got valued, presumably, incredibly high.
Right. I was going to say, and as a counter, you have these secondary guys.
But most of them now, because there is so much competition and they are growing so much, are saying, âI can compete in two ways. I can either compete on fan experience and/or I can compete on inventory,â having something thatâs differentiated. âAnd if Iâm going to compete on inventory, I need to be the system of record, that underlying platform, so that Iâm selling the ticket the first time.â
Thatâs primary ticketing and, just as what we did at Ticketmaster, you know, our baby when I was there, was that TM Plus product that put primary and secondary together on the same map. SeatGeek is now moving into that and has bought an Israeli ticketing company so theyâre now sort of primary/secondary, theyâre doing the Cowboys and the Saints and a few others.
Youâre going to start to see the market blur the line between primary and secondary ticket because those words are not fan words.
No, not at all. And you donât know …
No fan gives a … right.
I go to Minnesota once a year. I go see a Twins game once a year.
And I check out the different apps. Iâm curious, but I also use SeatGeek because your pal Bill Simmons had a deal with them and I got 20 bucks off or I got 20 percent off my first ticket.
Oh, youâre welcome.
Youâre welcome. Itâs totally unclear to me where the ticket is coming from.
It looks legit and I get in with it, so Iâm fine with it.
Iâve played around with enough of the different apps, they all kinda show me a picture of what the seat looks like …
… what the view looks like. I donât know â or I shouldnât know or care â if itâs a primary ticket or a secondary ticket. And it seems to me, in a world where the consumer doesnât know or care where this stuff is coming from, that itâs very difficult for new companies to come up, because in the end youâre still selling the exact same product: A seat at a game.
Two things. One is the consumer does care when they walk up to the gate, they have a fake ticket, which happens …
Thatâs bad. Yeah.
… hundreds of times a night at big events. But secondly, itâs a supply-driven business.
Thereâre only 20,000 seats to the concert, right? Or to the game. And so, thereâs an underlying platform that has to power that. And I canât believe at the beginning of the podcast we had a 20 minute debate over whether or not the experience is great or not. We can go search fansâ frustrations and itâll tell you everything that they want. It can be and will be made better.
I think no one has taken … By the way, you said that, in talking about Eventbrite, when I was CEO of Ticketmaster, there were two companies I woke up terrified of. It was Eventbrite and it was StubHub. It was StubHub because they owned the end consumer, and it was Eventbrite because they were starting from scratch with equity and great engineers and a totally blank slate. From scratch, they couldâve built a platform. Now, they chose to stay in a lane that, to their credit, and I admire Julie and Kevin tremendously, will produce a company that went public.
To fight StubHub, we went after their business. We went deep into secondary, and that kept StubHub in their lane, so far anyway, at least. The fan doesnât care, but the experience is still not a great one. No fan wakes up and went, âThat was awesome. I loved that entire process.â A lot of these products are single-start apps in the app store, but nobody has done the hard work.
It is hard, long work, and thatâs why this is a VC-funded business, by the way. Not every business should be VC funded, for us it is, to build out the richness and robustness of the enterprise software that it takes to run a Madison Square Garden. That takes years to build, coupled with, âWhat is the hardest e-commerce challenge on Earth from an engineering perspective?â Which, again, is when two million people want 20,000 unique SKUs that can be bundled all together all at 10 a.m. on a Saturday morning. Thatâs a really difficult thing to do.
For the last two decades, nobodyâs done that hard work. Everybody has replicated what StubHub built, which is effectively a marketplace to exchange anonymous pieces of paper. So Rival, for the first time in 20 years or so â after the advent of Cloud, after the advent of modern SaaS architecture, camera and visualization technology, mobile â is building from the ground up that operating system. Again, nobodyâs done that in 20 years. When you say, âLots have come in and try and fill …â I disagree.
You mentioned Amazon briefly.
Last year, lots of folks thought Amazon was going to get into this business. It seems like a business that Amazon would come crush, right? They can come crush anything. We just had a presentation from Scott Galloway at our Code Commerce thing, and he talked about, theyâre the equivalent of the Allies and the U.S. with their defeating everyone else just with more gasoline, right?
