The Guru

November 1, 2008

By Chris Cannon

On first encounter, Terry McBride comes across like a car salesman who pushes the rust-proof undercoating, or a cult leader who just can’t believe it when people find his Kool-Aid too sweet. “I know you’re all here physically, but I also know you’re not here mentally,” he tells an audience of 60. “I’m going to use a bit of a trick to bring you mentally withinside the room.” I brace myself, thankful I left my chequebook at home.

It’s a sunny Wednesday in May, and McBride—founder of Nettwerk Music Group and manager of an artist roster that includes Sarah McLachlan, Avril Lavigne, and the Barenaked Ladies—is out to dazzle his audience. At Nett-werk’s live venue and retail space near Granville Island, he hovers over a slide show, unresplendent in striped shirt and blue jeans, sandals with socks, a military-style haircut, and wrists wrapped in strings of beads.

“ Is this picture possible?” he asks as he clicks on the first slide, a graphic similar to M.C. Escher’s staircase drawings. He takes a vote. Several hands go up in the affirmative, one in the negative. They are all correct, according to McBride, who smiles like he just blew everyone’s mind.

“ These dots don’t exist,” he says, clicking on the next slide, which may or may be a picture of dots. “But they exist in your mind because you’re making them there.” The intro goes on for 20 minutes, each slide introduced with such verbal hypnotica as “Not one single one is not exactly straight” and “How many feet does this elephant have?” When the illusion of Jesus appears in a Rorschach print, I prepare for a moral intervention and promises of eternal virgins.

McBride is demonstrating the subjectivity of perspective and the illusory nature of things we take for granted—the underpinning of his philosophy of the music business. “It’s all about perception,” he claims, “and how the different parts of the business see other parts of the business. And how they see it is how they run it.” His message is actually straightforward: the music business is stuck in a century-old paradigm in which different parties own different slices of the pie—record labels own masters; publishing houses own publishing rights; and artists, if they’re lucky, own their image. But McBride believes technology has so altered our behaviour patterns that we must rethink everything we know about the artist/fan relationship. “I’m gonna talk about the past, the current, and what I think is the future,” he says. “And what I think is the future is what I think today. Chances are, I’ll think differently tomorrow.”

Though an extended conversation with McBride is likely to give grammarians a headache, it’s also likely to be inspiring and memorable. It’s not as if he can’t be articulate and even downright brilliant at times—he’s well-educated and especially clever—but his brain seems to operate faster than his mouth can manage the information. He likes to use odd words and phrases such as “withinside” and “all of the suddenly”; his “specific” sounds like “pacific”; and when he talks about the future, he clearly has no regard for temporal physics. But how can one not be enthralled by a man who broaches a topic with the sentence, “Music for me is not a pair of pants”?

A native of Richmond, Terry McBride attended Richmond High and Steveston Senior Secondary, then tackled civil engineering at the University of British Columbia (where his father was a marine biologist). He left UBC in 1984 to found Nettwerk with his friend Mark Jowett as a way of releasing undiscovered artists they liked whose music most people couldn’t find. Though his computer experience was limited to programming with punch cards, he had a knack for envisioning the social networking possibilities of the digital future. “I remember back in the early ’90s, walking into people’s offices with a big, heavy portable Mac, plopping it down, and showing them a QuickTime video that was, like, two inches by two inches,” he explains in his spacious but cosy Nettwerk office. “I can remember [Arista Records founder] Clive Davis looking over and going, ‘That will never work, it’s too small.’ But all they were doing was looking at the image. They weren’t looking at the possibilities.” McBride has since made a career out of envisioning possibilities for his artists, tackling the artist-management game with the same sense of creative adventure his artists bring to their music. He speaks of “economic models” and “micromarketing” the way musicians speak of melodies and bridges, and seems to regard his managing work as just another instrument in the lineup. His entry into the management game coincided with the advent of the compact disc in the 1980s, a technological coup that he believes caused a behavioural sea change as well as a revolution in data storage.

