Q+A with Claes Loberg, CEO of Australian music service Guvera

Australia-based online service Guvera (http://guvera.com) has been making waves among the music industry recently. It offers free high quality (256kbps) downloads to consumers, which are paid for by advertisers who can match particular artists to their brand’s ‘personality’. As you can see by the image to the right, Guvera is not particularly subtle when it comes to marketing.

Waycooljnr editor Andrew McMillen spoke with Guvera CEO Claes Loberg a few days ahead of its worldwide public launch on March 30, 2010.

Andrew: Hey Claes. Can you summarise what Guvera’s all about?

Claes: Here’s the gist of it: advertisers paying for downloads. There’s nothing new about the idea of advertisers actually paying for content. That’s how we’ve been receiving TV for free for all these years. What’s wrong with television at the moment, is that advertising is actually starting to lose value year, on year. People have got the power to click past it, sort of get around the advertising. That’s a reflection of all advertising across the board.

Now that the people are in control, Guvera’s business model is a reversal of the advertising process. Instead of advertisers being the annoying thing they used to be years ago, now they can be a channel that people will want to go to, to get content. It’s trying to change the value proposition away from ads-as-disruptors. It actually pays the artists for the content it’s created, and the people still get it for free.

Why should the average 21-year old digital music consumer give Guvera a chance?

Realistically, the person that we’re targeting is the person that’s currently getting it illegally. Guvera is not a streaming service, so we’re not one of the other different clients that exist that you can jump onto and create your own playlists, and listen to the music. Instead, we’re a client where you download music and stick it onto your iPod and then do your own playlist and do whatever you want with it.

Why we’re asking you to give Guvera a go is if you’re currently stealing the content from LimeWire, or BitTorrent, or any of the places that go to for peer-to-peer content: nobody is getting paid for that. Yes, you’re getting the content for free. Yes, it’s easy. But Guvera provides an opportunity to get it free, and the artist gets paid.

We get the argument all the time: “why wouldn’t people just continue using [services like Limewire and BitTorrent] because those services are so easy?”. The reality is that the people who want to use those services still can. What we’re trying to do is just implement something that creates an option for the music industry to try and monetise the free stuff that everybody’s already getting, by getting advertisers to pay for it.

How do the artists get paid?

We pay the labels for each download in exactly the same way as iTunes pays the labels for each download. It’s a pretty similar deal. It’s basically a transaction for the downloaded file, as if the file was purchased through one of those services. You just get the raw MP3 file that you can do whatever you want with. The transaction from the music label to us is exactly the same as if the end user actually bought it and somebody else paid the bill.

Which Australian labels are involved?

Of the global, major labels, we’ve got EMI and Universal, and IODA (Independent Online Distribution Alliance), a music group out of the U.S. Here in Australia specifically, we have Shock Records and a couple of smaller independent groups, but underneath your EMI, for example, you have Capital Records and Virgin Music and EMI represents about 15% of the music that exists. Universal represents about 35%+ of the music that exists.

Between just those two labels, that’s 50% of pop culture music. It’s not just your current pop. The content that we’ve got ingested into the system ranges from everything from the 1920’s up until now, so you’d be able to find a big chunk of what you’re looking for. But that in itself, the whole concept of Guvera when we launch, we know there are going to be issues with the system. We know that we have to create a balanced model: 1) We don’t have a 100% of all music. 2) If we don’t have enough advertising to support the number of users, that will limit the number of people that come in so we can guarantee the experience to as many people as possible.

Also, when you come onto Guvera, you may only be able to download 20 songs for free, and then maybe tomorrow you have to come back and download a couple more, and then maybe there is no brands the next day, and then maybe after that there is another 10 created. We see Guvera as sort of a stopping point; as we start growing and really becoming mainstream, and bigger, we have a vast array of advertising dollars to support unlimited downloads. We eventually see Guvera as a way for you to actually support the artists that you want to download their content from.

You just go check on Guvera. If it exists it’s in the catalog, and if it does, there’s a brand that pays for it and you get it for free. If it’s not, maybe you use the traditional method you would have used whether you go buy from iTunes or whatever it is you do to get the track. Think of it as a first stopping point.

I only say that because I recognise that when we launch, Guvera is not built around this idea of having 200 million people using it, and then figuring out how to generate revenue afterwards. Guvera is built on the idea that we only open the doors to as many people as we think we can give a good level of experience to. At the moment, we have 27,000 beta users, and that just keeps inching up each day as we just add more people into it, preparing for launch. We should have about 100,000 people in there at launch.