Essentially unlimited resources. So this is something where they can buy their way into the business. They also have direct access to the consumer …
… and you would think their pitch would be really effective, which is why theyâre going to, âBuy our way in and/or weâre going to help you guys sell all your unsold inventory.â A year later, they donât seem to have gone anywhere with that business. What do you think stopped them, at least so far?
Itâs a supply-driven business and they donât have supply. You could build the most beautiful consumer-facing interface, but if you donât actually have supply, it doesnât matter.
Which we just spent 20 minutes talking about, right?
You either have the Beyonce ticket or you donât.
And they do not have … For all the other areas of their business, they have supplier tools, whatever, 50 percent of their business comes from third-party sellers, and they can upload their inventory onto Amazon. They had none of that. So youâre building this beautiful … Itâs trees falling in the woods…
Itâs like weâre in a rabbit hole because you were just explaining how you were going to get into this business even though itâs supply-driven, but just …
Because Iâm doing the work that they didnât.
But letâs park that for a second.
No, thatâs the right question. We are building the underlying enterprise software to actually manage supply. They built just a consumer-facing interface.
So youâre saying, âItâs worth you, X Stadium or X Team, to give me your business because I will actually do something with it that Amazon canâtâ?
Yeah, youâd be able to sell it through Amazon. Amazonâs built a bunch of stores with empty shelves.
But you mentioned the Pelicans or these teams. Theyâre not Beyonce. Theyâre not the Warriors.
Wouldnât Amazon be able to buy their way in there, say, âLook, you guys have a lot of unsold inventory. Weâre going to bundle it with Prime or …â
Absolutely. Here, I think, was Amazonâs misstep. They learn over time, so I donât think that storyâs over, but Amazonâs misstep was, of course, they would be great at selling upper-deck tickets for the Sacramento Kings. That brings not a lot of value to Prime members. The Prime members want the front-row tickets. Well, guess what? The concert promoters and the teams donât need help selling the floor seats.
They donât want to give Amazon their customer data, and my gut says that at the end of the day, Amazon was not willing to give the teams and the artists the customer data. They wanted to completely control the customer and the experience, and the teams and the artists said, âWell, Iâm not giving you my best customers, so weâre at loggerheadsâ and they didnât make progress.
So youâve been in and around music, live biz and ticketing for a long time.
My standard rule of thumb â for digital music, at least â is anyone who was in that business leaves it and never comes back. What about this appeals to you, fundamentally?
I wish that I didnât love it. I wish I could quit you. Look, I started as a kid, as a touring performer. I made music. I had four, five albums signed to a record label in Nashville, toured around every year playing music. It just runs through me. The energy of the crowd, the energy of that live event, it just crackles through me. Itâs why I love this city.
I know that the problems that exist today, that frustrate fans, that frustrate the team owners who I talk to every week, are solvable through technology. I learned that at Twitter. I learned what a small, high-performance product engineering design team can build, and how.
The entire thesis behind Rival was these are solvable problems if we give ourselves runway to do the hard work and build the underlying enterprise platform, the consumer facing piece and solve the problems, leveraging technology as it is today, that we can make the experience better. Weâre a product-driven strategy. We make no bones about that, and weâll either be successful or weâll dig a big hole in the ground.
The standard rap for the last 10 years for music, of business, has been you guys are either going to make no money selling music traditionally, or youâll make a little bit of money from streams, or if youâre phenomenally successful, you can make some money from streams. Go make it live.
Youâre really going to make your money live.
That always seemed to me to be not very realistic with a lot of acts that canât tour or shouldnât be touring, or they have a song. But the tour business keeps increasing both actual dollar value and the number of tickets sold keeps creeping up, right?
Do you think that trend continues?
I do. And the only question from here is if the artist is really making 80 to 90 percent of his money from touring, how long can the other stakeholders in the industry stay out of that? Because Appleâs got a model that sells hardware. Okay. Spotify has a model that weâll see. They might …
Spotify is the only music company â only digital music company â that is only a digital music company. Everyone else is selling something else.
Yeah. Theyâre on a journey to be more than that, though. Theyâre either going to vertically integrate into content, or theyâre going to horizontally expand into other kinds of media and raise prices and go.
But broadly, you think there is an increasing audience of people who want to go see stuff live, and it doesnât just have to be Fleetwood Macâs Eternal Farewell Tour or whatever, the handful of generally older acts and a handful of new acts. That well keeps replenishing.
