There is no other place I want to be
Right here, right now
Watching the world wake up from history

The old President is going to jail. Which means he can’t run for President again. Serendipity delivered me to Rio on the biggest day of the year, the Supreme Court was deciding the future of the country. The nation had descended into lawlessness, the statutes on the books were useless, and not only did that leave havoc unchecked in the favelas, the rich were profiting and never going to jail for their corruption, they just appealed until…well, basically forever.

So, last night the scheduler of the second stage for Rock In Rio was streaming the hearing to his iPhone. The organizer of the conference was giving us a lesson in history, in politics, how we got here. You see there was 80% inflation PER MONTH! If you were rich and had investments, you were cool. But if you lived on your paycheck, it was insanity. But a new President came in and stabilized the country. And when he termed out a new guy replaced him saying he was for the poor while stripping the cupboards bare. That’s the guy caught up in operation Car Wash, the one they nailed after midnight last night. He coasted on the coattails of his predecessor and got rich in the process, kinda like Trump and his cronies, did you read about David Pecker?

Then again, maybe you don’t believe it, just like some people, the poor people, still believe in the Brazilian ex-President.

But now there’s a path forward. Although the U.S. papers say the country could end up with a military dictatorship, people want order, people might want a strongman.

Which is what we’ve got in the U.S.

Before lunch I met the U.S. consul, Tommy, from South Carolina, kinda aw shucks, very nice, I realized I could never be a diplomat, I can’t sling that much b.s. But I enjoyed Tommy, he was likable, he lived through Afghanistan, in July he’s going to VENEZUELA! Living in the city we focus on money, but there are other routes to fulfillment.

And then I went to the Museum of Tomorrow, with its exquisite structure exceeding its exhibits, but there was one about population and the challenges coming and it made me feel good I wasn’t gonna live that long, then again, most of you are, it’s time to deal with what we’re doing to the planet, actions have consequences, plan today for tomorrow or you’re gonna be obsolete.

Like my driver, he’s never seen a Tesla, he was fascinated by my stories, but he’s smart enough to get out of the game before driverless cars put him out of business. And he’s asking my advice, about pursuing your dream, going back to college, even at age thirty. I told him to. You want every advantage you can get.

And then on to the historical museum to get the Brazilian history we never learned in school. They had a huge slavery problem. Coffee is a staple of the economy, as are minerals. As for destruction of the rain forest…

I was told last night that Roberto Medina of Rock In Rio planted a zillion trees, that the problem is passe.

Then again, people have to live, people have to eat.

So it’s off to dinner with Ed Cherney and Geoff Emerick and crew and…

Right now, there’s no place I’d rather be, as I hear about the making of Bonnie Raitt and Bob Dylan records, as I hear about working with Paul McCartney. The lessons are so insightful. Dylan told Cherney to make it dirtier, he could hear every instrument in the mix and didn’t want to!

And that’s all history, but you’ve got to study it so you don’t repeat it.

There’s your sign of the times.

“Lula, Brazil’s Ex-President, Can Be Jailed, Court Rules”

Right Here, Right Now – Spotify

Right Here, Right Now – YouTube

Distribution is king, never forget it.

All those cable channels disrupted by Netflix and the internet? The systems distributing them are doing just fine, better to own the pipe than that which flows through it. As for Netflix…

It owns both content and distribution.

Which is why Disney is trying to imitate it.

As for HBO, it’s caught in the “Innovator’s Dilemma,” so busy trying to protect its old model that it can’t jump into the new. As you will remember, Clayton Christensen said to build your competitor across the street, and when the time is right, you JUMP! NOW IS THE TIME!

And now Spotify is worth more than all three major labels COMBINED!

Think about that, Spotify is worth more than Sony, Universal and Warner put together. Talk about leverage! And that’s what Spotify plans to employ, it’s right there in its investment materials, they want to drop the cost of wares.

Will the labels say no?

Well, when Spotify owns the marketplace, it gains power. Never forget that, in internet world one entity controls 60+% of the vertical. Can you say Google in search, Amazon in retail, Facebook in social networking? All the competitors are also-rans. The music business thought it was building a competitive distribution marketplace, but with all outlets just a click away, people gravitate to the one with the best user interface where their friends are, as long as you continue to innovate, you win, until someone comes along and completely disrupts you. Could that disruption be voice control? Interesting. But right now, we are in the heyday of on demand streaming.

Which the music business infrastructure fought for eons, some of the musicians are still fighting it, even though streaming has caused recorded music revenues to spike by double digits, because they just can’t understand it, and refuse to accept that music is now akin to the rest of the world, the rich get richer and the poor…stay that way. Although with Spotify data you can build a cottage industry, you just won’t get rich on recordings, but you can tour and sell merch but you won’t be ubiquitous.

