October 6, 2022 • 33 mins
What do Enron, Warner Music Group and Krispy Kreme have in common? “King of the Turnaround” Steve Cooper’s guiding hand during key transitions. Bob sits down with the business legend to talk about the possibilities of web3, Steve’s upcoming departure from WMG and why we should all rewatch Disney’s “Wall-E.”
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Speaker 1 (00:01):
You're listening to Math and Magic production of I Heart Radio.
The industry had a long history of resistance to change
as they went from the album format and vinyl t
c D s. Their view of technology was something to
(00:23):
be rebuffed, not embraced. And technology is you know, it's
like an avalanche. If you're standing on a mountain and
you see the avalanche coming at you, you either get
out in front of it and you get on the
leading edge, or it's just gonna bury you. Hi. I'm
(00:45):
Bob Pittman. Welcome to Math and Magic Stories from the
Frontiers and Marketing, where we explore that unique combination of
data and analytics and the creative ideas that are behind
the biggest business successes today. We're exploring this world through
the experience, answers and insights of someone who has an
amazing career. Was running MGM, O I M, Telcom, Crispy
(01:07):
Kreme Donuts, and even the CEO of in Ron as
they went through their restructuring. But today he's here as
the CEO of Warner Music Group. He's Steve Cooper, a
Wharton n B. A who started as an accountant and
wanted to become what some have described as the king
of the turnaround world. He's the guy you call when
you need to get out of the woods. He's had
(01:29):
over three hundred engagements restructuring over one hundred billion dollars
in debts. But for the last eleven years he's been
the CEO of Warner Music, and in that time the
company has doubled revenue, increased its total market value of
the company five x, and increased the equity by about
fifteen acts. Steve recently announced he'll be retiring next year,
(01:51):
so we've got even more to talk about today. Steve. Welcome,
Thank you, Bob, nice to be here. Well, we're glad
to have you here. And before we jump into the
meat of everything, I want to do you in sixty seconds,
so you're ready. Yep. Do you prefer New York City
or l a New York City? Cats or dogs? Cats,
track or football? Football? Boats or planes? Planes in Ron
(02:16):
or Warner Music, Warner Music, Abbey Road or pet Sounds,
Abbey Road, Ed Sharon or Justin Bieber, Ed Sharon, Palm
Springs or Palm Beach, Palm Springs. It's about to get
a little harder. Childhood hero Albert Einstein. First job, Well,
my first job when I was post sixteen was in
(02:39):
Marbon Chemical and Gary, Indiana. Favorite city London, last vacation,
can't remember. Favorite cocktail Tequila on the Rocks. Favorite TV
show was probably Star Trek, Who would play you in
a movie? Somebody's Short with not a lot of hair.
(03:02):
I have to ask you this. One favorite radio station
one those six point seven FM. And the biggest surprise
about the music business. My biggest surprise was that in
two thousand and eleven the business was organized the same
way as it was in Okay, Steve. Before we get
(03:24):
to the present, let's go back to the beginning. Your
doctor's son, Gary, Indiana. You're a high school athlete who
got sidelined with back surgery. What are the lessons from Gary,
from your parents and from being a high school athlete
and then being knocked out of the action. My parents
really gave me, you know, my values, respect for other people,
(03:50):
the concept of fair play with respect to sports injuries,
except from me a pretty good example that you know,
if you're playing something and it's absolutely not working, whether
it's because of talent or an injury, you've got to
find a different game to play, hopefully one that you
(04:11):
really love and one that you can excel at. You
left Gary go to college in California. It was that
part of this why California. Well, if you've ever spent
a winter or a summer in Gary, you would find
California unbelievably appealing. It was really such a seismic change
(04:38):
for me. What did your parents think of you being
in California? Did they come visit? No? Actually during the
four years I was in college. They came for my
college graduation. When my mom saw the apartment I was
living in as a senior, she not only refused to
come in, she told me she was complete shocked at
(05:03):
what my apartment looks like versus what my room at
home looks like. After you graduated, you went onto business
school at Wharton University of Pennsylvania. The other coasts. So
now you've been the Midwest, you've been the West coast,
now you're in the East coast. It's that deliberate or
by accident, and why business school. When I graduated, I
was just a few months past one years old. The
(05:26):
thought of full time employment, having had really a fun
filled four years in California was just not something then. Frankly,
at the time, I could wrap my head around. So
I decided my best course of action was to apply
to graduate school. I was literally the youngest guy in
(05:49):
my business school class the day it started. Everybody was
in sports coach or suits and ties. I was twenty
one from Cali, Fornia. I had a pair of jeans on,
some sneakers and a T shirt. And a professor said,
you pointing at me, this is the graduate division, not
(06:12):
the undergraduate division. And I said, well, sir um, I'm
here for the graduate division. And he shaped his head
and muttered, what was the world coming to? So that
was my first day of graduate school. This is business
school in the nineteen seventies, and as you say, it
looked quite a bit different than it does today. What
(06:32):
were they teaching you about business in the nineteen seventies. Well,
they took a fairly thoughtful, actually analytical approach to most
aspects of business, finance, marketing, labor, organizational theory. Computers had
rolled around by that time. We learned programming with a
(06:55):
card deck and punch cards. What I did was to
ask a lot of questions, go beyond just corporate speak,
to look at real data, real information, real analytics that
really served is kind of the cornerstone for what I
(07:20):
did for most of my professional career up to and
through today. So you first worked as an accountant in
the predecessor company, did deloit you gotta taste for company
reorganizations in by you left to start your own company.
