Cherie Hu - Water and Music

Lawrence Peryer:  Hi. It's great to me you.  How are you?

Cherie Hu:            Good, good. How are you doing?

LP:                        I'm doing well, thank you. How are the people in your world?

CH:                       They're doing all well, I think, yeah. Thankfully. So I'm just in – I'm based in Brooklyn normally, so I'm still in Brooklyn. Yeah, I've just been inside mostly for the past couple of weeks. And then my parents were in Westchester, which is actually like one of the, I guess epicenters of the outbreak in New York; it was like Manhattan and – or not actually Manhattan – New York City and Westchester County.

And so they have moved to my aunt's place in Maryland. They moved pretty early on, actually, like in early March, and they've just been there ever sense. And yeah, they're still doing well, thankfully. Yeah. I guess we're all just hanging on and monitoring the situation. Yeah.

LP:                        Whereabouts in Brooklyn are you?

CH:                       I live in Bed Stuy at the moment.

LP:                        I lived in Carroll Gardens for a better part of 10 or 12 years. Yeah.

CH:                       Oh wow. And are you based on the West Coast now?

LP:                        I'm in Seattle now, yes.

CH:                       Seattle. Oh, okay.

LP:                        I moved out here a few years ago. You know, not as bad as New York looks from far away. It's been kind of heartbreaking to watch the news or to see the pictures. I've found the hospital set up in Central Park and the military hospital ship off of the Hudson tough to see, and it's not quite as much of a visible presence here in Seattle. You know, it's a big more geographically dispersed, bigger just land mass. So yeah, and there's just not that kind of presence. It's much more of an invisible kind of – you know, it bring its own anxiety.

CH:                       Yeah. Yeah, yeah, yeah. A very different kind of level, yeah. I can totally understand that. Yeah.

LP:                        So how's the weather been out there during all this?

CH:                       The weather?

LP:                        Yeah.

CH:                       Last week, from what I remember, it was actually really good. It was like really sunny. I in general, just over the past couple of years, I've noticed that like spring doesn't really exist. It kind of just like goes from winter to summer, at least in New York. And there's like kind of a middle ground, but it was like 60 or even like 70 degrees some days last week, and like really sunny and nice.

LP:                        Yeah.

CH:                       Which felt kind of weird, to see like from indoors. But yeah.

LP:                        Yeah, very similar out here. It was unseasonably warm, which I think the positive was if we had to start off on, you know, the sequestering and the social distancing, at least people could still get outside and walk around and not be in the Seattle gloom. I think the bad side of that was people went out and walked around and interacted.

CH:                       That's so true. Oh my God, in New York especially. Oh. Oh God, that's true.

LP:                        Yeah, there was a lot of scolding going on from the authorities here. And I saw some of that out there as well with the governor saying, hey, people have to stay inside.

CH:                       Uh-huh.

LP:                        But it's difficult. You know, the cabin fever and the isolation. We're social creatures.

CH:                       Yeah, yeah, definitely.

LP:                        So it seems like, you know, you've jumped right in and met the situation with what I perceive to be your normal curiosity and insight. It looks like the first topic you chose to tackle as a it relates to the COVID situation is this notion of how work from home and remote working might – might or might not become a more permanent fixture of the music business. How did that become your entry point to this?

CH:                       Yeah. Yeah, it was one of many entry points that I was thinking about in this climate. I guess there has been a lot of attention given to how the artist-fan relationship is changing in this environment, given that touring is no longer available as an outlet; like how does that manifest online? And I realize there were like inklings of the same conversation, but not as much as I think there should have been. Behind the scenes as well, just in terms of how people in the music industry – just such a relationship driven business, at leas traditionally, it's a very networking driven business, very like emotion and communication heavy – how does that all happen online, once – you know, a lot of – well, it's like if you're like promoting an album to industry like curators or DJs where you normally go to their office, now all that is happening online.           