I think it does. Look, in 2008 the rap on Live Nation, which was a small company at that time, was that, âOh jeez. All the old acts are going to die,â right? The Stones are going to kick it. McCartney … Whatâs going to be the next generation? Here we are 10 years later and the business is healthier than ever.
I think that, again, weâre chemically wired to come together. So long as people are creating, people are going to come out and see it. And the good thing about the Spotifys of the world is it does get to that long-tail theory, which is people can identify and cluster around smaller bands, and those bands, then, can go out and travel. My own crappy band, when we go live on Periscope through Twitter, 500 people come in and watch it. What?!
One last question about your business. Itâs an enterprise business, right? You have to go to the team, to the stadium, make the deal with them. Theyâre your customer.
Is there any way to do this the other way? Where you are a consumer brand and people want to come to you and you build up your leverage that way?
I think thatâs what StubHub did.
But thatâs not how we approach the business. Itâs a supply-driven business. We are building the best tools in the world, have built the best tools in the world to manage supply. Now, in the longer run, this is a platform that manages inventory and access and facilitates commerce wherever people gather.
As you think about the venue of the future, itâs not just about a concert in four walls. Itâs about an entire retail campus and experience where the concert or the game is really bait to bring people out to these retail experiences that are converting, as Amazon upends the retail world, to being about people congregating and coming together. That, in the big picture, is what Rivalâs about.
And, ideally, you take a slice of that and …
Right, manages access and inventory and commerce wherever people gather. Thatâs what Rival ultimately means.
Have you ever thought about letting people see unlimited numbers of movies for $10 a month?
I heard that you can make it up in volume.
Yeah. The MoviePass guy was right here where youâre sitting in February.
Howâd he fare? Howâd he fare under the spotlight?
He was saying you have to burn money to make money.
Well, sometimes thatâs true.
Theyâre still alive!
Sometimes thatâs true.
Theyâre still around.
It requires the second piece, though, ultimately making money.
I mean, by the way, one of the issues that he had â beyond the fact that he was losing money on every transaction â was it was really only going to work if he could get the AMCs and the other handful of big supply owners to work with him.
You have the same issue.
Yeah, and I think youâve got a very fragmented … Outside of the big incumbent, youâve got a very, very fragmented industry of supply owners that have technology platforms that just are not up to speed, and weâve got the best product in the world. So, weâll see what happens.
We mentioned Twitter a couple times. You ran commerce there?
Yes, and moved on to babysit the media team and others, but yeah.
So Twitter never really had commerce? Still doesnât.
Well, I am so wistful about seeing what came out of Code Commerce this week where it is so clear that Instagram has grabbed, and a bunch of my Twitter alums, weâve all been DMing each other this week because itâs so clear that it is happening, and …
Yeah, every single company that was up there, thatâs where they were spending their money and thatâs where they were converting people.
Look, the challenge at Twitter was that you didnât have the canvas to bring shopping to life. Itâs the same …
Are you talking about the actual format of Twitter, or there just werenât enough people using Twitter?
Yeah. No, there were enough people, but the actual format of Twitter, there wasnât … The long-term challenge at Twitter has been, âHow do we get people out of the timeline into another experience?â Moments is the first time that people really started to do that. That took a lot of patience. Some of Twitterâs video initiatives are the second foray into that, but Instagram, it turns out, in part because of what theyâve done with Stories, which has broadened peopleâs thinking about what Instagram is, Instagram has permission to off-ramp people into other experiences out of that home feed.
Itâs also just, âHereâs a beautiful picture or video thatâs a great billboard. Are you interested in these shoes?â Then they can lead you somewhere.
Thatâs right. At the core, what is shopping on Instagram and Twitter? Itâs transactional ad units …
Yeah, and by the way, shopping on Instagram still is barely thing, right? Itâs still mostly billboards. Thereâs still very little actual commerce happening.
But if you listen to their advertisers and you listen to them, thereâs a reason why thereâs a buzz about, âWell, maybe theyâre going to start a separate shopping app.â I donât think thatâs where theyâll ultimately go, but I think …
It sounds like theyâre not, actually.
Right. They have a canvas that can facilitate this, and people today … All you had to do was look to Asia where WeChat was doing this extraordinarily well. You could tell that through time, that sort of invisible line between social content experience and commerce experiences was going to be erased.