Talk a little bit about what the catalyst was to
leave that obviously a prestigious place and take the chance
(07:42):
on betting on yourself. Well, I started in seventy and
left them literally to the day, fifteen years later. And
during that time, while it was your point a large
prestigious organization, it had morphed from a small, tight partnership
(08:06):
where I knew every partner and they knew me. And
then in the late seventies early eighties, all of these
large professional firms just had explosive growth through acquisitions and mergers,
and it really changed the nature of the environment. It
(08:27):
went from something that resembled really a partnership to you know,
just big business. For me. You know, I established three
rules for my life, and part was life short, you
gotta have fun. The second was no assholes, because life short,
(08:50):
you've gotta have fun. And the third was I treat
people fairly and I expect to be treated the same way.
It just became a large, anonymous business. If the world
there wasn't something I enjoyed, I had to go create
my own world in my own future. And so it
became a pretty simple decision, and you did. You had
(09:13):
great success. As I mentioned at the top, all these
successes you had and really transforming restructuring companies in essence
saving companies. Let's get a couple of lessons that you
learned during that period of time. Why do companies get
in trouble financially Well, oftentimes it's because they didn't see
(09:34):
the megatrends that were developing that, either because of government regulations, competition,
or technology, had not only the possibility but the probability
of dramatically changing the world in which they operated. A
lot of companies just moved away drastically from their core competencies.
(09:58):
You know, they figured that if they could play basketball well,
they'd be able to play baseball well, or they'd be
able to play soccer well. But companies, like many many athletes,
don't really have the capacity to go from one sport
to another sport without incurring a lot of pain. Many
(10:22):
of the companies that I dealt with underestimated the risks
associated with dramatic, unplanned growth and the risks that came
not only financially but operationally, organizationally, culturally. You know, the
stress that publicly held companies the board and management field
(10:47):
to constantly be on a steady northward path for revenue growth,
bottom line growth, cash flow growth. In order to do that,
a lot of people would make short term decisions that
could impact the company's long term health. You know. It's
(11:08):
kind of like an athlete. They can juice their performance
by using steroids or other enhancing drugs. One may accelerate
their muscle mass and their strength, but at the end
of the day, the harm it causes makes it not
worth it. You know. They're really two kinds of management
(11:30):
teams and leaders, those that manage from hindsight and react,
and those that manage from foresight and are proactive. The
foresight and the proactivity creates more often than not, insight.
Many of the management teams I worked with would blame
(11:52):
everybody and their brother or sister for the failure of
the companies, but they would never look at themselves at
being at the heart of the matter. And so one
of the lessons that I've always carried forward is that
whenever there's the funk up, the first place you ought
to look is in the mirror and not allow the
(12:15):
proverbial crap to roll downhill. More a Mathew Magic right
after this quick break, welcome back to Mathew Magic. Let's
do more from my conversation with Steve Cooper. How do
you think about corporate culture? What is it doing for you?
(12:39):
How do you build it? How do you use it?
Here's what we try and do inside of Warner there
are four words communication, cooperation, coordination and collaboration. When a
company does those four things, well, there's almost all we's
(13:00):
a spike in creativity. Those four words are the glue
that create a culture a team, and when you play
as a team, you will always outplay a bunch of
people that don't play that way and don't relate to
(13:20):
each other that way. But getting people to communicate, collaborate,
cooperate and coordinate is a full time, never ending undertaking
in any business that's got any level of scale. Let's
(13:41):
take that and let's jump to Warner Music now one
of the three big music companies. Lindvatnik buys Warner Music
back in two thousand eleven. He saw something that others
did not, and at the time most thought it was
a bad acquisition, and he paid way too much, according
to the gossip of the moment, and then, to make
(14:01):
matters worse, gasp, he brings in someone from outside the
music business entertainment industry to run it. You. Let's unpack
that a little bit. At what stage in the acquisition
did you get involved? I got involved a couple of
months before we close the acquisition. The plan once the
company was acquired, I was going to be the chairman
(14:22):
of the board and kind of keep an eye on
Len's investment. But Edgar Brownman Jr. A very bright guy,
great guy. He was the CEO. He decided to move
on to other things, and the three of us were
at lunch one day. Edgar announced that we didn't want
to run a day to day anymore. And Lynn looked
(14:43):
at me at lunch and says, you don't mind doing this?
Do you? How hard can it be? What did you
think you were getting into, Steve? Well, you know, first
of all, it was pretty obvious that the industry was contracting.
Major players had all shifted through mergers and acquisitions. The
(15:07):
industry was in survival mode. The industry had a long
history of fighting against each other as opposed to looking
at what was happening in the broader world around them.
You know, if the industry had played their cards differently,
they would have been the iTunes store. But they had
(15:28):
a resistance to change. As they went from the album
format and vinyl to c d s, they were just
raining money. Their view of technology was something to be rebuffed,
not embraced, and technology is you know, it's like an avalanche.