Like what does that – what's the impact of that on, you know, artists' market strategy or their plans for the next couple of weeks or months? Also just, you know, like how, how do people make decisions and how do people communicate in general in their day to day work once everything shifts online? And what kinds of companies are most or least impacted by that? Or maybe like which companies are better suited to adopt to a fully remote setup? And then the more I thought about it, the more I guess like deeper questions came to mind in terms of – this is not unique to the music industry, but I think is especially relevant, things like the concentration of opportunities in general.

Like if you think really long term or like really historically, traditionally had like music cities in the US, like Los Angeles, New York, Nashville, Atlanta to an extent now, where opportunities are really concentrated and like relationship building was really concentrated, to the point where people still say today, if you're an artist or you want to work in the music industry, LA is like one of the best places to be.

But now we're in a situation where for like as long as a couple of months – people like don't have that geographic barrier anymore, which could be a good thing in terms of people who are in a situation to hire, how they access talent and how open they make that opportunity. You don't have to fly to one of these like highly concentrated cities to do an interview. Like anything can happen online. Yeah.

Maybe that's like more optimistic but yeah, I do think it'll open up the playing field for people from cities where like opportunities aren't as frequent, to just get the attention of everyone who's just spending so much more time online. So that's one element of that as well.

LP:                        And what industry segments or what type of companies did you find or are you feeling are more ideally suited to adapt?

CH:                       Yeah. In the shift to remote work in general, I think the streaming, the major streaming companies are some of the first to mandate close to all their employees if not all of them right off the bat to work from home and work remotely. And I think they, compared to many other companies in music, are better suited to adapt, even if they're at the size of a company like Spotify or Soundcloud, which were some of the first companies to move in this regard. Just because they're not, you know, they're not shopping a big physical product for the most part; they just have to keep their server running and a lot of it like based in software development, a lot of which can be done remotely. It doesn't really rely as much on in-person meetings.

In general, software companies, or like in the software world, the idea of remote or distributed work has been much more commonplace. Whereas in the label world, and in general, as I found in like the finance world as well, I feel like a lot of the culture around labels is not around like in person meetings but also maybe around some, like around dealing with a lot of sensitive data. And like having around the MDAs and obviously meeting in person is better for dealing with that. I think people are so looking into solutions to how you would have to, how you can successfully navigate that remotely.

But then also like, yeah, on the recording side, unless you're an artist who is very like streaming heavy and that's your primary source of revenue on the recorded side, you have issues with basically all physical formats, like vinyl manufacturing, CD manufacturing. Those have all slowed down as well.

LP:                        So we're seeing disruptions in those supply chains right now?

CH:                       I think so. Or at least it's, they've definitely slowed down. I mean a lot of factories around the world have closed down temporarily, just to, yeah, avoid people, lots of people gathering in one single location. Yeah. So there's that. And then this is not so much remote work in terms of the companies that are – I've noticed they're like even more in demand.

I think, or I've heard of a lot of like smaller digital market agencies that are getting more work than ever now, actually, which makes sense, because I think there are a lot of artists and music companies now who are trying to figure out what are the best ways to engage with their audience online right now, and what's the best way to like foster community in, in like a real genuine way, not just to sell something but like how do we best serve our audiences, let alone actually identify like where they are right now, like how is their behavior shifting?

And I think people who have been like trained in that from the very beginning and whose very job and very company revolves around that, like being able to understand your audience better, like alone like communicate better with them over time in the long term, I think there's a lot that can be done there, whether with like one-off events like a lot of these like live-streaming concerts that are happening or just in general, how do you build a stronger brand online. There are a lot of agencies that already specialize in that, that I think are getting a lot more work now.

LP:                        Is some of the ability to adapt better – you mentioned streaming companies, software companies in general, digital agencies. How much of that has to do with sort of a digital native workforce to begin with?

CH:                       Oh. I think that plays a really big role. Yeah. In terms of, yeah, especially if you're going to work remotely, you know, like being familiar with certain kinds of software that have only come out within the past like five, at most, like six, seven years, for sure. People who are much quicker to learn, like newer kinds of software will adapt a lot more quickly.

