Date: September 6, 1999

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The "Herring on Hollywood" conference was held
August 1-3, 1999 at the Century Plaza Hotel, LA
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Dear Readers, Clients, Partners, Friends:

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Preface: Geez, I can't believe it's taken me so long to finish this--too damn busy doing the things that pay the bills, I guess. But, dear readers, I promise to spend more time doing this free stuff in the future--honest. I actually tried to finish writing it at the beach a week or so ago--in a new place I was exploring, as a matter of fact: Seaside, Oregon (which I happened upon as it was gearing up big for the finishing celebration of the annual "Hood to Coast" relay run). I was sitting at a picnic table strategically located right along a point break, watching some crazy dudes surfing in full wet suits. But the sun was so damn bright, I couldn't see the screen--and I just wasn't feeling *that* dedicated that I was gonna throw my tee shirt over my head and my Powerbook and start pounding away. But the thought was good--know what I mean? My heart was in the right place. And, doggone it, I felt better because I actually considered it.
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But back to business: the conference in LA began Monday morning with Red Herring introducing representatives of the sponsoring companies, who made some brief remarks, including:

-Layne Britton, EVP of Replay Networks, who noted that his company just raised $65 million and "will be the most watched kind of TV soon--on demand."

-Bud Enright, VP of Corporate Development at Compaq, said his firm was a returning sponsor, and happy to be back--they did at least six deals at the last Herring conference, Venture '99 in Tahoe a few months before.

-Bill Miller of Intel invited us to his booth, where three of their partner firms were featured, including Quokka Sports and Launch Media.

-Bob Gett, CEO of Viant, defined his firm's mission as "helping clients build complete digital businesses....including the entertainment business." One of their clients, Sputnik 7, was featured in their booth. "The Internet is the new business platform," he said.

Then it was on to the Monday morning keynoter: Ed Sanctis, COO of NBC's Snap.com, who had some interesting comments about his parent company's run at becoming an Internet powerhouse. Ed said he's worked in television for 15 years, "all at NBC-owned companies." So, corporate loyalty the guy knows. He showed results of somebody's rankings of the top 10 "tech poles" in the U.S. (meaning those areas with drawing power), with LA being 4th, while New York was only 9th. So there.

The TV he knew as a kid is going away fast, he said--forever. "The electronic hearth is eroding. But there are still some events that will bring the family together around the TV--at least I hope."

There is a trend toward personalization--customized, on-demand consumption of media, Sanctis said. And media companies have to be *fast*...they have to leverage their existing businesses.

He talked of NBC's current initiative to merge Snap and Xoom, into a new public company, NBCi, with an all-new board. "The 'Net has solidified as the future of media." he declared. And with NBC's clout as one of the most powerful promotional media in the world, the idea now, he said, "is to get closer to the viewer, to do transactions." They're moving toward targeting the individual user.

Sanctis said NBC has now made some 20 investments in tech and content companies.....mentioning just two initiatives: "Second Shift," an online and on-air show, and "Video Seeker," which is seeded with NBC staff. They have so many of these ventures that they needed a central hub--so they went to a portal strategy and, in July, NBC gained full control of Snap.com. Pre-NBC, it had been only #55 in Web site traffic, but they have so far advanced it to #14.

In fact, check out this number: in the January through June period, Snap had a 40% growth rate--ahead of GoTo, LookSmart, and Yahoo. He then showed a warm, fuzzy TV spot featuring kids, for which they received an Emmy nomination. [So when did they start doing those for ads?] And he called our attention to their catchy new tagline, "Snap to the Possibilities." [Yawn.] Anyway, with the recent acquisition of Xoom.com, the 13th most visited site on the Web, the new NBCi will actually be in a combined reach position of #6 overall. Now, says Sanctis, they can reach their "dream of turning viewers into buyers...building commerce around an entertainment platform."

There's a real pent-up user demand, he said. Look at MP3--the hottest thing now in school libraries, with lunch hour lines to use PCs. It's been such a phenomenon because it puts the user in control. There are already 20 million MP3 players in use, and growing.

********* So much so, folks, that he cited numbers showing "MP3" is actually about to displace "sex" as the top search term on the Web. ***********

Bytes on demand, as he put it, is where music delivery is going. And NBC is learning that people *will* use their PCs as entertainment devices--which has required them to rethink marketing and distribution, where the economies are clearly changing. MP3 is the key thing that will drive broadband adoption, he feels. On the Snap.com portal, which has a newly introduced service for higher-speed users, one in five searches already has something to do with rich media. And, with 15 million people already having high-speed access--many at work--they're getting "hooked," he said. Snap expects their faster service will have 26 million users by 2003. "The 'always on' aspect of high-speed or broadband service is an important driver," Ed added.