Just to beat this into the ground, Instagram is a feed.
It is almost entirely pictures and now, some video. Twitter is a feed that is very text-based, but certainly can accommodate pictures, can accommodate video. Is this something where, if you went back to it now, thereâd be a real opportunity to do it and you could do it? Or is there something baked into Twitter, in the way that most people use Twitter, and itâs text and re-tweets, and itâs Donald Trump saying outrageous shit, that is going to prevent it from actually being a commerce business?
I believe that just as brands spend their money on Twitter, commerce and transactions can happen there. We proved that commerce and transactions … We sold the first ticket through social media on Twitter. It can happen for the right things, but the use case has to be broadened about what Twitter is, and Iâm sure we can talk more about this. The use case of what Twitter is â intentionally by Jack, I think â has been pretty narrow over the past couple of years as theyâve sought to operate on themselves while running in a marathon.
You say, âitâs news.â Then ânewsâ has sort of a broad definition.
Thatâs right. Instagram has broadened what it is into a larger content platform with a richer set of experiences that, I think, gives Instagram permission to introduce shopping experiences, and itâs working.
Twitter has had multiple leaders. Sometimes people like Jack could come more than once. Which era were you under?
I was under both. Most of my time was with Dick Costolo, but some of my time was with Jack. I got to see them both.
This idea that Twitter is really valuable, has a lot of news, but is also a cesspool and a home for Nazis and other malcontents, that seems like thatâs a relatively recent sort of conventional wisdom about Twitter. That wasnât happening while you were there. There was a lot of abuse, but …
No, I think we understood the abuse to be … We didnât understand the exploitation. At least, it wasnât part of the ongoing dialogue because at the time there were … Dick also used to say, âTwitter either is on the cover of magazines and websites as this soaring bird or as a dead bird.â We were in a particularly dead-bird phase, post-IPO.
Yeah. There was a dead bird on New York Magazine, right?
And so the focus there was, âJeez. Okay, how do we inspire user growth and get moving there?â But … Enough on Twitter.
Weâre all kind of obsessed with Twitter, though. We canât stop talking about it. Itâs like that and Trump.
It matters. Look, your question was, âDo we understand abuse?â Yes, we did. Of course we did. The question is, âWhere is that platform going to go from here?â And â¦ Iâm waiting for the Snap merger.
Itâs time. As somebody who ran a large incumbent, the best thing that you want as a large incumbent is all of your little competitors to be fragmented and having to sell against each other because what they end up doing is selling against each otherâs advance proposition, not the big incumbent.
Whoâs making the case for that? Is that Jack going to Evan, saying, âThis is a good idea for you. Listen.â Or is it the other way around?
I think itâs probably their boards, because Iâm not sure either of them … I mean, itâs both of their babies. Theyâre not going to sort of voluntarily do that, I expect. Thatâs not necessarily founder ego so much as it is just founder focused.
Who gets more upside from that merger?
Well, Twitterâs twice the market cap. Right now, I donât know. Weâll see. I actually think probably Snap does because theyâre two years behind where Twitter was on the evolution curve, where investors start to go, âHmm, this isnât growing as much as I thought, so thereâs not as many eyeballs to put ads in front of.â
Now I just have to measure how many eyeballs are seeing ads, and how many ads can you put against those eyeballs? The pressure invariably comes on user experience. Now, Evan has been super protective of that, and good on him. I just think that in the long run, scale is why Facebook wins, and you have two very interesting, very desirable products that are literally competing with each other, not just for ad dollars, but also for content, and I would like to see those two companies come together.
Snap is the last sort of big social platform to emerge, in the U.S. at least. At one point it was just common wisdom to go … Obviously, a new one is going to come and replace it. Are we at a point where everyone has what they need and theyâve already sampled everything and everyone has a smartphone and itâs going to be very hard to displace a Twitter or a Snap or a Facebook or an Instagram? Or do you just assume something is coming and we just canât see it?
My answer to that is that something is coming and we donât see it. I think people migrated mostly … The migration away from Facebook is because itâs not cool and itâs not where your people are, and it looks like every demographic and generation have something thatâs for them. The only question is whether that gets built natively or sort of organically out of existing players â history says it never does â or whether something new comes along and gets snapped up.
