This Billboard cover story (Vol. 125, Issue No. 15, newstand: April 13) entitled “Power Trio” examines three of the music industry’s most successful music and tech entrepreneurs: Guy Oseary, Scooter Braun and Troy Carter, who in addition to managing three of the biggest musicians ever in Madonna, Bieber and Lady Gaga (respectively), are actively investing in tech companies like Spotify, Uber and SoundCloud. This piece features exclusive insights into all three men’s businesses and marks Oseary’s first major interview since 1997. Billboard.biz is pleased to reprint this article from Billboard magazine in full — note that subscribers got the full article nearly two weeks ago.
GUY OSEARY IS SITTING IN THE SPRAWLING YARD OF his Beverly Hills estate, listing all the things he’s said “no” to in the past 16 years. It is not a short list.
Though he’s built an enviable career as co-founder of Maverick Records, business partner-turned-manager of Madonna and a powerful partner in A-Grade, an investment fund with Ashton Kutcher and supermarket billionaire Ron Burkle valued at more than $20 million, Oseary has done little press since 1997. That was the year he agreed to talk with the Los Angeles Times’ Calendar section regarding Maverick’s meteoric ascent as the little boutique that could—breaking Candlebox, Alanis Morissette and, later that year, the Prodigy—and the last time he can remember participating in any type of profile that focused more on him than Madonna.
He has just turned down an interview request from another business magazine before Billboard arrived at his house, and it will be 24 hours before he agrees that this conversation can be on the record. When he does, the floodgates open, and nearly everyone who moves money around Los Angeles wants to talk about Oseary and his investment activities.
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It’s an exceptionally sunny L.A. afternoon, and Oseary is friendly, focused and remarkably forthcoming for someone who doesn’t like doing interviews. He’s also exhausted—it’s early January, and he’s been home for barely two weeks after being on the road with Madonna’s MDNA world tour, Billboard’s highest-grosser in 2012, no less. “It’s nice to just be in one place for a while, you know?”
So why is he talking now? Since 2009, Oseary has become an increasingly important presence in the tech and entertainment startup scene, partnering with Kutcher and Burkle for A-Grade’s investments in more than two dozen companies (Fab.com, Airbnb, Vyclone, Path and Tinychat among them). In addition, Oseary’s personal investments that have helped take companies at varying stages of maturity to the next level (including INDmusic, the video music service now known for helping monetize the YouTube videos driving Baauer’s “Harlem Shake” meme).
In turn, he’s inspired two of his most notable peers—Troy Carter and Scooter Braun—to build their own tech portfolios and rewrite the definition of what it means to be a successful music executive in the social media age. Oseary, Carter and Braun are already the managers of three of music’s biggest stars—Madonna, Lady Gaga and Justin Bieber, respectively. How big? Billboard Boxscore calculates their 2012 touring revenue at $582 million combined, and the trio’s combined album sales stand at 83.5 million units and digital singles at 89.1 million, according to Nielsen SoundScan.
Not bad, but not enough. The music business that Oseary came of age in from the late ’80s to the early 2000s could rely on album sales and touring as principal revenue streams. No more. Being a manager in the age of disruption means staying abreast of every ripple and current in not just pop music, but social media, technology and even consumer products. Promotional opportunities and brand partners are constantly surfacing. Some demand attention and evaluation; others need to be sought out and understood before they cannibalize your business.
In part, that puts managers like Oseary, Carter and Braun at the forefront of emerging technologies, able to spot investment opportunities as early if not earlier than seasoned venture capitalists. This trio invested early in Turntable.fm, SoundCloud and Spotify. Together, they’re helping redefine not just the profile of a music manager in 2013, but also how Hollywood’s gradual merger with Silicon Valley (or “Silicon Beach,” as some have dubbed it) unfolds.