I’m interested to know how you pitch the service to advertisers. For example, what value does McDonalds gain from knowing that they have a lot of Lady GaGa fans?

At the moment, McDonalds runs an ad on television and it speaks to everybody that watches television. Or they run an ad in the newspaper or they run an ad wherever they do it and they present their message to everybody. Traditionally, you have 30 seconds to get somebody’s attention and to present your message to them by disrupting what they’re actually doing.

What we’ve presented to the advertiser is, first of all, because we know who our members are, you can say “I want to only pay for music to be downloaded by 25-30-year olds in Brisbane,” or whatever it is target that you want to promote to. So advertisers in Brisbane might pay for just that group, or regional advertisers in Melbourne could pay just for the downloads to those groups.

The secondary thing is that instead of disrupting the customer, you’re engaging them and you’re showing them the songs that fit with your brand personality. You get to say that, for example, Levis stands for a certain type of rock music. The advertisers themselves start to become this useful thing where it’s almost like a tag for a sub-genre or sub-classification of content. I know what rock music is, but do I know and understand all the different sub-genres? Whereas somebody could easily explain to me what “Jack Daniels country” meant, or what “Levis rock” meant, you know. These brands could actually present themselves as a grouping or personality subset.

The other thing is that your average person at the moment stays on each one of the channels for about 6-7 minutes. Instead of the advertiser having to try and get an ad in their face, stopping them from what they’re doing to watch an ad, they’re actually inside the brand’s world for 6-7 minutes, and they get a look at the brand’s personality. All they’re doing is they’re actually looking at a selection of music but by looking at that selection of music inside the world of that advertiser, it’s like looking at their personality.

The value proposition there for the advertiser is you’re actually allowing the customer to understand the sort of emotional or personality aspect of the brand, and then therefore look at the offers as you see fit, versus them trying to get it all rammed down your throat in 30 seconds.

On the flipside of that, can advertisers refuse to be associated with certain artists?

There are rules on three different aspects of the engine. Number one is the advertiser can say “I don’t want to be associated with any explicit content”, or “I don’t want to be associated with any rap content”, or country content, or whatever they feel sort of goes against their personality. They can also choose specific artists if they don’t ever want to distribute that artist’s track.

At the same time, we’ve got the same rules set up on the reverse side, where the actual label for the publishers or the artists can work either a track, publisher, artist or album level, and they can apply rules to say “Coca-Cola is never allowed to distribute this song” because they may have a deal with Pepsi, for example; or “no alcohol brands are ever allowed to distribute my music”, or no “brand X”, which you may think is doing something wrong in the world. Artists and labels can actually have that moral judgment. The artist can choose and apply rules, and the advertiser can choose and apply a similar set of rules.

At this stage, you’ll only be dealing with artists who are signed to labels?

Yes, that’s what we start with. All the artists that we have, and our whole catalog is obviously as big and wide as possible to try and handle everybody in there. We’re working with all the major labels and independent groups. The ultimate picture is a new unknown artist could sign up to Guvera themselves and upload their music. If their music starts becoming shared and appears on channels, then they receive a check for their music.

It creates this opportunity for unknown, unsigned artists to actually generate sales. We had a pre-event launch party in New York a few weeks ago. At the party, we had Alice Cooper standing there talking about how when he sold a few million records, his whole life changed as he became a platinum [seller], and everything about his lifestyle just branched up as a result of the sales.

Then on the flipside of that we had a girl called Marié Digby [pictured left] who had something like 80 million views on her  YouTube channel. On all accounts she would have been a platinum artist and should have been this hugely recognised, known, and her whole world should have changed as a result. But she never generated any revenue from that.

You’ve got this sort of world that even if you’re a struggling musician now and you think one day you’ll become a huge-selling musician that everybody is interested in. Chances are, you’re not going to generate any revenue any kind of physical sales. The only way you can make money is if you’re actually doing 3 shows a day, 365 days a year. Guvera represents, in that aspect, the ability for a new artist to actually start generating sales, by generating revenue for music.

I see. That sounds, cool Claes.

We’re hoping so. At the end of the day, every new business, regardless of how much we believe it’s going to work and what we know it can do, and where we see the actual issues, it’s in the hands of the customers whether this is a success and whether advertisers will support it enough to give us the dollars to promote the thing. But we feel like we’ve got everything sort of answered.

Good luck with it, and thanks for your time. I look forward to seeing how it goes for you.

Cool, thanks very much Andrew.

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Guvera’s worldwide launch is Tuesday, March 30 2010. Try it for yourself at Guvera.com.

Tagged as: alice-cooper, claes-loberg, download, guvera, interview, marie-digby, marketing, music, piracy