So if your older brother, older sister is on Snap, youâre going to want to use something else at some point?
I think so. Instagramâs done a great job of pivoting and pulling people in, so maybe they can keep that up. Weâll see.
Who in that world, if you had to bet a dollar on one of the platforms today, so that youâd be capturing value going forward, right? What are you most optimistic about?
Even though everyone knows that Instagram is a huge deal, so itâs fully valued.
Yeah. Look. The greatest sort of … We donât have 30 for 30 in the tech space, but we should. And the story that needs to be told is …
This is your friend Bill Simmonsâs documentary series.
Yes. The story that needs to be told is the breakdown of the Twitter/Instagram acquisition, which would have changed the web and mobile forever and changed what Twitter is.
Right. Twitter had credit for seeing it, going, âWe want to buy that.â
Yup. And it didnât happen, and it is why Facebook is where they are and it is why Twitter is where it is. And Snap is where it is.
And youâre saying thereâs more to that story than just Mark Zuckerberg showing up with a big check?
I think thereâs a very deep, rich story around what actually happened over the course of those months and weeks that needs to be told.
Can we talk about that offline if youâre not gonna tell me now?
I wasnât in the room, so Iâm not the one to be interviewed.
Music. We did Amazon, we did Twitter.
Your business. Spotify.
In the music business.
Yes, they are.
They have talked on and off, mostly privately, sometimes publicly, about their desire to do other stuff. They played around with video for a bit. You could see Viacom shows on the phone for a minute. That didnât work. Theyâve gone into podcast, it sort of maybe worked. Do you think they have the ability to branch out?
How are they gonna do that?
Well, I think they need a canvas to show it. I think when they got the Taylor video, for example, it probably wasnât presented in a way that was super accessible. I just think, not unlike what we just talked about …
Iâm guessing itâs Taylor Swift, was there an exclusive?
Yeah, I think around … She had sort of an exclusive video that came out on Spotify, and I think people had a hard time finding it. And that is not the end of the world. Itâs just like we talked about with Twitter, Twitter didnât create a canvas until further down the road for sort of a different kind of viewing or user experience. And Spotify can and will get there. If theyâre gonna move into other content, then theyâre gonna go do that deal and land that anchor that they need. Whether thatâs the XM Howard Stern deal or Netflixâs deals or Amazonâs deals. They just need that one thing, and they can build on it.
Do you think itâs a product problem or sort of a company problem? To me, it seems like both, but fundamentally.
I donât think itâs a problem. I think itâs opportunity.
But theyâve got a thing that works so well that I turn it on, I put it in my pocket, and then Iâm really happy.
Because theyâre giving me music, and I donât need to go hang out with them. I donât need to …
I know, but Amazon started in books. Think about what Daniel … Daniel [Ek] went public, heâs got Apple Music nipping at his heels. If Iâm Daniel, the best thing I can do as CEO is make sure this first year of going public that we have extreme laser focus as a company because weâve got a real hungry competitor nipping at us, and weâre being measured now on a quarterly basis. So Iâm quite sure the battle plans are there, but would you launch them three months into being public? No, you probably wouldnât.
So I think thereâs a whole lot of opportunity ahead. They have a great user base thatâs gonna do it … theyâve got lots of models that have come before them of how you expand from a narrow vertical into other fields, whether thatâs Amazon or Netflix, and itâs coming. Because look, if it doesnât come then you imagine looking at their per unit economics if theyâre not gonna raise prices that theyâve got to go downstream and start competing with labels. And Iâm just not sure that they feel like thatâs their business.
But to compete, thatâs the other thing I wanted to ask you about, was the competing with labels part, right? So they distribute Universal Music to me, I pay them, they pay Universal.
They clearly laid out a plan where they want to go to some artists and say, âYou either donât need to work with a record label, or by the way, youâre not really working with a record label now. Do a deal directly with me, not exclusive but just do a deal directly with me, you will keep almost all of the money instead of getting very little of the money, itâs better for you.â
If they do that enough with enough artists, thatâs a real problem for Universal Music and the existing big labels.