(15:49):
If you're standing on a mountain and you see the
avalanche coming at you, you either get out in front
of it and you get on the leading edge, or
it's just gonna bury you. The industry at one point
had an opportunity to do that if they had interpreted
Napster differently, but they didn't, and as a result the contraction,
(16:14):
the shrink, the disaggregation, and the album into singles. It
was going to be a brave new world that the
industry was reluctant to embrace. You know, it's interesting, probably,
I guess twenty years earlier. I was in those meetings
at Warner Communications back when I was running MTV, and
(16:36):
there were people talking about the C D and what
it might be. And there was this real fight over
the c D. There were these folks, very smart people,
who said, the CD will be the worst thing that
ever happens to the music business because it's a master
quality recording and the pirates will use it to kill us.
(17:00):
In that situation, unlike what you were just talking about,
the forces for let's use the technology one and they
embraced the CD, and as you know, that was probably
one of the greatest decades of growth the record industry
has ever seen, when people got rid of their LPs
and transferred it all over to c d s. And
(17:22):
you're exactly right. I also was there when Napster came along,
the same sort of folks that we can't embrace this
because digital will kill the music business. And this time
the conservative forces won and they decided to fight it
rather than embrace it. When you came along, you know,
(17:43):
the business was at that point where he had already
suffered that terrible damage from really being out of the
action for ten years and being diminished. How did you
get comfortable that that was not the future, that there
was really something else going on. Look, you should never
get comfortable the minute you get too comfortable about your
(18:04):
business is when you get slammed. You know, Historically you
see big technology shifts come every decade. We did see
this emerging technology streaming and this you know, little Swedish
company who had an approach that was based on access,
(18:29):
not ownership. The theory was that they could offer up
virtually all of the world's music in a convenient, easy
way to use, and people for a relatively nominal price
could have access to all of the world's music. Seven.
(18:54):
It was a relationship that changed the fundamental nature of
how people looked at music. It was very clear, at
least to me, that if we clung to the download model,
that we were never ever as an industry or a business,
(19:17):
going to see a turnaround of any reasonable degree. Whereas
if we embrace and promoted this kind of seismic shift
in both the way people thought about music and interfaced
with music. The team warnered the board members, we made
(19:40):
a collective decision that we were going to double down
and go all in on streaming as one of the
key components of Warner's future. Streaming ended up being more
than fifty percent of our business. You not only bet
(20:00):
on Daniel with Spotify, but somehow you got Apple to
do something they said they would never do, which is
going to a subscription service business. Amazon went into the
business that you managed to find others that would build
out platforms to give you more ways to reach the
consumers and more ways to use your music. How did
(20:22):
you think about that, Well, it was pretty clear to
Apple that this technology had legs, the iTunes store having
peaked in that beginning to contract because you know, it
was just a digital analog to a physical sale, and
(20:43):
Amazon will give anything a try. YouTube, at the same time,
was developing as the streaming business. Relative to video audio streaming,
while it was a leap for the industry, was already
on relatively sound technological footing. You know, it's interesting we
(21:05):
sort of we're on the parallel journey with you, because
for radio, we expose people to new music. We come
about new ideas, we explain who the artists are, we
put them in context. I think the numbers something like
Spotify users say the main way they discover new music
is still FM. Radio. Well, look, I think radio is
(21:26):
still a very very important component across all of the
aspects of music, whether it be discovery, what's trending, the
preservation of musical history in catalog. It's like as many
things transition to the digital world. You know, the demise
(21:49):
of X, Y and Z has been predicted, but I
think radio is going to be around forever. It's certainly
reaches tens upon tens of millions of people every day.
It's a medium where they utilized for figuring out what
(22:10):
the weather is, where the traffic is, what the news is,
where the music is. The difference between the digital vehicles
and radio is primarily the linear of radio versus the
demand nature of stream. We've got our host which are
(22:32):
really make us so different. They bond with the audience.
People trust them, and when they start telling you about
a new artist or a new song, or by the way,
a new song from an established artist, it creates the
conversation really and embeds that in the culture. You know,
we and our company are probably doing the same thing
you're doing, which is looking ahead. One of the areas
(22:55):
we're looking at is web three, blockchain, tokens, metaverse. You
you've been really active in this, Steve and sort of
a hallmark of viewers talk a little bit about next
step because we're not there yet, but you're already working
on what that's gonna be. If you think about the
Internet that went from just you know, Web one was
(23:17):
just simply kind of information and search. Web two was
really social platforms and interacting with one another. Web three
is kind of building these immersive communities online through gaining
(23:41):
live streaming, like literally building worlds where common communities grow up. Now,
I think Web two isn't going to go away. It'll
be with us for a long long time. Web three
it's gonna take I don't know, three or four or five,
ten years for to begin to really illuminate all the
(24:02):
possibilities that it holds. But they'll be able to coexist
as Web three grows and as Web two continues to mature.
What I do see is that there will be more
and more people spending more and more time in a
(24:25):
world where they have a hand in its creation. What
Web three will do, Bob, is allow people that are
now fans to become players. It will allow people to
be the person that they hope they would be or
want to be in a community that they have helped create,
(24:49):
in a world where they feel as if they are
part of it, and where that world makes them feel
that way. Is well, you can see in our world today,
people are gonna want to create and find better worlds.