So to go like specifically to artists and like album roll out strategies, a lot of which have kind of been modified or – sorry, postponed basically indefinitely because of the situation. I find that a lot of artists impacted, a lot of the companies impacted, are the ones that rely on more traditional promotion channels to like – terrestrial radio as an example, yeah.

Like that, kind of as I was alluding to before, it relies a lot on like face to face meetings. Like some artists will do entire tours just going, visiting different radio stations. And that is just impossible to do as well. And it's also very like legacy, not very digital native format at all. So yeah, for sure, artists who rely on that to spread the word about their music for sure are struggling as well.

LP:                        You mentioned something in your piece that I think ties into this, which is this notion of notion of marketing momentum and how the breakdown of the ability to meet face to face is in a very, very real tangible way impacting rollout strategy and rollout execution. Talk about that a little bit?

CH:                       Yeah, for sure. I guess it's like [unintelligible 0:14:26] just thinking about like every conversation, I guess, more with a journalistic hat on than I have with artists who like want to pitch their music or like managers, labels want to pitch their music. There's always, like the way that people like talk about upcoming releases and the way that they do the really hard work of like planning how that release happens, it's, you want to create a sense of momentum and a sense that is emerging and about to break.

The way I heard it once from a music supervisor – sorry, from someone working on the sync licensing side, is that like everyone wants to get on a moving bus. And in general I feel like in society to an extent that is true. But especially in music where like emerging talent and being the first to invest and work with emerging talent, that's like so much of the currency in – at least in like the mainstream industry and like certain other like smaller scenes as well.

And so – but actually I think people are realizing that building up that sense of the moving bus and building up that sense of momentum does take like months and months of planning. And months and months of like reaching out to people and scheduling these in person meetings, even with – I think mentioned, you know, like streaming curators. It's really interesting to me that the way that like playlist promotion with say a Spotify curator looks very similar to terrestrial radio, in that like the artists are going into the Spotify offices and meeting with the editors. And that's a lot of the work that goes on, even on the streaming side, which is supposedly more digital native. As far as marketing is concerned. So yeah, and I've talked in the last week or so with a lot of artists in particular who like haven't even released anything yet.

And they're about to release their first album or they've just scheduled a lot of co-writing sessions with songwriters. That's actually a specific area, like the creative side of music that revolves so much around this culture of like gathering in person in a studio and seeing, and like manifesting some kind of magic, right, like when everyone's in person, there in person together, bringing something to life.

That's still very much the culture on songwriting and even around producing to an extent, that this isn't possible anymore. And so I've heard some stories of like songwriters now holding sessions over Zoom, which is kind of interesting. Because yeah, that is like one of the only alternatives in the situation, but for sure the dynamic is very different.

And so yeah, I think about that as well. It's not just thinking about the artists who have – like the Lady Gaga's of the world, you know, have to postpone their album release because it's like the talent, like just starting out, what do you do in that situation if you're – you’ve just started to take label meetings, you've just scheduled co-writing sessions that are now not happening anymore? I think a lot of smaller artists are going in the direction of just making and releasing as much music as they can and just like making the most of the situation and not necessarily sticking to this like several week or several month plan that they initially carved out for themselves.

Otherwise they will literally just be sitting around for several weeks doing nothing, and money is definitely a consideration for these artists as well. So yeah, it's just rewriting everyone's, everyone's playbook for the next couple months. Yeah.

LP:                        Yeah. I think that that’s something that, that fans or people who aren’t necessarily observers of the music industry don’t understand, is that there's a notion maybe of a rock star as, you know, somebody rich and insulated from the realities of life. But often times, like with any wealthy individual, you know, more money comes with more overhead, and a lot of times artists are going on tour because they need to, they need, you know, it's their income, it's their job.

Separate from the creative outlet and how much they love doing it, it's something they need and have to do on a regular basis. So you know, it's always sort of a bad idea to count somebody else's money and think that somebody else has it easier. And it could be, you know, we don't know; some may, some may not. But a lot of these artists do need to be on the road. They do need to be releasing music. I don't know if you saw earlier today, I think it was released today, atVenue, you know, the point of sale company for performers, put out a report, very stark; you know, before March, I think it was, or the average weekly per heads on merchandise sales for tours this year was something like 5 dollars and change.