Maybe. But so much of streaming is catalogued, and labels control the catalog, and that is just the point of leverage. So I think youâre right that theyâre gonna do this cute little dance and theyâre gonna see how far they can wade into the water without bumming out their supplier, as it were. But that catalog, oof …
Right, so that is the tension, and this is what, if you go to Universal they say, âWe own all this catalog.â Thatâs old music, to everyone whoâs listening. âIf Spotify wants to compete with us, we are gonna walk away.â But the tension is right, is that Spotify has built themselves up enough that Universal and the big labels really need the money that Spotifyâs giving them.
Yeah, they need a distribution.
They canât really walk away.
Spotify canât really have them turn off.
Right? If a third of the music on Spotify goes away tomorrow, thatâs a real problem for Spotify.
Right. Which is why I donât think the interesting question is whether theyâre gonna get into that music content. Theyâll do some of it, for sure, theyâre gonna find a happy medium with the labels because they need each other.
You think that detente is structurally sort of stuck there?
It has to happen. It has to happen because of their interdependency. Nobody has the trump card there yet. Yeah, so Spotify gets bigger, but Spotifyâs not gonna be the only game in town with Apple Music. So the labels are gonna have that leverage.
And if you donât know this business, though, you look on the outside and go, âThis just looks like Netflix,â right? Where they used to have to buy DVDs. Then they started buying content directly from the studios, and the studios said, âEnough of that.â And then theyâre making their own. And now they have enough money, enough leverage that they can kind of succeed without Fox or Disney.
The difference is that you donât watch a movie or a show usually more than once. And theyâre carrying the soundtracks of our lives. And that is why you have to have that catalog because I listen to Joni Mitchellâs Blue album or the new Kanye record, like, back to back and over and over again. Iâve only watched, you know, whatever, âThe Handmaidâs Tale,â once.
So I think thatâs the power of the catalog. And why whatâs going to be interesting from an execution standpoint in Spotifyâs case is whether they go horizontally out and into other media verticals.
If you had to bet, how do you think theyâll proceed?
If I had to bet, how do I think theyâll proceed? I think the battle plans are there for them to go horizontally for sure. I think Troy Carterâs departure â and Troy is a friend â is an indication that theyâre moving into the next phase of their artist relationships, letâs put it that way. And sure, theyâre gonna do some direct deals with artists, but thatâs gonna be done in a … thereâs gonna be a happy medium thatâs reached with the labels there. I think theyâre gonna move really quickly into other forms of audio content, and Iâm sure that videoâs not far behind.
So horizontal meaning weâve already added podcasts, but theyâll go deeper into podcasts or something like that that can deliver to you on their platform.
Yeah, within the canvas that they have now, but Iâm sure somebodyâs got some great mock design/UX poster boards on the walls of Spotifyâs offices that show what a video experience is gonna look like.
Do you think youâre going to see … This is something Iâve asked you, but itâs a perennial question, right? Thereâs always one or two â Chance the Rapper is out there â who have gone and created a successful musical career without a big label or they created a successful musical career with a label and then they go off on their own, like a Radiohead.
But thereâs only a couple at any given time. Do you think weâre going to get to a point where enough people finally say, âThereâs enough upside for me to do the work and actually do this myself or get a VC to fund me or I no longer need a Universal,â and thereâs more than one or two of them doing it.
Iâm not sure that those are mutually exclusive things. I think Universal will provide a bunch of services to those artists, but thereâs no doubt that the last decade has facilitated this transition from artists to entrepreneurs. Right? The best, the biggest artists in the world â Madonna, Jay-Z, U2, Taylor Swift â those are the best brand managers you know. Behind the scenes, theyâre doing that. And that now, artists actually do have the tools to make that migration from artist to sort of artist/entrepreneur.
And yes, weâre gonna continue to see more of them pop up and use their leverage to work with companies from the labels for marketing and support to Spotify and Apple for distribution, to sponsors to, again, live event companies who are gonna help them make their money.
I like calling her Taylor Smith. Iâm gonna call her that for now. Taylor Smithâs album deal with Universal is up.
So weâve talked about this before. And now itâs kind of a meme. Do you think she re-signs with Universal because thatâs the easiest thing to do? Thereâs really no risk there for her? Do you think she does something where she takes on more risk and thereâs more upside for her?
When I was at Live Nation in late 2000s, Scott Swift, her dad, called me once every two months and said, âYou guys donât understand, my 13-year-old daughter is a star.â
But you must have got those calls all the time.