“ From the 1920s forward, the music business has really worked to try and force the consumer to consume the way they want the consumer to consume. We can go back to pre-Napster—let’s go back to 1998—and if you wanted to purchase music you only had one way to purchase it. You had to go to a store and buy the music. Basically, you didn’t have a choice.”

With the advent of the CD, consumption moved from “push” to “pull.” The instant track selection of CDs allowed listeners to choose the songs they wanted to hear with the press of a button, a feature McBride believes was especially effective with young children, who would have their parents play the same song over and over—something he learned firsthand through his then-preschool daughter. “I know a hit single from any of my artists when she wants to hear it five or six times in a row,” he says. “She’s my greatest radar. She’s not formatted to rock, pop, hip-hop, or anything. And she hears everything. But when she gets stuck on a song, I know it’s a hit. It’s that pull mentality.”

The generation that grew up on CDs became a potent market force at the turn of the century, and coincided with another technological achievement that continued this move toward pull: Shawn Fanning’s invention of Napster in 1999. Napster not only introduced peer-to-peer music sharing, its circumvention of major-label control ushered in an age of messy litigation over copyright. “When Shawn created Napster, it was all about pulling,” says McBride. “All about finding it the way you wanted to find it versus being told how to find it.” At the time, the record industry was consolidated under five major labels—Warner, Universal, BMG, Sony, and EMI—and the idea of fans snatching free music from the digital stream sent shivers through boardrooms from New York to Los Angeles.

The entertainment industry had faced such challenges before. In pre-vinyl days, when most income from songs was generated by sheet music, publishers sued to prevent their tunes from being played on the radio, fearing it would hurt their publishing sales. When Betamax and VHS brought video recordings into living rooms in the mid 1970s, movie companies sued, fearing the new technology would kill the film industry.

But if today’s label fears are based on precedents, so is their short-sightedness: home video actually increased profits for the movie industry, just as radio had done decades earlier for the music industry. So while modern peer-to-peer technology is considered a plague by the major labels, McBride feels the solution is to learn how to commodify the technology rather than sue the innovators. “I don’t think it [the music industry] was cut in half by kids ripping,” he claims, referring to steadily declining CD sales. “I think it was cut in half by a business that couldn’t and wouldn’t look at the behaviour of its consumer and understand it and learn how to monetize it. Laws, litigation, legislation, is not gonna solve this issue. What’s gonna solve it is understanding who you’re selling to, and understanding how a consumer consumes.”

It’s easy—even stylish—to point fingers at the corporate monster, but when McBride defends the power of consumer choice, he puts his money where his mouth is. When the RIAA (Recording Industry Association of America) sued a Texas family in 2006 because the children were downloading songs from the Internet, Nettwerk paid the family’s legal fees and promised to pay any damages. Two years into the case, the fight is still on.

Some view Nettwerk and McBride as enemies of copyright holders everywhere, but McBride claims they’re not fighting to win, necessarily; they just want to make the RIAA understand the futility of ignoring the inevitable. “I believe in copyright,” he says. “I believe in the value of intellectual property. Nettwerk’s a member of the RIAA. But this has got to be one of the stupidest things I’ve seen in a long time. Suing your consumer, and all the bad media that comes with it, does not build any goodwill. It doesn’t build up any sort of business relationship. How can you sue someone and maybe six months later ask them to buy a concert ticket?

“ Litigation, or legislation, cannot change behaviour. A few kings have lost their heads to that exact same principle. If you try to tell them what to do, chances are they’ll think you’re trying to do something to them. So it doesn’t really matter in this country, or in America, or anywhere else in the world, how governing bodies decide to change the copyright law. Because the consumer has moved past it. And the genie’s not going back in the bottle.”

While McBride is often celebrated as a champion of the music fan, that doesn’t mean he’s an enemy of the industry; on the contrary, his business model seeks to skirt the age-old animosity between the labels and the fan base by exploiting the tendency of fans to share music with their friends. In the late 1980s, Nettwerk hit upon the idea of micromarketing Sarah McLachlan—its first international breakthrough artist—by paying attention to sales spikes in small cities and then working to build her appeal in those places. By relying on “überfans” to build these local markets, Nettwerk helped McLachlan’s 1993 album Fumbling Towards Ecstasy sell a quiet million, increasing her presence and introducing her to an international audience.