“I have a lot of friends tell me, ‘The house you’re at was paid for by the music business,’” Oseary says from his patio, nodding at the expansive property that includes several wings, fresh orange trees and a private tennis court. “Absolutely. Maverick Records was sold and bought me this house. My life is music, no matter what part of my soul I’m using.” But that said, he’d rather be funding SoundCloud, Spotify or INDmusic than working with a traditional record label. “I don’t control these labels. I don’t control the managers and lawyers. It’s very complicated. I’d rather support pipes.”
The transition that Oseary, Braun and Carter are looking to spearhead for the music industry comes with a healthy dose of skepticism from veteran tech investors. “I think they are actually distractions,” says Fred Davis, a founding partner at investment group Code Advisors, of managers who enter the investment world. “Are they misusing their platform as a representative to an artist to sweet talk their way into investment deals they should not be a part of, or are they good investors? Good investors provide value, and if they’re not good investors, they can be distracting.”
Shervin Pishevar, co-founder of investment fund Sherpa Foundry and a powerful investor in his own right as former managing director of Menlo Ventures, sees Oseary, Braun and Carter as assets, if not major money players. “They’re value creators—they’re not value extractors in this context,” he says, having worked with all three on mobile car service Uber. “They’re definitely not the most cash in a deal, but they bring way more value than just their money.”
In many instances, celebrity managers can create the most value through access to their respective Rolodexes. Airbnb co-founder/CEO Brian Chesky credits Oseary with introducing him to the company’s now-heads of international and for playing a hands-on role in Airbnb’s global growth. (The online travel housing company was valued at more than $2.5 billion in a Wall Street Journal report last October.) “Guy’s really focused on big, not small steps,” he says. “Expanding internationally was a major thing for us, and the outcome was we eventually became the overwhelming leader in our category. We are far ahead of the clones and all the other international companies—we’re no longer an American company.”
Social commerce site Fab.com co-founder Jason Goldberg also cites Oseary’s introductions to fashion designers who’ve sold on the Fab platform and other key partners as having a direct correlation to his company’s current valuation—Fab was expected to complete $500 million in revenue by 2013, according to Goldberg’s comments at TechCrunch’s Dispute confab in 2012. “I can say without a doubt that Guy’s involvement with Fab has added tens of millions of dollars to Fab’s value as an enterprise.”
Oseary knows how important valuations and exit strategies are in defining an investor’s ultimate success, and teases that A-Grade is prepping an announcement in the coming month that’ll make some of his own projects a little more clear. “We have investments in a lot of companies that haven’t exited. Their growth is all you can measure,” he says. Kutcher adds, “What we do as a team is more valuable than some celebrity marketing your product. We’re trying to figure out the direction of the product and the direction of the company. We put our money where our mouth is, not create some promotional vehicle for myself or Guy.”
Coming to the table with battle-tested instincts is a critical strength in investments, but so is another skill well-cultivated in Hollywood: a proven eye for talent capable of capturing the public’s imagination (and dollars). To hear Oseary tell it, signing an artist isn’t so different from evaluating a startup tech founder: “At Maverick, we were a small label, so I had to have a quick gut check. Most artists I signed were within the first songs they played me. Alanis walked in and played me I think the first 30 seconds of the song ‘Perfect’ and I said, ‘I’ll sign you.’ Or Muse—I stopped them after the first song and said, ‘You can keep playing, but I’m good.’ If you don’t do that when you’re a small company, you’re just waiting for someone to come in and overpay—and you can’t compete and they take it from you. Today, I’m not doing music, but you got to meet the founder. The founders are kind of like our artists now. It’s a different kind of experience, but we still make quick decisions because we know what we like. I know I have a partner who also has a strong gut, so together if we both love something, then we know it’s right on.”
TO FULLY UNDERSTAND THE POWER and speed of Scooter Braun’s network in action, one need only spend a few minutes at his home in the Hollywood Hills, just off the Sunset Strip.
Braun is 31, and has a Zen-like dedication to his many ventures. Although a viral video of Bieber smoking pot at a party has widely circulated less than a week before Billboard’s visit, and there are likely 15 projects demanding his attention at this moment, Braun just wants to talk about business, eat some sushi and maybe catch up on the Lakers game, which is on mute on a giant TV that frames his spacious living room.