âSheâs playing …â Yes. âBut sheâs playing these amphitheaters, and you guys arenât servicing the fan right. Thereâs all kinds of opportunities to make money in a really healthy positive way for the fan. The experience should be better,â on and on and on. And yes, I got those calls all the time, and the first couple of times I was like, âUgh.â And you hang up. And he kept going … he knew sure as Sunday that he had not just a star but also one of the smartest business minds of a generation in his family.
And so every step of the way that I have watched her career evolve has been the advancement of artist as entrepreneur. And so … Hereâs what I know. The next step is going to be something new and something different and something groundbreaking that advances the cause of artists overall. I know that that camp thinks that way, and I think theyâre gonna … That doesnât necessarily mean theyâre abandoning the label.
But I think theyâre gonna show what can happen in the same way that youâre starting to see athletes start to say, âHey, weâve built up these giant brands. How do I build a business around that? How do I take more control and ultimately a larger share of the economics?â
So it sounds like youâll be surprised if thereâs a story tomorrow that says she is re-upped for a four or two or whatever album deal with Universal and has got an X-sized advance and it kind of looks like any other artist deal?
If it looks like any other deal, Iâll be surprised. I wouldnât be surprised if she continues the relationship with Universal. Great label, can support her in all kinds of ways. But Iâm quite sure that sheâll have some interesting control and independence in decision-making and maybe even in the way that she releases her content going forward. It seems to me silly to start doing record deals based on albums now. âYou owe me an album. Weâre gonna do a five album deal.â In a world in which streaming is blowing up that concept altogether, why would you do an album deal versus a content-focused deal?
Except that for a handful of people, and sheâs one of them, people still buy her albums, they buy digital versions of her albums, they buy actual CDs.
Of course, Iâd just argue that she could probably make as much as sheâs getting paid for one-eighth of the content. And that itâs probably in her business interest to â just like sports leagues divvy up their media rights and sell them â that she can divvy up her content rights and make more money in the aggregate because each individual Taylor Swift song is probably worth more than the sum of the parts.
Because the old model was the song is valuable because it gets you to buy the $15 CD that you didnât actually want to buy.
And you think now we move to an era where the song actually has value in and of itself?
Yeah. Look, Iâm totally fanboying out on Taylor.
But she is one of the most meaningful songwriters, like, she just, she had …
Just two middle-aged dudes talking about Taylor Swift.
You know it. Taylor Smith. She had a song, a country song of the year, right? My point is sheâs going to continue to create content and probably signing an album by album by album deal is a very backwards way of thinking about the kind of artist that she is right now. She now is a brand, and sheâs probably looking at the entirety of her content thinking about how do I monetize that in the most effective way going forward? Thatâs not a traditional record deal.
That said, Iâm sure that the very smart people at Universal have a whole bunch of interesting ways that they can help her because they really do provide valuable service to artists. Theyâre good at what they do.
And itâs important for them to keep her. Right? The headline, it says she walks away and is doing a deal with Andreessen Horowitz or whatever, is very bad for them.
I donât know if I agree with you on that. Why is that very bad for them?
Thatâs the way they think about it.
I think they have an enormous …
Thatâs what they tell me. They say, âWeâll pay x amount of money to keep this artist even though they donât sell as many records because itâs important for us to say we work with this artist.â
My gut says that theyâre measured by profit and loss like any other business in the long run, and part of the reason that scale works for them is that they can smooth out those ins and outs of artists being on the label or not, and so they can weather the storm. Iâm sure they donât want a headline, but theyâd rather have a headline than a call to accountability in the boardroom for why theyâre losing money.
I want to get Lucian in here, too. I donât think heâll get as peppered up. Itâs the guy who runs Universal. Nathan, youâre great. We did your business â which I canât go buy something from Rival.
No. Next year.
Next year, Iâm gonna go to it, Iâm gonna buy a ticket at a stadium.
And youâre gonna get some of that transaction.
And you will feel the joy and delight and inspiration of that experience.
And if I donât, I call you up?
Yes. You can tweet at me just like how you used to when I was running Ticketmaster and before I went to bed every night, I searched for the company and …
Whatâs your Twitter handle?
Okay. You heard it here first. Bug Nathan at Twitter. Thanks for coming on.
Thanks for having me.