The labels screwed up. Primarily because they are public companies without vision, everybody’s on the short term payroll. Did you see that Sony dropped a ton of Spotify stock yesterday? Maybe they were acting as a market mover, but that’s a contracted exec for you… Cash out on my watch, so I can get my bonus! All those label incubators, they’ve delivered bupkes. As for 360 deals, now you can build yourself online and negotiate them away, and the labels never added any value, it was all a land grab, while the labels were protecting their margins, like the newspapers, they faded the same way.

So…

Can Spotify eradicate the majors, or at least their power?

That’s what the company so publicly states, that it wants to cut out the middleman, i.e. the major label, to increase its margins.

Well, Spotify will never become a label, never buy a label, you don’t compete with your suppliers, especially when legacy assets are worth so much. Amazon tried to do this by starting a publishing house, they were frozen out. Furthermore, it’s bad business. Without said catalogs the labels would be in the toilet, catalog, already paid for with low royalty rates, props up the majors.

But beginners are pissed at said loyalty rates. When they can make a direct deal and earn a multiple.

BUT HOW DO YOU GET STARTED??

Spotify went public to return value to investors. Can you make it without investors?

Some can, most can’t.

You don’t need a label, just someone with deep pockets. But odds of success are so low, deep pockets are hard to interest. And, deep pockets want a ton of upside, that’s right, Daniel Ek may control Spotify with Martin Lorentzon, but they don’t own the majority share, that’s the way business works.

So majors give cash for low royalty rates because they can survive on catalog and hits, and so far no one’s come up with a better business model. Most managers refuse to spend and…until someone does, we’re stuck with the same damn system.

Marc Geiger said WME was gonna lend to artists, but we haven’t heard him talk about that in eons.

And in today’s cacophonous world, if you don’t have the investment to raise your profile, forget it.

But Chance succeeded on his lonesome. Buoyed by the hip-hop culture online. That’s right, cultural capital can be as valuable as cash.

So, Spotify has a cost issue, it prevents scale, they say they’re going to attack this via leverage with the major labels and going direct with the indies, they’ve delineated their strategy, disregard it at your peril.

But there will be some movement along the way..

And sure, Spotify stock could crash, like ArtistDirect, but Spotify’s an ongoing concern with income, unlike ArtistDirect, it won’t go to zero.

So, we’re in a new era, the shine is off the major labels. Hell, if you want cash, you’re better off going to a concert promoter, who’s got it, will spend it and will take very little in return.

Proving, once again, the lack of importance of recordings in the ecosystem. Hell, if you’re a great performer you don’t even need a ton of streams. But if you’ve got them, you’ve got people who want to see you in a world based on experiences, i.e. live.

So Spotify now has more power than the people it licenses from. They did this by building a better mousetrap and being respectful, taking the fox into the henhouse.

They’re gonna start eating the chicks soon, just you wait.

It’s all about income inequality.

So I’m talking to Shep Gordon and he tells me not to leave the hotel without security. My sister says to bring no watch, to be wary of cellphone theft. And then the “New York Times” writes about yellow fever. WHAT’S GOING ON HERE?

I’m not the paranoid type, but if you plant a kernel in my brain…

I went for a typhoid shot, because of my pemphigus I could not be immunized against yellow fever, I’m traveling with Cipro…but none of them are a match for a gun.

Which are illegal to own in Brazil.

But that does not keep the criminals from holding you up, shooting you if you protest.

But the cops won’t go up into the favelas to pursue the offenders. They’re not paid enough. And are they paid by the criminals? And the convicted don’t get euthanized, there’s no death penalty. And because they’re so impoverished, the government lets them out early, there’s no life in prison so…

At least that’s what my driver told me.

Brazilians are like Canadians, they’ve got the gift of gab. Put a dime in the jukebox and you’ll hear amazing stories. From the left and the right. There’s agreement on the problems, but not on the solutions.

But underneath this all is corruption.

So we’re driving up to the concrete Christ and I see a billboard for “The Mechanism.” Has the driver seen it?

OF COURSE!

And it’s on Netflix to boot. All these companies have international penetration, except for Apple Music, which required credit cards and American money in a country where most people don’t have them. So Spotify took off. Deezer is #2. We’re so U.S. focused, but it’s a great big world out there.

Where most people don’t speak English.

Back in the seventies, you traveled internationally and there was a language barrier. But go to France now and you have no need to speak French. And many people love the U.K. because we share the same language. But I like places a little more exotic, and despite so many speaking English, most in Rio don’t. And it gets very basic, it’s not so easy to buy a hamburger, it’s hard to order at all. And sure, one can get by, but it’s humbling, I wish more could experience it, it gives you perspective.

So there’s a brouhaha about “The Mechanism.” It’s fiction, but thinly-veiled, and if you’re on the wrong side of it you’re complaining, but everyone agrees there’s corruption.