Joined by SB Projects chief marketing officer Brad Haugen and COO Scott Manson, Braun is sharing the story of how he helped close a Series C round of funding in 2012 for Stamped, a user-recommendation app already backed by himself, Bieber, the New York Times Co., Bain Capital Ventures and Google Ventures. To help him tell the story, he calls up Robby Stein and Bart Stein, the (unrelated) co-founders of Stamped, to see if they can tell the tale of how Braun was a little . . . preoccupied, to say the least, during the funding process.
Reached within minutes, Bart Stein recalls, “I was at Scooter’s house, and he was saying he was going to get these influential and cool people to invest, and then he just disappeared. I asked Brad, ‘What happened to Scooter?’ Suddenly my phone starts buzzing and I got an email from Mark Cuban being like, ‘Send me the deck, please.’ And in the next 20 minutes I get emails from Cuban, Ryan Seacrest, Ellen DeGeneres and [an A-list actor and a major pop star who didn’t end up getting involved], and Scooter’s still not in the room. Then I go back to Brad and say, ‘Is Scooter in the bathroom?’ and he says, ‘Yeah, it happens all the time. He’s most productive in the bathroom.’”
Now, both Steins and Stamped are in the middle of Yahoo’s transition to more of a startup mentality under new CEO Marissa Mayer, with Braun, Bieber and DeGeneres among the early investors who exited handsomely during the company’s sale for $10 million. Artist equity is often a smaller part of many conversations at Troy Carter’s management/investment firm Atom Factory (Gaga has a sizable stake in social network Backplane) and Oseary’s ventures (Madonna is an investor in YouTube channel DanceOn, but has otherwise used a handful of A-Grade products for promotional purposes).
But equity is almost always on the table at SB Projects when it comes to the business of Bieber. “Sometimes it’s equity, sometimes it’s investment-only. It depends on what the ask is from the companies, too,” Braun says.
Haugen adds, “And sometimes it’s ‘We want your talent to tweet about it, and we want you to run marketing for us.’ We either say ‘no,’ but that’s a different discussion when it becomes ‘Can you put money in?’”
“Don’t put your talent into deals unless they’re passionate—I learned that the hard way,” Braun says. “Then it’s easy and you overdeliver. If it’s not easy and you don’t deliver, then it hurts your reputation. That I don’t like. When it comes to tech products and our clients, not only do I want them to look at things and give me advice, I want them to lead me. I want them to be pushing me and saying, ‘This is cool!’ I’ve had that experience with Justin a lot of times.”
Braun is an investor in more than a dozen companies through his SB Projects and his incubator, Silent Labs—Songza, Sojo Studios, Viddy, Tinychat, Spotify, Uber, GifBoom and Pinterest among them. There are others, too, but, he chides, “You’ll know about those when you see the [Securities and Exchange Commission] filings.”
He was also recently appointed by Universal Music Group chairman/CEO Lucian Grainge as UMG’s entrepreneur in residence, a role that has seen him setting up key meetings with the company and his investments like Spotify and Songza, as well as bringing other music and tech-related opportunities to him first. “The key to success in any business is having access to communication,” Braun says. “By being an entrepreneur in residence, I basically connected people with the big-dog record label so they could have a real, open, honest dialogue. That is the only way we’re going to get the answers we need, by actually speaking to each other. Otherwise you have a lawyer calling six months later.”
IT’S FOUR DAYS BEFORE LADY GAGA’S BORN THIS WAY Ball is about to kick off its ill-fated North American run, but Troy Carter has plenty of other items of business to keep him busy—about 40, to be precise. That’s the number of logos painted on the walls of his offices at Atom Factory, illustrating all the investments he’s made in the last two years, ever since Braun brought him in on his first investment around Christmas 2010. That includes everything from link shorteners like Bre.ad, news apps like Summly (recently in the news when Yahoo bought it for an estimated $30 million last month), chat services like Socialcam and Tinychat and consumer products like Pop Chips and Warby Parker Eyewear. “There’s a lot of different sectors, but great founders are the common denominator,” he says.