Today Google Analytics and social networking sites have made the practice of micromarketing far more sophisticated, but no amount of technology can replace the fans. “Your überfans, they’re your record company,” says McBride, who organizes fans by city, state, and region, with local leaders cobbling together street teams to promote shows. He points to Brand New, one of the 40-plus acts that boogie under his fingertips. According to McBride, in 2007 the group sold about a half-million tickets to 200 shows—with a mere $1,000 spent on advertising for the entire tour. The secret to this sort of cheap, wide-scale market penetration is involving fans in an artist’s career—running contests, collecting data through the artist Web sites, involving fans in artist promotion. “Every artist [we manage] has a street team behind them,” says McBride, who expanded Nettwerk’s reach by opening branches in New York, Los Angeles, Boston, Nashville, London, and Hamburg. “It’s quite labour-intensive, but it’s worth it.”

Regardless of his command of technology and his devotion to the fans, McBride still confounds the industry giants and even his own artists with his tendency to dive down rabbit holes just to see if there are any carrots to be found. By exploring the potential of Internet downloading—generally thought of as the enemy of hard sales—he has raised more than a few of his peers’ eyebrows. Bruce Allen, who manages artists including Bryan Adams, Anne Murray, and Michael Bublé, says his business model is “180 degrees apart” from McBride’s. “Terry has completely eschewed the old model of doing business,” says Allen. “I agree that the old system is broke, but the biggest acts in the world still go through it. Why? Profile and distribution. Without those two things, a song or an artist cannot reach their utmost potential. Remember, the major monies an artist can earn come via touring. The Internet has not proved that it can drive an act to major headline status.” Perhaps not, but while Allen currently houses four artists who’ve made a fortune from music, McBride has more than 40 who make a living at it.

There’s a certain point in a conversation with McBride when you simply give in to his verbal quirks, his disregard for rules of first, second, and third person, his penchant for fusing literal and figurative language, as when he says music is “in the clouds” and you can’t help but glance skyward.

His speech patterns reflect his intellectual physiognomy—part of his charm, perhaps—and just as he enjoys unusual combinations of words, he himself seems to embody a combination of characters. His ever-questioning nature is Socratic. His grasp of market forces puts one in mind of Adam Smith and Malcolm Gladwell, and his understanding (and challenging) of cultural practice evokes Andy Warhol. Like many adventurous thinkers, McBride can lose a listener as he navigates through a topic, but he makes it a point to find them again down the road.

He seems to relax only when he talks about his six-year-old daughter, Mira, and four-year-old son, Kai, who live with their mother in Point Grey. When McBride went through an amicable divorce several years ago after a 16-year marriage, he scrutinized his own life with the same microscope he was using at Nettwerk, challenging established patterns to find a new way of doing things. His introspection brought him to yoga, which he now describes as his other passion.

“ Music and yoga balance each other really well. The intuitive nature of music is the intuitive nature of yoga. There’s a spiritual balance within music, and there’s a spiritual balance withinside yoga.” His new passion has expanded his professional life beyond music—he’s founded YYoga, a chain of studios opening this year in Vancouver. He considers the studios “mini radio stations,” playing little-known artists during classes, then making their material available to the students. “I’m not gonna get rich from it—that’s not the point,” he says, echoing the driving force that brought him to the music business in the first place. “The point is to have the music heard.”

Of course, how the music is heard depends on the medium—a progression that in the last century has moved from coils, tubes, airwaves, and wax to tape, iPods, and now digital downloads. But advances at the intersection of art and technology have never come about on their own. It took Owsley Stanley’s high-fidelity sound experiments to launch the era of large rock concerts in the 1960s; Brian Eno’s “outsider” musical aesthetic to develop electronica in the 1970s and 1980s; and, at the turn of the century, pioneers like Fanning and McBride to demonstrate the power of Internet technology to change the way we think about and access music.