But despite being aware of Trump, they don’t know that we’re freaking out now too. Sure, we can walk after dark in so many neighborhoods in the U.S., but if you don’t have a college degree, you can’t even get a job as a receptionist. There’s no upward mobility for the underclass, and that results in…

Tension.

America is sliding into third world territory.

So we drove up the mountain into the park, where the vegetation was so thick if there wasn’t a road, you’d have no way to get out. And as we’re jetting around the corners in the Corolla I’m getting nervous. One false move and we’ll fall thousands of feet, it’s just that steep. Meanwhile, my driver is turning to talk to me, checking WAZE…should I just shut up?

That’s another thing, they’ve got 4G, all the tech comforts we do. We’re not that far ahead.

And then I took the train up to the concrete Christ. Had to scale a series of steps to get there, but when I was up….

You don’t want to have agoraphobia. It’s amazing what a steep drop it is. And you can see so much. And nobody is speaking English.

After that we went to the BBQ restaurant, Fogo de Chao. Where I stuffed myself. When they slice the meat off the skewer, it’s juicy, it’s succulent, you cannot stop.

And the traffic back to Baja…

It’s kind of like L.A. There are so many famous places. Like Copacabana. And Ipanema. WHERE’S THE GIRL? Records come alive.

And it’s getting dark and I wonder if they have daylight savings time.

OF COURSE! IT ENDED IN FEBRUARY!

That’s right, we’re upside down!

And then it started to pour…

You try to get ahead. My driver dropped out of college and then was a musician and then bought a car, which he immediately switched to natural gas, to save money. His father lost his job at the bank, bought a taxi license and within two years, Uber was everywhere. My driver said his dad “had a hard life.”

And his girlfriend, who he met on Tinder, after spending two years kissing twenty-odd frogs, is studying psychology but lives next to a favela.

Hmm…

Meanwhile, the big sound here is country music. Not ours, but from the Brazilian hills.

Like I said, it’s the same, but different. I’m doing my presentation today and some of my laugh lines are not registering, because audience members are listening to simultaneous translation, into Portuguese. Really twists your head.

And everybody’s young and excited. They’re optimistic.

With a base layer of pessimism.

You want to climb above, you want to work. And the dream?

My driver wants to go to America. But he’s got no angle.

Most people want to stay. After all, Brazil is a huge market, about the size of the continental United States, with hundreds of millions of people here. High rises, beaches, EVERYTHING!

They don’t need us to survive.

Then again, the conference organizer told me he was a Trojan, and one of his gigs was in business development for Live Nation in Brazil.

You see globalization already happened, that ship already sailed. And those who own it are going to prosper in the future.

As for Brazil, Marcelo told me it comes and goes in waves. Everything was looking up, especially before the Olympics, but there were government lies and lack of execution on social initiatives and then things got bad.

But he’s convinced they’ll get good again.

But according to the Petrobras guy I spoke with, “PetroBrasil” in “The Mechanism,” it’s only best if you’re privileged. He got his job via a government test. 90% of the public couldn’t take it, they were uneducated, but maybe smart.

And there you’ve got America, where the educated class perpetuates, marries each other and uses its connections to get ahead. Eddie Lampert didn’t come from money, he went to Yale and his roommate’s dad got him a gig at Goldman Sachs. Did you have these opportunities?

Probably not.

Which might be why you voted for Trump. While the privileged classes, both Democratic and Republican, don’t want to sacrifice, don’t want to lose anything they have, they want to keep the door shut.

It’s all anybody wants to talk about, it doesn’t take long for conversation here to stumble on to politics, corruption, government.

Just like the U.S.

So when you say you’re sick of talking Trump, of D.C., the joke is on you. Our future is at risk.

And you could influence it, just like Jose Padilha did with “The Mechanism.”

That’s the potential of art, it can change the discussion.

Don’t relinquish your truth in pursuit of faux dollars.

Happiness comes from pushing the envelope.

And so does power.

I’m so full of steak, I may turn into a cow…or a chicken or pig, I ate them all at this BBQ restaurant by the water. They do it differently here, it’s more well-done, not medium-rare, but the items are so tasty you cannot stop, especially since I hadn’t eaten anything all day. And now I’ve got to run to the opening ceremonies for Rio2C so…

This week’s podcast features John Dick, who you don’t know but you should. Mr. Dick runs a polling company out of Pittsburgh called Civic Science. They gain their data via online quizzes, since no one picks up the phone anymore, and his insights are truly fascinating. I met him on these AXS TV Grammy prediction telecasts, Mark Cuban is on the company’s advisory board. Furthermore, almost all the tech companies you know buy data/insight from Civic Science. AND, John puts out a weekly newsletter of insights, only one, he doesn’t overload you like me, it’s on Saturday and if you want to receive it e-mail him at: jd@civicscience.com

Go to it.

I’ve got to jump in the shower!

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