Don't look at virtual worlds where they can live the
(25:13):
way they want to live. I think it holds an
enormous world of possibilities. People ought to regularly watch several movies.
One is The Terminator, where we're fighting the machines we created.
One is The Matrix, where we're just the batteries for
the stuff we've created, you know. And one is Wally,
(25:37):
where we just live in a virtual world. I think
of the three possibilities, I'm betting on Wally so little
more mundane. You bought Parlophone, you and lend it increased
your market share, but it really turbocharged your earnings as well.
(25:57):
At that moment, of course, the conventional wisdom while you overpaid,
Oh my god, what a stupid price. Today it seems
like a bargain. As an industry, are we going to
see more consolidation. Are the Indian is going to be
pulled into the major companies or is most of the
effort going to be on new technology like Web three.
(26:17):
I think that it'll be both. You know, what the
Internet has done is democratized access. But what you can't
democratize is talent. When you look at something approximating a
hundred thousand new tracks being uploaded to iHeart Digital or soundclouds, Spotify, Amazon,
(26:45):
Apple every day, it is almost impossible for an individual
artist to break through in the world of music. I
see music curators like my Heart, and I look at
companies like us that have a global footprint, skills that
(27:08):
go from Alpha to Omega, and the financial resources to
be able to help those with truly great talent maneuver
their way through those hundred thousand tracks a day, whether
it be Web two, traditional streaming, Web three, immersive Web four,
(27:31):
God knows what that's going to be. I see the
role of companies like Warner becoming more critical to the
success of songwriters and artists, and more critical to you know,
working with people like yourselves, Spotify, Apple and others in
(27:54):
the curation of really, really great music and wonderful artists.
So let's jump coming towards the end here. If you
could give your twenty one year old self some advice,
what would that advice be? I would have been more
open minded, and I would have told myself notwithstanding I
(28:15):
was convinced I knew everything and was right about everything
that I really didn't know much at all. More often
than not, I had no idea what I was talking about.
You sounded persuasive, though, Steve. Let's jump to your latest
news here. You announced you're going to step down next year.
I don't know if I should call a retirement or
(28:35):
you're gonna go do something else. You've been on an
incredible tear. I mean, this has been one of the
great success stories and media and entertainment. What made you
decide it was time to step down? You know? I
believe that after a certain amount of time in the
fish bowl, your view used to be more objective when
(28:58):
you're just first starting, can become more subjective over time.
What I believe is the right thing for Warner is
a fresh set of eyes, a not only understanding, but
an appreciation for Web two, for Web three, where the
(29:19):
company's got to go. Somebody that has the time and
the energy to chart the course over the next five
to ten years. I don't want to start something that
I know, in my heart of hearts, I'm never going
to be able to finish. I remember two thousand and
two I was agonizing about deciding I wanted to retire
(29:43):
but actually, the minute I did it and announced it,
I felt like the way of the world had come
off my shoulders. Have you felt once you announced this?
Did you feel anything different? Did it have an impact
for you? It kind of creates as sense of freedom.
I've got a fairly long glide path here, so it'll
(30:05):
give the board time to noodle through the right successor.
And the fact that it's out, it's public. You know,
it's not something rolling around in my head that I
haven't articulated. It feels great. So we're gonna wrap up,
and we always wrap up these episodes the same way.
(30:26):
It's a tribute to those folks that are great at
the analytics and see the world as math, and to
those people who just have those genius ideas that pop
in their heads math and magic. We'd like you to
add to the honor society some of the people you
think deserve it. So if you think about it, who
is the best math person you know in business? And
(30:48):
then who is the best magician? Well, I think the
best magician is George Lucas. He created worlds that people
never even dreamed of, and he spawned generations of people that,
through imagination and creativity created art that I just find
(31:14):
mind boggling. The greatest mathematician, his impact I think has
been beyond belief is Einstein. He, in much of the
way that Lucas did for other worlds, did the same
thing for math. I would like to believe that time
(31:35):
is a river, that one of these days you and
I will figure out how to backstroke in. Yes, we will.
David Eagleman, who was at him, who said that time
is probably a circle and it just stays in a loop.
I hope that's true, because we'll be coming around to
it again. Steve Cooper, great friend, king of transformations, extraordinary
(31:58):
visionary and leader. Thanks for being here today and enjoy
that retirement thing. Thank you, Bob. I appreciate it. There
are a few lessons I picked up in my conversation
with Steve. One, don't abandon your core competencies like an athlete,
just because you're good at one sport doesn't mean you'll
succeed at another. Two, Communication and collaboration, cooperation, coordination, as
(32:23):
Steve said, those portraits build a strong culture and encourage
creativity and teamwork. And three embraced technology like an avalanche.
You're not gonna win by fighting it. You must get
in front of it. I'm Bob Pittman. Thanks for listening.
That's it for today's episode. Thanks so much for listening
(32:43):
to Math and Magic, a production of High Heart Radio.
The show is hosted by Bob Pittman. Special thanks to
Susan Warden for booking and wrangling our wonderful talent, which
is no small fees, Marissa Brown for pulling research, our
editors Derek Clements, Mary Dow and Ryan Murdoch, our producer
Morgan Levoy, our executive producer, Nikki Tour and of course
Gayle Rahul, Eric Angel, Noel and everyone who helped bring
(33:04):
this show to your ears. Until next time, m
You're listening to Math and Magic production of I Heart Radio.
