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"We need to get more excitement. We need to find more credible bands that, ideally, will be around in 10 years time—that’s the challenge. Of course, a lot of record companies are not really signing new bands. And a lot of radio stations are not playing new bands. So there’s this sort of vicious circle, with labels living off of their back catalog."
——Richard Branson

BRANSON TALKS, WE LISTEN

Virgin Founder Discusses the State of the Music Business, Retail and the Future of Both

When Richard Branson turned his student magazine into a mail order business back in the ‘70s, few could have imagined the global empire that was in the making. Almost 30 years later, Branson heads an impressive array of corporations with retail, label and airline entities all vying for his attention. V2 Records boasts Moby and White Stripes, the latter one of the hottest buzz bands in the world. Virgin Atlantic Airlines continues its successful run even in the wake of 9/11. And Virgin Entertainment Group is just about to open its 23rd location in the United States. Branson was in town to celebrate the 10th anniversary of Hollywood’s Virgin Megastore, his first stateside retail storefront, and stopped long enough to talk to the press, which HITS’ own retail maven Mark "Once Shook Willie Mays’ Hand" Pearson was mistakenly thought to be a member of.

Congratulations on Virgin Megastore’s 10th anniversary
Thank you very much. At a time when the record industry is in such turmoil, especially in record retailing, I think it’s pleasing that the team at Virgin has been able to stand out from the crowd, do such a fine job and actually have a music retailing chain in the world that’s profitable. Which is unusual at the moment. And it’s nice to be here to celebrate it.

How is Virgin expanding when everyone else in music specialty retailing is contracting?
People seem to like the quality of the stores. The brand itself is well-respected. Our roots are in the record label. Some of our bigger rivals have become a bit tired in their approach and they’ve perhaps over-stretched. Tower was very innovative back in the ‘60s and I think in some ways we were fortunate to only set up 10 years ago, so we could come in with fresh, new ideas. Time moves on and the less you actually change, or adapt, you die.

Are you still bullish on the music business?
Well we’re investing in it quite heavily and I do think it’s a good investment. It helps not just to be reliant on the music industry. We’ve launched mobile phones here two-three months ago and we’re selling about 1,000 mobile phones a day. We’re using our Virgin Megastores to help break into the cellular phone market and develop a youth mobile phone. And now we’ve also bought the rights to the MTV brand and are working with them on that as well. If we can break [mobile phones] as big as we think we can, it would be like breaking 100 hit recording artists.

Ten years from now, will Virgin still have music as its core business?
It’s impossible to predict where the industry will be 10 years from now. All I know is that Virgin is ready and willing to dance. Depending on how the public adapts. We’ve realized the average person who buys music is getting older. I think 29 is the average age of a music buyer. We have to aim at the generation that actually buys music. Ten years from now, people will still be buying music. If you have a bit of money, the trouble of having to copy music is the same as when cassettes originally came out. It’s a chore. Most people would much rather come into a music shop and buy records. But music may not be where our main profits come from, which is why we’re diversifying the brand into other areas.

Give us some examples.
We have a small team looking at what Sony has done with electronic goods and trying to decide whether we can move into that area. But we’d only want to do that if we can come out with quality products that enhance the brand.

Do you see a cure for the current downturn in the music business?
We need to get more excitement. We need to find more credible bands that, ideally, will be around in 10 years time—that’s the challenge. Of course, a lot of record companies are not really signing new bands. And a lot of radio stations are not playing new bands. So there’s this sort of vicious circle, with labels living off of their back catalog. At V2, the White Stripes are doing great. We just signed a band called the Datsuns who we expect to do as well as the White Stripes. The Moby album hasn’t done quite as well as we hoped. Surely the next album will do better. Stereophonics have a good chance. V2 is a very good, credible record company. There aren’t many good independent record companies like it left.

Is there a chance that Virgin Megastores will look at expansion through acquisition?
Generally, our philosophy’s against that. Having said that, there are retailers in trouble and if we can think of a way to enable them to stay open, it’s certainly something we’d look at. But the best approach generally is building from scratch.