On a busy Tuesday, several of those founders pass through Atom Factory’s headquarters—a bright, white warehouse situated directly across the street from the Sony Pictures lot in Los Angeles’ Culver City. The space is part office, part garage and part “brand studio,” with a whole suite of rooms dedicated to hosting business meetings with partner companies and testing products like Pop Water, a new low-calorie beverage Carter funded in-house that launched in Southern California in the spring. Atom Factory has a diverse, largely young staff of 24, including a VP of operations who’s a former schoolteacher and a director of technology partnerships, Allison Streuter, who used to work at William Morris Endeavor (WME) as head of music Marc Geiger’s assistant.
The guys from Rap Genius pop by for a quick check-in, having previously worked with Carter on one of the company’s biggest success stories. In May 2012, Carter helped enlist Nas, a former management client, to become the hip-hop annotation site’s first verified rapper. The site quickly exploded in audience and captured the interest of Silicon Valley behemoths Marc Andreessen and Ben Horowitz, whose venture capital fund put $15 million into the site last October. “Our thinking was, ‘You get Nas and a lot of people are going to follow,’” Carter says. “He’s going to be able to give you great advice on the product. He built so much credibility on the rap side, that now people are annotating presidential speeches, Shakespearean plays, country lyrics. Our bet, and Andreessen Horowitz’s bet now, is that after a few months people are going to be able to utilize the site for just about anything.”
Later that day, Carter is sitting in his office, surrounded by various Gaga artifacts (the exploding bra from the “Bad Romance” video, an MTV Video Music Award), and he wants to discuss data and how to own it. That’s largely through direct relationships with Backplane’s launch of Little Monsters, a social network exclusively for Gaga fans. Designed to host in-depth connections among fans and with Gaga herself, the site was created in part with hopes that it could unlock fan data like “time spent” and amount of content created that Facebook and Twitter just aren’t equipped to isolate for artist pages. Many of Atom Factory’s other investments were made with in depth-connections to fans in mind. The same can be said of its management clients—earlier this month, Carter signed Lindsey Stirling, a violinist who became famous for her classical take on dubstep on YouTube and has translated her online following into sales of more than 100,000 copies for her self-released debut album.
“The next phase of data is going to be transparency and also a deep dive into analytics—is it being used in a way that doesn’t violate the trust between the artist and the fans and the consumer and the brands?” he says. One recent example of how Carter is preparing for that next phase of data lies in Atom Factory music client Ceremonies, an indie band whose music Carter shared with Songza to see how fans of similar bands would engage with it. “We wanted to see which songs they’re listening to from start to finish, which songs they’re skipping and which are the best playlists in which those songs could exist,” he says. “That’s helping us realize what sorts of music are going to work at which format, and whether this song should follow the other on a particular release. It’s an ongoing education and we’re learning a lot.”
Little Monsters has also acted as a presale hub for Gaga’s 2013 Born This Way Ball U.S. dates, giving fans an exclusive one-day jump on presales from sponsor Citi and promoter Live Nation. In some cities, Carter says, “we were doubling and even tripling what sponsor presales were and what other artists’ fan sites have done.” That included selling upwards of 6,000-7,000 tickets per show from Little Monsters presales alone, he adds.
No wonder the industry has its eyes on Backplane’s performance. “If Backplane launches successfully, it will move everything forward because Troy’s involved and connected it and developed it,” WME’s Geiger says. “And primarily because it’s written from the music business utility perspective outward, not tech inward.”
Of the trio, Carter is certainly the most vocal about his investments in tech, having spoken at conferences for the likes of Wired, AllThingsD, Ad Age Digital West and, in March, South by Southwest (SXSW) about the intersections of tech, entertainment and big data. Braun and Oseary often make the rounds of the big conferences like DLD (Digital Life Design) and TED, too, though not always as speakers.