The industry had a long history of resistance to change
as they went from the album format and vinyl t
c D s. Their view of technology was something to
(00:23):
be rebuffed, not embraced. And technology is you know, it's
like an avalanche. If you're standing on a mountain and
you see the avalanche coming at you, you either get
out in front of it and you get on the
leading edge, or it's just gonna bury you. Hi. I'm
(00:45):
Bob Pittman. Welcome to Math and Magic Stories from the
Frontiers and Marketing, where we explore that unique combination of
data and analytics and the creative ideas that are behind
the biggest business successes today. We're exploring this world through
the experience, answers and insights of someone who has an
amazing career. Was running MGM, O I M, Telcom, Crispy
(01:07):
Kreme Donuts, and even the CEO of in Ron as
they went through their restructuring. But today he's here as
the CEO of Warner Music Group. He's Steve Cooper, a
Wharton n B. A who started as an accountant and
wanted to become what some have described as the king
of the turnaround world. He's the guy you call when
you need to get out of the woods. He's had
(01:29):
over three hundred engagements restructuring over one hundred billion dollars
in debts. But for the last eleven years he's been
the CEO of Warner Music, and in that time the
company has doubled revenue, increased its total market value of
the company five x, and increased the equity by about
fifteen acts. Steve recently announced he'll be retiring next year,
(01:51):
so we've got even more to talk about today. Steve. Welcome,
Thank you, Bob, nice to be here. Well, we're glad
to have you here. And before we jump into the
meat of everything, I want to do you in sixty seconds,
so you're ready. Yep. Do you prefer New York City
or l a New York City? Cats or dogs? Cats,
track or football? Football? Boats or planes? Planes in Ron
(02:16):
or Warner Music, Warner Music, Abbey Road or pet Sounds,
Abbey Road, Ed Sharon or Justin Bieber, Ed Sharon, Palm
Springs or Palm Beach, Palm Springs. It's about to get
a little harder. Childhood hero Albert Einstein. First job, Well,
my first job when I was post sixteen was in
(02:39):
Marbon Chemical and Gary, Indiana. Favorite city London, last vacation,
can't remember. Favorite cocktail Tequila on the Rocks. Favorite TV
show was probably Star Trek, Who would play you in
a movie? Somebody's Short with not a lot of hair.
(03:02):
I have to ask you this. One favorite radio station
one those six point seven FM. And the biggest surprise
about the music business. My biggest surprise was that in
two thousand and eleven the business was organized the same
way as it was in Okay, Steve. Before we get
(03:24):
to the present, let's go back to the beginning. Your
doctor's son, Gary, Indiana. You're a high school athlete who
got sidelined with back surgery. What are the lessons from Gary,
from your parents and from being a high school athlete
and then being knocked out of the action. My parents
really gave me, you know, my values, respect for other people,
(03:50):
the concept of fair play with respect to sports injuries,
except from me a pretty good example that you know,
if you're playing something and it's absolutely not working, whether
it's because of talent or an injury, you've got to
find a different game to play, hopefully one that you
(04:11):
really love and one that you can excel at. You
left Gary go to college in California. It was that
part of this why California. Well, if you've ever spent
a winter or a summer in Gary, you would find
California unbelievably appealing. It was really such a seismic change
(04:38):
for me. What did your parents think of you being
in California? Did they come visit? No? Actually during the
four years I was in college. They came for my
college graduation. When my mom saw the apartment I was
living in as a senior, she not only refused to
come in, she told me she was complete shocked at
(05:03):
what my apartment looks like versus what my room at
home looks like. After you graduated, you went onto business
school at Wharton University of Pennsylvania. The other coasts. So
now you've been the Midwest, you've been the West coast,
now you're in the East coast. It's that deliberate or
by accident, and why business school. When I graduated, I
was just a few months past one years old. The
(05:26):
thought of full time employment, having had really a fun
filled four years in California was just not something then. Frankly,
at the time, I could wrap my head around. So
I decided my best course of action was to apply
to graduate school. I was literally the youngest guy in
(05:49):
my business school class the day it started. Everybody was
in sports coach or suits and ties. I was twenty
one from Cali, Fornia. I had a pair of jeans on,
some sneakers and a T shirt. And a professor said,
you pointing at me, this is the graduate division, not
(06:12):
the undergraduate division. And I said, well, sir um, I'm
here for the graduate division. And he shaped his head
and muttered, what was the world coming to? So that
was my first day of graduate school. This is business
school in the nineteen seventies, and as you say, it
looked quite a bit different than it does today. What
(06:32):
were they teaching you about business in the nineteen seventies. Well,
they took a fairly thoughtful, actually analytical approach to most
aspects of business, finance, marketing, labor, organizational theory. Computers had
rolled around by that time. We learned programming with a
(06:55):
card deck and punch cards. What I did was to
ask a lot of questions, go beyond just corporate speak,
to look at real data, real information, real analytics that
really served is kind of the cornerstone for what I
(07:20):
did for most of my professional career up to and
through today. So you first worked as an accountant in
the predecessor company, did deloit you gotta taste for company
reorganizations in by you left to start your own company.
