Strauss Zelnick

Brandweek, July 3, 2000 by Michael Schrage

Basically, your premise is that ultimately once the technical standards shake out, business processes degenerate to a commodity as well.

Within specific businesses. So in terms of the way music will be sold, there will be 10 new ways, versus the way business is transacted today. And not everyone will do it in the same way. In fact, everyone will probably do it slightly differently. But when you go buy a record online, you, as a consumer, should be indifferent as to the business models among the distributors--and you will be.

Let's talk about MP3.com versus Napster.com versus a big store.

Let me give you an analogy. There are many different record retailers, but when you go into a record retailer you pretty much transact business the same way at all of them. They didn't collude with each other to do that. They didn't even think about best practices. But at the end of the day, an approach evolves in the market and you're going in and buying a record. You don't walk into a record store and someone says, "Well, to buy a record here first you need to register and fill out this card and then you need to take it to that counter and then we give you a point and then you gather up 10 of those points..."

Are you digitizing content?

We are completely redesigning the backbone of our systems here to create, first of all, a robust B2B environment for all of our vendors and partners, and secondly, and more importantly, to digitize all of our content--both audio and audio visual.

What does brand building mean to this new market?

Historically, entertainment companies don't built their own brands. People buy entertainment based on the piece of music or the movie or the TV show or the star. The brands typically are the product or the artist, the actor, the actress. No one buys a record because it's put out by BMG. There are exceptions, of course. Parents buy Disney material because it's brand-name Disney, adults buy Windham Hill Music because it's Windham Hill--and that's one of our labels. Typically, exceptions occur when you're packaging material consumed in a packaged way. So, for example, ESPN is a brand because it means sporting events on television; it's a packaged group of shows. MTV is a brand--you turn on MTV because you know what you're going to get when you get there. It's all about music.

Well, MTV has non-music shows like The Real World.

They have, but now it's a lifestyle brand. We are doing that and we were the first company to launch genre-based Web sites, which are branded places to get music and information in the particular genres. We did this five years ago because we felt that it's very hard to develop brands and that label Web sites were not the way to get consumers. So we built Peeps Republic, which is a strong brand, and Twangthis, BUGJuice, and now GetMusic and click2music.

What kind of hits do you get?

We're one of the top music sites and GetMusic has well over a million unique visitors a month. We don't really talk about hits.

How important is cross-marketing?