CH:                       Okay, yeah.

LP:                        And in the month of March, it was zero. And – because nobody's on the road. And so if you assume, you know, 5 dollars or so a head per fan, across all the fans going to concerts, that's significant revenue for touring artists outside of ticket sales and sponsorship and everything else that they're participating in. So revenue streams are crumbling fast for everyone. And to your point in your piece, the merchandisers who make the shirts and the merchandising outlets who vend the shirts and all the people in the supply chain, some of whom are very vulnerable in terms of their work status, work situation, it's very difficult to watch this unfold.

You talked a couple of times about the streaming companies. Have you seen much in the discussion or news over the last few days about this notion that streaming numbers seem to be down for the month of March?

CH:                       Yeah.

LP:                        Any thoughts or insight into that? What are you seeing and hearing?

CH:                       Yeah, I have so many thoughts on that. And yes, I've heard this from multiple sources, both on like the macro financial analysis side and also from like individual artists and labels. A lot of them are seeing streaming going down, at least like over the past couple of weeks.

Spotify actually published a post on their blog that understandably didn't release any numbers but I guess gave some more context on what kinds of content actually was going up. So I guess, to backtrack a little bit, to say some reasons why I think streaming has gone down, I think maybe what some people knew but not many people realized – most people didn't realize, is that the model, so like the subscription model popularized by Spotify and then across other services as well, also kind of inadvertently became like a background soundtrack kind of model, at least in the way that Spotify like markets its own service.

It's like music for every mood, music for every moment. I think a lot of, especially in the past couple of years, a lot of the marketing assumes a costly on-the-go lifestyle. So like people are listening to the likes of Spotify like on their commute to work; they're listening to it at work, to focus, in like a specific office setting. They're listening to it in the gym while working out. Or just in general in the background of other things. And all those parts of that like everyday on the go routine are just not happening right now. And podcast listening I think in the aggregate is also down for this reason, because a lot of people listen to podcasts on the go. Especially in the car, or yeah, just on the commute in general.

So yeah, so those outlets are just totally wiped out. And so people aren't listening to music in those specific contexts. That said, one hypothesis I had that Spotify confirmed, at least in their own blog post, is that a lot of people listen to like more calming or chill music at home, either to like calm their own nerves or just to like create the right environment like while they're working from home.

And so I think Spotify set like a lot of chill playlists, which are very mood driven, like definitely of like functional music. That's increased over time. News podcasts specifically have gone up recently, which totally makes sense. I think people are just in a mindset of like what's going to happen tomorrow, like what's the latest update. Because so much can change in a matter of days. So yeah, it makes sense that that is up.

And then beyond music, while audio streaming is down, TV and film streaming and gaming, I think both of those channels have gone up quite a bit. Yeah, there's a lot more activity on Netflix, for sure, and a lot more people are just playing games. A lot more people are live streaming in general, but especially like watching platforms like Switch. So – or like on platforms watching other people play games as well.

And I think, you know, there may be like a psychological aspect to that, in that more long form immersive content like a movie or a TV show or a game is – I guess two things. One, it is to some people a better form of escapism, because it's all consuming. It requires –

LP:                        More immersive?

CH:                       Yeah. It's more immersive, it's like, it's audio-visual. There are multiple elements to it. Whereas music is much easier to relegate into the background. And then it does depend on who you are, but in general people aren't spending time like on their commute or something. And they have more time to invest in the aggregate, in this kind of immersive content, maybe than they had previously

And so yeah, I think that's a question a lot of people in the music industry are asking themselves in terms of how, maybe how to align with that more immersive content, or at least that shift in behavior that's very clearly happening, in terms of more people consuming games and movies and not so much the – at least like music as it's presented in a streaming environment. But it's very much like a background soundtrack kind of function.