Talk a little bit about what the catalyst was to
leave that obviously a prestigious place and take the chance
(07:42):
on betting on yourself. Well, I started in seventy and
left them literally to the day, fifteen years later. And
during that time, while it was your point a large
prestigious organization, it had morphed from a small, tight partnership
(08:06):
where I knew every partner and they knew me. And
then in the late seventies early eighties, all of these
large professional firms just had explosive growth through acquisitions and mergers,
and it really changed the nature of the environment. It
(08:27):
went from something that resembled really a partnership to you know,
just big business. For me. You know, I established three
rules for my life, and part was life short, you
gotta have fun. The second was no assholes, because life short,
(08:50):
you've gotta have fun. And the third was I treat
people fairly and I expect to be treated the same way.
It just became a large, anonymous business. If the world
there wasn't something I enjoyed, I had to go create
my own world in my own future. And so it
became a pretty simple decision, and you did. You had
(09:13):
great success. As I mentioned at the top, all these
successes you had and really transforming restructuring companies in essence
saving companies. Let's get a couple of lessons that you
learned during that period of time. Why do companies get
in trouble financially Well, oftentimes it's because they didn't see
(09:34):
the megatrends that were developing that, either because of government regulations, competition,
or technology, had not only the possibility but the probability
of dramatically changing the world in which they operated. A
lot of companies just moved away drastically from their core competencies.
(09:58):
You know, they figured that if they could play basketball well,
they'd be able to play baseball well, or they'd be
able to play soccer well. But companies, like many many athletes,
don't really have the capacity to go from one sport
to another sport without incurring a lot of pain. Many
(10:22):
of the companies that I dealt with underestimated the risks
associated with dramatic, unplanned growth and the risks that came
not only financially but operationally, organizationally, culturally. You know, the
stress that publicly held companies the board and management field
(10:47):
to constantly be on a steady northward path for revenue growth,
bottom line growth, cash flow growth. In order to do that,
a lot of people would make short term decisions that
could impact the company's long term health. You know. It's
(11:08):
kind of like an athlete. They can juice their performance
by using steroids or other enhancing drugs. One may accelerate
their muscle mass and their strength, but at the end
of the day, the harm it causes makes it not
worth it. You know. They're really two kinds of management
(11:30):
teams and leaders, those that manage from hindsight and react,
and those that manage from foresight and are proactive. The
foresight and the proactivity creates more often than not, insight.
Many of the management teams I worked with would blame
(11:52):
everybody and their brother or sister for the failure of
the companies, but they would never look at themselves at
being at the heart of the matter. And so one
of the lessons that I've always carried forward is that
whenever there's the funk up, the first place you ought
to look is in the mirror and not allow the
(12:15):
proverbial crap to roll downhill. More a Mathew Magic right
after this quick break, welcome back to Mathew Magic. Let's
do more from my conversation with Steve Cooper. How do
you think about corporate culture? What is it doing for you?
(12:39):
How do you build it? How do you use it?
Here's what we try and do inside of Warner there
are four words communication, cooperation, coordination and collaboration. When a
company does those four things, well, there's almost all we's
(13:00):
a spike in creativity. Those four words are the glue
that create a culture a team, and when you play
as a team, you will always outplay a bunch of
people that don't play that way and don't relate to
(13:20):
each other that way. But getting people to communicate, collaborate,
cooperate and coordinate is a full time, never ending undertaking
in any business that's got any level of scale. Let's
(13:41):
take that and let's jump to Warner Music now one
of the three big music companies. Lindvatnik buys Warner Music
back in two thousand eleven. He saw something that others
did not, and at the time most thought it was
a bad acquisition, and he paid way too much, according
to the gossip of the moment, and then, to make
(14:01):
matters worse, gasp, he brings in someone from outside the
music business entertainment industry to run it. You. Let's unpack
that a little bit. At what stage in the acquisition
did you get involved? I got involved a couple of
months before we close the acquisition. The plan once the
company was acquired, I was going to be the chairman
(14:22):
of the board and kind of keep an eye on
Len's investment. But Edgar Brownman Jr. A very bright guy,
great guy. He was the CEO. He decided to move
on to other things, and the three of us were
at lunch one day. Edgar announced that we didn't want
to run a day to day anymore. And Lynn looked
(14:43):
at me at lunch and says, you don't mind doing this?
Do you? How hard can it be? What did you
think you were getting into, Steve? Well, you know, first
of all, it was pretty obvious that the industry was contracting.
Major players had all shifted through mergers and acquisitions. The
(15:07):
industry was in survival mode. The industry had a long
history of fighting against each other as opposed to looking
at what was happening in the broader world around them.
You know, if the industry had played their cards differently,
they would have been the iTunes store. But they had
(15:28):
a resistance to change. As they went from the album
format and vinyl to c d s, they were just
raining money. Their view of technology was something to be rebuffed,
not embraced, and technology is you know, it's like an avalanche.