How do you feel about selling downloads?
If there’s legitimate technology that can be sold, we ought to be selling it. Even if it damages another part of our business. Obviously, if it’s illegal, we wouldn’t sell it. But you really can’t hold back a different way of doing things.

Do you feel like you have the same passion for the music business?
I love challenging myself; I love challenging the people around me. I love the idea of seeing whether we can recreate Virgin through V2, especially in this awful marketplace. I still get enormously excited when we sign a new band like the Stereophonics—seeing whether we can actually educate people in America what a great band they’re missing. I’m not, sadly, as involved as I used to be. Going out clubbing every night with our bands is something that I don’t do as much as I used to do. Having said that, two nights ago, I was out with Tom Jones until three or four in the morning.

How long will you continue in this role with your companies?
As long as I’m enjoying it. If Ahmet Ertegun can still go out there and party at his age, I would hope to be able to do the same.

What will the record label of the future look like?
The only reason that the record industry is not doing as well as say, book publishing companies, is that people get paid the most incredible sums of money. The realism has to come into the industry in terms of salaries and the amount of money spent on promotions, in advances, etc. The industry has to start to reflect those new realities. There’s still good money to be made if you act accordingly.

Does the relationship between the artist and the label have to change, like the Robbie Williams deal that was just signed with EMI?
It’s a good idea that record companies are involved in all of that—touring monies, publishing, recording, merchandising. The work the record company does is effectively benefiting the touring money and vice versa. We bid for Robbie Williams and our original offer was very much along the lines of what the deal was at the end. Although EMI coughed up a bit more money.

What’s your reaction to Steve Fossett making it around the world in a hot-air balloon?
We tried an awful lot of times. Before Fossett did it, I had this wonderful flight with him where we went nearly around the world and became superb friends. He’s capable of doing things that I could never do. He is somebody that very much deserved it. The only sad thing is that he’s taken that challenge away from me.

What is your next adventure?
Space would be something that I’d love to do one day. We’re working a little bit with some of these people who try to get the reusable rockets going so we can take up passengers into space one day, build a Virgin hotel up there. I hope, in my lifetime, to be on one of the first flights up there.

What has Virgin Atlantic Airlines’ business been like post-9/11?
Virgin Atlantic has bounced back much more quickly than the other airlines. Whether that’s because people feel more comfortable flying on an independent airline than maybe they do on many of the big American carriers, I don’t know. We like to think people prefer Virgin Atlantic to the big American carriers based on policy. But we’re back and profitable quite quickly and expanding again, putting on new routes, buying new planes. We just bought the longest plane in the world, the A3-4600. We had fun turning up at an air show and parking it next to a British Airways plane with a big slogan along the side, ‘Mine’s bigger than yours.’ Interestingly, the airlines that are doing well in America are the low-cost carriers like Southwest and Jet Blue. The airlines that could easily disappear are United and American, and I think it would be good for the industry if one of them did go bust. Because they’ve got enormous overheads with very high air fares and the slots would be freed up for Jet Blue, Southwest and Virgin Atlantic to offer better quality and better value.

Do you ever regret selling Virgin Records?
I certainly did at the time. I didn’t want to. But if I hadn’t sold it, Virgin Atlantic wouldn’t exist today and we were under attack by British Airways during the Gulf War. We needed the funds to keep it going. So it was the right decision, and, for awhile, Virgin Records went from strength to strength. And I’m delighted to hear that Phil Q., whom I had dinner with last night, has come back to work there. He’s a fantastic, fantastic guy. But when we did sell it, we kept the right to go back into the music industry three years later. To actually build a company from scratch like V2 is often more fun than running an established one.

No truth to any of the rumors you want to re-acquire the label?
First of all, I don’t think it’s for sale. Also, it’s likely our skills are better at building companies then acquiring them. I can trust the Virgin brand will be well-protected by Phil. He’s got great taste and was very, very sad that when we sold Virgin he left and went to Warner, so it’s great that Virgin and EMI got him back.

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