LP:                        Inasmuch as you're, as you'd want to disclose at this point, I'd be curious to know what you think the interesting areas of inquiry of the interesting topics to explore, coming out of this situation, for the music industry will be, both on the business side in the relationship to consumers.

CH:                       Hmm. Yeah. Interesting topic. So this is related to the topic of just like music marketing general and like album rollout strategies, how all that's changing. I think the model of artists releasing albums almost as a loss leading advertisement for tours, that allow them to make ends meet, make a sustainable income, that obviously, I mean the whole touring side of that is just not happening right now.

And so – without that, there are a lot of artists who are just relying on streaming income, which can be just like pennies or dollars for some artists; it's not really sustainable for a lot of them. And so a lot of people are like questioning the sustainability of that kind of cycle in the first place, like you release an album and then you go on tour with it. And you have to spend like weeks or months touring in order to break even.

Interestingly, so in like the – in the mainstream music industry, I think because people have realized that streaming income alone wasn't sustainable for a lot of artists, or maybe this had to do with like Billboard chart placement specifically, there was a lot of, there were a lot of attempts to bundle streaming consumption or like album sales with the very sectors of music that are also now suffering. So like ticket bundles, like you could get a digital download of the album with the tour.

Merch bundles. If you bought a digital download of this album, you would get free merch or some kind of digital collectible. Or like other kind of collectible. And yeah, I think those became more popular because Billboard started like counting them more in, or more officially in their chart rankings. But also, I think that for, yeah, for many reasons that we discussed, it's not going to be as relevant now, like bundling, in terms of bundling, but like physical product or like in-person experience.

LP:                        So people have to actually like your music for you to have a number one?

CH:                       What a concept. Yes. Yeah. So related to that, I think one of the more interesting questions that a lot of artists and labels especially are facing is that, okay, so you take touring out of the picture, and a lot of artists are just left with streaming and they realize that they haven't actually experimented with that much digitally, as far as like fan experiences or let alone business models are concerned.

And so live streaming is one of the buzziest areas for a lot of artists and [unintelligible 0:27:16] investing in terms of taking live streaming more seriously, where previously it really was not prioritized at all by most artists. It was still seen as kind of a niche or like kind of side activity or nice to have, rather than a must have or a necessity like it is now. I notice a lot more activity on membership platforms. I think Patreon published a post on its own blog from their head of data science just about – I think it was like tens of thousands of members; over 30,000 new artists have created pages in just the last couple of weeks.

'                             And they've also interestingly had many more new patrons than the amount of churn that they had. Because I guess you would expect in the current like economic situation, a lot of people would cancel their memberships or their payments to certain creators on Patreon. But that's actually gone up as well. Yeah. So I think –

LP:                        We see that light as well. We're seeing increased demand for concert tickets, for the concert tickets that are still on sale.

CH:                       Interesting. Okay. Yeah.

LP:                        So anyways, we can talk about that later.

CH:                       Yeah. Yeah, so membership is another avenue in terms of recurring revenue directly from bands that has a higher margin from the artist's perspective compared to what they might be getting in like royalty checks from streaming. There's yeah, and with live streaming, this is not for every artist, but if you look at a platform like Twitch or YouNow, they have essentially the equivalent of a tipping function.

So like fans can watch a live stream for free but then buy this virtual currency that they can give to the artist who can then exchange it for like real cash. So that's also, like that's a model that was considered emerging but may be very much normalized as more and more artists and people in music in general start live streaming more and then making fans more accustomed to the format as well.

LP:                        That's amazing. Well, I want to thank you very much for taking time to talk to me. I very much enjoy the newsletter and I always look forward to it showing up. I really appreciate your insight and I know lots of other people do as well, because folks were asking me to get you on.

CH:                       That's amazing, thank you.

LP:                        Yeah, thank you for helping me to meet consumer demand in my own way.

CH:                       There you go, there you are, yes.

LP:                        I hope that you and your family continue to stay safe and healthy.

CH:                       Yeah, same to you.