“Despite being in music so much, they are all at these events to learn and apply it to their own field,” Spotify founder Daniel Ek says. “Any aspiring manager should take note of that, especially as more and more music is being played online. Troy called me a couple weeks ago about a data insights company he met at a conference, just because it interested him. He’s one of the very few people who’s interested in building data, not just having the data but building tools from it, and that’s really unique.”
Though Carter, Oseary and Braun are cited by many in Silicon Valley as the three most active music executives in startup investments, they’ll have company before too long. “People realize how deeply these guys are thinking about and spending on technology, and that has a really deep impact on them,” Sherpa’s Pishevar says. “Music in today’s form is in fact made of digital bits, which is no different than software. Once you bring it down to the code level, down to the actual bits, then it changes. It’s how you share the experience socially that makes the difference. And that’s why the music guys figured it out first, because the music industry got disintermediated by technology for a while.”
In March, Oseary, Braun and Carter all descended upon Austin for SXSW, with Carter making a brief trip to speak on a panel for Fast Company titled “Generation Flux,” a new term given to the psychographic mind-set of millennials and post–millennials. During the discussion, Carter makes the case for why the music industry has been forced to embody the Generation Flux attitude after having “the luxury of getting our asses kicked for the last 10 years [by digital piracy]. The new generation of music executives and artists—they’re breaking down distribution models, they’re breaking down any sort of barriers or intermediaries when it comes to reaching audiences, and the companies that are sticking to their guns are the companies dying off now. With us, you evolve or die on your business. Nothing wakes you up like cold concrete,” he says.
Less than two hours later, Oseary and Braun gather two black SUVs full of business partners, colleagues and friends for a casual lunch at barbecue ranch the Salt Lick, located about 30 minutes outside of Austin in Driftwood, Texas. It’s Oseary and Braun’s first time at SXSW Interactive, and they’re joined at lunch by Kutcher, SB Projects’ Haugen, “Two and a Half Men” creator Chuck Lorre, actress Sophia Bush, Uber head of global operations Ryan Graves, BBH LA managing director Matt Ross and others. “We’re going to go see a bunch of stuff together today,” Braun says of Oseary, asking Haugen to pass the brisket basket. “There’s a couple companies we both want to see that we’ve been sharing each other. We’re more powerful together than apart.”
Oseary estimates it’s been about 20 years since his first trip to SXSW Music, though. “I’m not very reflective of where I was at a certain time,” he says. “I’ve always worked my ass off since I was 14. I was working at 17 already at [Warner Bros.] and didn’t really look back. And my goal has always been to be able to work with my friends, which is really great.”
Later that night, Oseary and Kutcher host A-Grade’s first SXSW party at the Austin W downtown, and the scene is—appropriately—straight out of Hollywood. Outside, dozens of young startup execs, agents and a few of A-Grade and Oseary’s own partners are frantically calling and texting anyone who can get them in, so limited is the guest list. Houston Rockets point guard Jeremy Lin even gets turned away at one point. But inside, a mix of A-list entrepreneurs (Mark Cuban, Gary Vaynerchuk), entertainment executives (Lorre, Maker Studios’ Courtney Holt) and big brands (Coca-Cola head of global sports and entertainment Emmanuel Seuge) mingle amid a noisy set from Jane’s Addiction and a bar line that requires a very dedicated 15-minute wait.
Though it’s Oseary and Kutcher’s party, Braun is there all night alongside his friend and frequent business partner. His enthusiasm is, as always, unflagging, and it’s clear he’s feeding off the energy of SXSW Interactive, which seemed unbridled and optimistic in a way the music portion of SXSW hasn’t for many years. “I’m here at Interactive because I primarily work in the world of music,” Braun said earlier in the day, “but I surround myself with people whose passion 24/7 is tech and I want to be around them. I want to learn from them. The biggest mistake is thinking you’re an expert because you have one thing you’re good at. I want to learn from everyone and surround myself with people that I love.”