Only about one million users now have broadband service in the home, but "instant, on-demand, personalized entertainment" is where he thinks the future is for NBC. And their emphasis on broadband "will be ratcheting up after the NBCi deal closes," he said, with his role "totally devoted to that."

After a short diversion to hear two elevator pitches from CEOs of startups (a Herring tradition)--Random Order and and eStyle--then a break to schmooze around the demo tables and booths, it was back into the big room for the event's first panel discussion....which Herring had billed as "Fight the Power," exploring the landscape of the new digital music delivery business.

What new products will result from this convergence? moderator Alex Gove asked.

* To which Jay Samit, Sr VP of New Media at EMI, responded that all kinds of devices--PDAs, cell phones, etc--will be music players.

* Ken Wirt, CEO of Riffage, said the 'Net will do to music what cable did to TV--creating many genres. But digital will not soon be the primary way of purchasing music, he feels.

* Larry Kenswil, EC head at Universal Music, pointed out that there's a big difference between catalog music and newly released music (the MP3 phenomenon being largely the latter.)

* Special guest, renegade hip-hop artist Chuck D, chimed in that digital "lets us microfocus on certain markets where traditional distribution just doesn't go." [One of his few comments without f*ck and sh*t, actually. He wasn't quite wound up yet.]

* Mark Geiger, co-CEO of ArtistDirect.com, said there will be glut of music. And that "community will be the revolution"--with Chuck D being able to talk directly to a million users, for example.

* Al Teller, CEO of Atomic Pop, predicted that "the majors won't be so major." and smaller bytes will become more prevalent (singles, extended plays, etc).

* Jay Samit of EMI then jumped in saying there could basically be 30 million channels, but it will still take the same marketing & promotion to effectively sell music. He sees aggregating artists and music into genres as the only way to do that, and "enabling local artists to sell internationally is a mandate for record companies."

* Ken Wirt of Riffage said that direct digital delivery and Internet radio means that many, many artists are able to sell their music.

* But, Larry Kenswil of Universal came out with a great observation: "Any artist who can only get 2000 people to buy his music probably needs a different job--even if he *can* get all the money."

* Jay Samit noted that no one yet knows what consumer acceptance will be--"we need to aggregate a lot of content around the technology and see what happens."

* Marc Geiger of ArtistDirect.Com, says that digital delivery has opened up a whole lot of other responsibilities for the artist. "He'll be busier than ever. He can even start his own radio station." [The question being, does he have time for that or is that what he should be doing?]

* Al Teller of Atomic Pop, noted that the complete range of activities that music companies do to market product "will totally change." And Larry Kenswil agreed that it does involve totally reinventing the game.

* Chuck D then blurted out something that got good audience reaction: "Yeah," he says, "the big boys will be forced to do what we all learned to do in kindergarten--share."

* Jay Samit noted that one thing will not change: "Music will continue to be the greatest determinant of lifestyle."

* Ken Wirt of Riffage said that his site gives artists a full, turnkey setup, including e-commerce, for an 85/15 split.

* Chuck D sees one million artists doing direct digital delivery within five years. "They'll no longer be ignorant to how the music business works."

* Al Teller said that "Public Enemy recently offered their album first on the 'Net, before retail release, and they had 300,000 downloads!" Some retail locations refused to sell it because of that, "but we're talking to them and they're coming around."

* Chuck D chimed in: "We believe in the Wendy's approach: we make three records and give three away--in the hopes they come back and buy seven."

* Larry Kenswil then pointed out one problem he sees in all this: "MP3 or digital delivery in general is bad for the songwriter--that's something that has to be addressed." [I.e., the "artists" involved here aren't just the performers.]

That's enough for one report, friends. I'll cover the afternoon sessions separately, which were CEO presentations from startup or emerging companies chosen by Herring as especially promising.

With a watchful eye toward music for and by everyone, wishing I would have gotten up my own MP3 site up before my kid did six months ago.... http://www.mp3.com/christhickins/ ...hey, if I *just* had the time...I remain

Your humble conference servant,
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Graeme Thickins, Founder & Principal Consultant
GT&A Strategic Marketing Inc.
*Twin Cities *LA *San Francisco *Seattle
Voice Mail: 612/944-1672  Fax: 612/944-1673
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And Editor-in-Chief:
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