(15:49):
If you're standing on a mountain and you see the
avalanche coming at you, you either get out in front
of it and you get on the leading edge, or
it's just gonna bury you. The industry at one point
had an opportunity to do that if they had interpreted
Napster differently, but they didn't, and as a result the contraction,
(16:14):
the shrink, the disaggregation, and the album into singles. It
was going to be a brave new world that the
industry was reluctant to embrace. You know, it's interesting, probably,
I guess twenty years earlier. I was in those meetings
at Warner Communications back when I was running MTV, and
(16:36):
there were people talking about the C D and what
it might be. And there was this real fight over
the c D. There were these folks, very smart people,
who said, the CD will be the worst thing that
ever happens to the music business because it's a master
quality recording and the pirates will use it to kill us.
(17:00):
In that situation, unlike what you were just talking about,
the forces for let's use the technology one and they
embraced the CD, and as you know, that was probably
one of the greatest decades of growth the record industry
has ever seen, when people got rid of their LPs
and transferred it all over to c d s. And
(17:22):
you're exactly right. I also was there when Napster came along,
the same sort of folks that we can't embrace this
because digital will kill the music business. And this time
the conservative forces won and they decided to fight it
rather than embrace it. When you came along, you know,
(17:43):
the business was at that point where he had already
suffered that terrible damage from really being out of the
action for ten years and being diminished. How did you
get comfortable that that was not the future, that there
was really something else going on. Look, you should never
get comfortable the minute you get too comfortable about your
(18:04):
business is when you get slammed. You know, Historically you
see big technology shifts come every decade. We did see
this emerging technology streaming and this you know, little Swedish
company who had an approach that was based on access,
(18:29):
not ownership. The theory was that they could offer up
virtually all of the world's music in a convenient, easy
way to use, and people for a relatively nominal price
could have access to all of the world's music. Seven.
(18:54):
It was a relationship that changed the fundamental nature of
how people looked at music. It was very clear, at
least to me, that if we clung to the download model,
that we were never ever as an industry or a business,
(19:17):
going to see a turnaround of any reasonable degree. Whereas
if we embrace and promoted this kind of seismic shift
in both the way people thought about music and interfaced
with music. The team warnered the board members, we made
(19:40):
a collective decision that we were going to double down
and go all in on streaming as one of the
key components of Warner's future. Streaming ended up being more
than fifty percent of our business. You not only bet
(20:00):
on Daniel with Spotify, but somehow you got Apple to
do something they said they would never do, which is
going to a subscription service business. Amazon went into the
business that you managed to find others that would build
out platforms to give you more ways to reach the
consumers and more ways to use your music. How did
(20:22):
you think about that, Well, it was pretty clear to
Apple that this technology had legs, the iTunes store having
peaked in that beginning to contract because you know, it
was just a digital analog to a physical sale, and
(20:43):
Amazon will give anything a try. YouTube, at the same time,
was developing as the streaming business. Relative to video audio streaming,
while it was a leap for the industry, was already
on relatively sound technological footing. You know, it's interesting we
(21:05):
sort of we're on the parallel journey with you, because
for radio, we expose people to new music. We come
about new ideas, we explain who the artists are, we
put them in context. I think the numbers something like
Spotify users say the main way they discover new music
is still FM. Radio. Well, look, I think radio is
(21:26):
still a very very important component across all of the
aspects of music, whether it be discovery, what's trending, the
preservation of musical history in catalog. It's like as many
things transition to the digital world. You know, the demise
(21:49):
of X, Y and Z has been predicted, but I
think radio is going to be around forever. It's certainly
reaches tens upon tens of millions of people every day.
It's a medium where they utilized for figuring out what
(22:10):
the weather is, where the traffic is, what the news is,
where the music is. The difference between the digital vehicles
and radio is primarily the linear of radio versus the
demand nature of stream. We've got our host which are
(22:32):
really make us so different. They bond with the audience.
People trust them, and when they start telling you about
a new artist or a new song, or by the way,
a new song from an established artist, it creates the
conversation really and embeds that in the culture. You know,
we and our company are probably doing the same thing
you're doing, which is looking ahead. One of the areas
(22:55):
we're looking at is web three, blockchain, tokens, metaverse. You
you've been really active in this, Steve and sort of
a hallmark of viewers talk a little bit about next
step because we're not there yet, but you're already working
on what that's gonna be. If you think about the
Internet that went from just you know, Web one was
(23:17):
just simply kind of information and search. Web two was
really social platforms and interacting with one another. Web three
is kind of building these immersive communities online through gaining
(23:41):
live streaming, like literally building worlds where common communities grow up. Now,
I think Web two isn't going to go away. It'll
be with us for a long long time. Web three
it's gonna take I don't know, three or four or five,
ten years for to begin to really illuminate all the
(24:02):
possibilities that it holds. But they'll be able to coexist
as Web three grows and as Web two continues to mature.
What I do see is that there will be more
and more people spending more and more time in a
(24:25):
world where they have a hand in its creation. What
Web three will do, Bob, is allow people that are
now fans to become players. It will allow people to
be the person that they hope they would be or
want to be in a community that they have helped create,
(24:49):
in a world where they feel as if they are
part of it, and where that world makes them feel
that way. Is well, you can see in our world today,
people are gonna want to create and find better worlds.
Don't look at virtual worlds where they can live the
(25:13):
way they want to live. I think it holds an
enormous world of possibilities. People ought to regularly watch several movies.
