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Roger McNamee: Music industry entering “Arab spring”

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With Warner Music Group being bought for $3.3 billion in cash and Pandora Media on the verge of an initial public offering of its stock, could the music business be attracting investors once again?

Roger McNamee, managing director of the Silicon Valley venture firm Elevation Partners, thinks there’s at least promise. While Elevation does not currently have an investment in any music start-ups, McNamee does know a thing or two about the music business and how it intersects with technology. When he’s not touring 100 nights a year with his band, an indie folk rock group he helped found four years ago called Moonalice, McNamee works closely with Elevation’s other co-founder, U2’s Bono.

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McNamee, who is delivering the keynote speech Thursday morning at the National Assn. of Recording Merchandisers’ annual conference in Los Angeles, believes the music business is headed for an ‘Arab spring,’ referring to the grass-roots uprisings in Egypt, Libya and other Middle Eastern countries earlier this year.

And when there is chaos, there is opportunity.

The Times recently spoke with the 55-year-old technology investor, whose firm has invested in Facebook, Yelp and Forbes, about the digital music landscape and whether he sees any sweet deals hiding in the rubble of a music industry ravaged by piracy. An edited transcript follows:

Ever since peer-to-peer file sharing took off in the late 1990s, the music business for the last decade has been written off by investors as a wasteland of piracy. Is that starting to change?

McNamee: It’s actually a really good time to look for things to invest in. We’re in the midst of a new dawn when we’re going to get another chance to change the rules in the music business. For the first time in 16 years, you can look forward to a world that’s very exciting. And everything that’s exciting about it is going to be favorable to those who create content.

What’s so different now?

Over the last 10 years, we have gone from just listening to music to making music. The tools of production are so cheap now. You can get Garage Band for free when you buy a Mac. It’s an eight-channel pro mixer. The original Beatles stuff was mixed on two-track mixers, equipment that was much less sophisticated than what you can get now for free.

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At one time, there were 8 million bands represented on MySpace. That means Silicon Valley has finally made a hero out of Karl Marx because the means of production are now in the hands of the proletariat. The recorded music business has shrunk dramatically. But people’s interest in music is higher than ever. We’re going to have an Arab spring in technology that will liberate the people who create content from the influence of guys who have dominated them for a long time.

Great news for the masses. But what does it mean for capitalists?

If you’re asking me when you can start selling $18 albums again, I can’t help you. Where the venture guys like me will matter a ton is in supporting the infrastructure. Think Amazon’s EC2 cloud service. The venture guys will aim at the infrastructure. The creative stuff will come from the people, broadly defined.

So start-ups that sell the proverbial picks and shovels to artists who want to use digital tools to create and distribute their music will have a crack at making money. What else?

There’s an old saying in the business: Sometimes when the world changes, you can see the bodies lying on the tracks a lot sooner than you can tell who’s driving the train. In the technology world, that’s Google and Microsoft lying across the tracks. Those guys will have to abandon their ecosystems to survive. What comes after is not as clear.

By day, you are a successful capitalist. By night, you are a traveling minstrel with your band, Moonalice. How’s that life working out for you?

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I’m the only one in my band with a non-musical day job. But I’ve been a professional musician since I was 17. It hasn’t always gone as well as it’s going now. We play four shows a week in small theaters and clubs when we’re touring. I don’t have children and my wife is in the band. So it works out.

I’m also the tech guy for the band, setting up the Facebook fan page, tweeting and setting up the live webcasts for all of our shows. We’re out communicating with our fans 10 times a day. If you’re an investor, you have to know how all this stuff works. We’re like the canary in the digital coal mine, seeing what works. It’s fun stuff.

-- Alex Pham

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