In 2007, major labels still made more than 70 percent of their money from the physical medium; Nettwerk turned that figures on its head, with more than 60 percent of its business based on digital sales. The opportunity Nettwerk affords artists to make a decent living without having to manage an expensive and cumbersome inventory has allowed them to build into the clouds as major-label heads moan about the falling sky—and with no one else to blame, digital downloading has become the industry scapegoat, something McBride thinks reflects a fundamental misunderstanding of how fans approach new music.

“ If you really, really like something, you really want to support that,” he points out. “If you casually like it, maybe you don’t want to support it, but I don’t mind you casually having it. ’Cause maybe then you’ll casually show up to a concert. And then you’ll be emotionally affected, and all of a suddenly, you’re no longer casual.

“ The problem with music is that you’ve got all these silos of monetization,” he adds, blurring the line—as he tends to do—between the cold logic of business and the freethinking of the arts. By silos, he means the division of contracts between the label, the publisher, and the artist. All too often, one copyright holder can’t take advantage of an opportunity that requires all three entities to agree but does not benefit all of them equally (such as when an artist wants to release free tracks on the Internet). Nettwerk encourages some of its artists to pursue a “collapsed copyright,” which allows them flexibility in shaping their careers. This approach does more than take advantage of professional opportunities; it builds the artists’ overall brand.

Given the long history of major record labels dangling the sword of Damocles over their artists’ heads, it would be easy to write off McBride’s ideas as impractically romantic were Nettwerk’s pudding not so thick with proof. When he recounts the success of the 2006 Barenaked Ladies album Barenaked Ladies Are Me as an example of his vision, his eyes light up and he seems to shed 10 years on the spot.

As BNL were contemplating the release of 29 new tracks, McBride decided he wanted to see how far the rabbit hole went, moving beyond sales tactics such as live versions, acoustic versions, and multitracks. In a discussion with the band, he suggested allowing fans to make their own mixes of the 29 tracks, an idea that had band members scratching their heads. “They’re like, ‘No, but you can do one,’ ” recalls McBride. “Then they elected to allow me to do five, and then when they heard the remixes that the fans did, they elected to let anything happen.”

The gimmick resulted in major buzz for the group, as well as a number of unusual mixes, including lounge, rap, disco, and metal. Those 29 songs created over 300 copyrights for the band, not to mention a memorable boost for BNL’s indie label, Desperation Records, after they’d spent more than a decade with a major. “The music business only likes to measure certain things,” says McBride. “They like to measure album sales, full album sales that are done digitally, and track sales that are on the CD. So when you try to figure out how successful the Barenaked Ladies have been, the metrics of measurement don’t capture over half of what they’ve done.”

BNL sold about 260,000 copies of the album on SoundScan, accounting for just over half the actual value of the intellectual property, which has so far brought the group more than $3 million. “On a major label, doing the usual game, that would probably equate to somewhere between two and four million sales,” McBride explains. “If I equate it back to the old model when they were with Warner Bros., that’s when it hits home to the band about how many records they would have had to have sold in order to put into their pockets the same amount of money.” Using a similar strategy for merchandise, BNL held a “crowd source” contest to design T-shirts. It cost far less than paying designers, and the winning entries became bestsellers for the group.

McBride found similar success with Avril Lavigne, pushing her 2007 song “Girlfriend” across the globe in video games, TV shows, films, and multiple releases sung in eight languages for Asian, European, and South American audiences. At one point, it was the biggest-selling digital track in the world; and it was the first foreign song in Japan to sell more than two million copies on mobile phones.

“ Seventy percent of her economic model is outside North America,” says McBride, “in Asia and India and even in Brazil. They consume music differently than we do here. So we thought it would be great to do her song in their language, so that they can consume it the way they do, which is on mobile. Avril understood where I was going, she liked the idea, and she had to sit there with various tutors and learn how to sing in various languages. But she understood. Where I’m coming from, that’s called being creative.”

Creative? Withinside the music business, it’s downright revolutionary.

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