One is The Terminator, where we're fighting the machines we created.
One is The Matrix, where we're just the batteries for
the stuff we've created, you know. And one is Wally,
(25:37):
where we just live in a virtual world. I think
of the three possibilities, I'm betting on Wally so little
more mundane. You bought Parlophone, you and lend it increased
your market share, but it really turbocharged your earnings as well.
(25:57):
At that moment, of course, the conventional wisdom while you overpaid,
Oh my god, what a stupid price. Today it seems
like a bargain. As an industry, are we going to
see more consolidation. Are the Indian is going to be
pulled into the major companies or is most of the
effort going to be on new technology like Web three.
(26:17):
I think that it'll be both. You know, what the
Internet has done is democratized access. But what you can't
democratize is talent. When you look at something approximating a
hundred thousand new tracks being uploaded to iHeart Digital or soundclouds, Spotify, Amazon,
(26:45):
Apple every day, it is almost impossible for an individual
artist to break through in the world of music. I
see music curators like my Heart, and I look at
companies like us that have a global footprint, skills that
(27:08):
go from Alpha to Omega, and the financial resources to
be able to help those with truly great talent maneuver
their way through those hundred thousand tracks a day, whether
it be Web two, traditional streaming, Web three, immersive Web four,
(27:31):
God knows what that's going to be. I see the
role of companies like Warner becoming more critical to the
success of songwriters and artists, and more critical to you know,
working with people like yourselves, Spotify, Apple and others in
(27:54):
the curation of really, really great music and wonderful artists.
So let's jump coming towards the end here. If you
could give your twenty one year old self some advice,
what would that advice be? I would have been more
open minded, and I would have told myself notwithstanding I
(28:15):
was convinced I knew everything and was right about everything
that I really didn't know much at all. More often
than not, I had no idea what I was talking about.
You sounded persuasive, though, Steve. Let's jump to your latest
news here. You announced you're going to step down next year.
I don't know if I should call a retirement or
(28:35):
you're gonna go do something else. You've been on an
incredible tear. I mean, this has been one of the
great success stories and media and entertainment. What made you
decide it was time to step down? You know? I
believe that after a certain amount of time in the
fish bowl, your view used to be more objective when
(28:58):
you're just first starting, can become more subjective over time.
What I believe is the right thing for Warner is
a fresh set of eyes, a not only understanding, but
an appreciation for Web two, for Web three, where the
(29:19):
company's got to go. Somebody that has the time and
the energy to chart the course over the next five
to ten years. I don't want to start something that
I know, in my heart of hearts, I'm never going
to be able to finish. I remember two thousand and
two I was agonizing about deciding I wanted to retire
(29:43):
but actually, the minute I did it and announced it,
I felt like the way of the world had come
off my shoulders. Have you felt once you announced this?
Did you feel anything different? Did it have an impact
for you? It kind of creates as sense of freedom.
I've got a fairly long glide path here, so it'll
(30:05):
give the board time to noodle through the right successor.
And the fact that it's out, it's public. You know,
it's not something rolling around in my head that I
haven't articulated. It feels great. So we're gonna wrap up,
and we always wrap up these episodes the same way.
(30:26):
It's a tribute to those folks that are great at
the analytics and see the world as math, and to
those people who just have those genius ideas that pop
in their heads math and magic. We'd like you to
add to the honor society some of the people you
think deserve it. So if you think about it, who
is the best math person you know in business? And
(30:48):
then who is the best magician? Well, I think the
best magician is George Lucas. He created worlds that people
never even dreamed of, and he spawned generations of people that,
through imagination and creativity created art that I just find
(31:14):
mind boggling. The greatest mathematician, his impact I think has
been beyond belief is Einstein. He, in much of the
way that Lucas did for other worlds, did the same
thing for math. I would like to believe that time
(31:35):
is a river, that one of these days you and
I will figure out how to backstroke in. Yes, we will.
David Eagleman, who was at him, who said that time
is probably a circle and it just stays in a loop.
I hope that's true, because we'll be coming around to
it again. Steve Cooper, great friend, king of transformations, extraordinary
(31:58):
visionary and leader. Thanks for being here today and enjoy
that retirement thing. Thank you, Bob. I appreciate it. There
are a few lessons I picked up in my conversation
with Steve. One, don't abandon your core competencies like an athlete,
just because you're good at one sport doesn't mean you'll
succeed at another. Two, Communication and collaboration, cooperation, coordination, as
(32:23):
Steve said, those portraits build a strong culture and encourage
creativity and teamwork. And three embraced technology like an avalanche.
You're not gonna win by fighting it. You must get
in front of it. I'm Bob Pittman. Thanks for listening.
That's it for today's episode. Thanks so much for listening
(32:43):
to Math and Magic, a production of High Heart Radio.
The show is hosted by Bob Pittman. Special thanks to
Susan Warden for booking and wrangling our wonderful talent, which
is no small fees, Marissa Brown for pulling research, our
editors Derek Clements, Mary Dow and Ryan Murdoch, our producer
Morgan Levoy, our executive producer, Nikki Tour and of course
Gayle Rahul, Eric Angel, Noel and everyone who helped bring
(33:04):
this show to your ears. Until next time, m
Host
Bob Pittman
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