Interview w/ Todd Williamson, CEO of MusicSteps

It is my pleasure.

(I mentioned to Todd that I had recently moved to Austin from Seattle 6 months prior, it is interesting how the business climates in the two cities has changed so drastically in the last 6 to 9 months due to the market downturn)

Thinking of Austin, when I was first moved to Seattle six years ago I was choosing between Austin and Seattle. And at the flip of a coin I chose Seattle, I really didn’t have a reason except that there are mountains here, and I like to ski.

Well, I moved from San Deigo and I was looking for a place that had a great music scene. I am a Jazz guitar musician, and moved up here to play music.

I did have a band, without a contract, and it was actually half a band. We did have a singer and a bass player though. We came up here to write songs and put a band together. Which we did, and really that is why Austin was such a close second choice.

Oh no. From what I remember, the music is quite diverse and very, very good.

Not any longer. We played a lot of shows, and really ended up focusing on Jazz because that is where we were making the most money. We were doing some shows over in Kirkland where we were making some money, so of course we began focusing on that area. That was my evening job, so to speak. My day job, was working for AEI Music as a Sales Representative for 4 or 5 years.

AEI does the music for Tully’s, Starbucks, The Gap, Banana Republic, and other retail chains.

Exactly. I was a sales rep for them. I did Regional and Major Account sales for them. I really wanted to start my own business and still be involved in music and the music industry at some level. I began research to launch a Jazz music web site, and at the time 3 years ago I didn’t see anything on the web that I thought was comprehensive enough. There certainly wasn’t anyone selling Jazz online, besides the Amazons, the CDNows. I believed that there was an opportunity for a niche site that specialized in Jazz music, because the Jazz consumer is very loyal and enthusiastic. They are diehard music fans.

We are trying to be everything to the Jazz consumer. We are creating THE destination for the Jazz consumer. We do not want to become a Jazz portal, but an end point for their Jazz needs. We are planning to have everything from content, product, information, streaming radio and more. The model has evolved over the last 3 years as we have tried to diversify into as many revenue streams as possible targeting this specific consumer.

Well, unlike the Amazons and CDNows which sell mainstream titles, we have gone out and focused on the Independent Labels, the import labels, the more difficult to find titles that people can’t get at Amazon and CDNow.

Absolutely, in order to do that I am working with over 400 Jazz labels in the world. I am acting as strategic partner to them.

Yes, very much so. But we have been fortunate enough to partner with All Music Guide. AMG provides a lot of entertainment and content for a lot of other music sites as well. What they have done for us, is that we now have a biography of any Jazz musician who has recorded a major album, included in that is critic reviews of over 20,000 Jazz recordings. From the start, with partnering with AMG, we have been able to compile this huge database of information. Of course, what we realized is that we not only got Jazz information but inclusive in our deal was that we got everything. We sell the Classical, ACDC, Brittany Spears along with Jazz. That is when we decided to expand our business model into other niche market opportunities.

One step at a time. We have decided our next focus will be on Classical Music. It is actually the largest online music genre. It is above Rock, which is number two. Jazz is actually number 3. If you look at the demographics of people online it makes a lot of sense; use of a credit card, laptop or desktop with a reliable connection, etc. What you find is that people buying Pop Rock and Rap are going to the mall, Kmart, etc. That is why Classical and Jazz are so popular online. Again, the Classical enthusiast is also very loyal, they are diehard when it comes to their music, similar to the Jazz enthusiast. Starting with Classical, we will move into Blues, and then Country. Each lifestyle based music community has a very loyal following, and that is where our greatest opportunity is. We have had a lot of success with our Jazz model, and just need to replicate that to these other genres.

The most obvious is CDs, vinyl and cassettes. We specialize in selling Jazz music. As the Internet continues to evolve, this will become some type a digital distribution model. Whether this is fee per download model, or a subscriber base at this time we do not know.

I think a lot of people know, but it is going to take time. We have never planned to spend a lot on new technology, infrastructure, we have always planned to let someone else do that. We have had a “wait, and lets see” attitude. Let see what everyone else is doing, let see how the industry progresses. We have recently decided to jump in, and are now talking with a number of companies, deciding how we are going to tap into this market.

Actually, OnAir is apparently no longer in business, as of about one month ago. They shut off our broadcasting a month ago without any warning, and I still have not heard from them. Their technology was then bought by LoudEye Technologies, which yesterday laid off about half of their work force.

Exactly, we had 35 channels of streaming Jazz and Blues music, and are now evaluating whether we want to do this in-house or to find another partner such as OnAir. We are evaluating a number of potential opportunities, but it is something that we will bring back to the site here in the near future.

OnAir was supposed to be supplying those statistics, but they never did. Consequently, I can’t answer that question. I can tell you though how much traffic JazzSteps gets, we get about 300,000 unique visitors a month. Which equates to about 2,000,000 pages views per month, for a Jazz niche site, I feel that we are doing extremely well.

A lot of our traffic comes from our partnership programs, which we have put in place. WindowsMedia.com, is one of our strategic partners, and it is currently one of the largest media sites on the web. We are able to get banner ad placements as a recommended retailer, and for a while, because we were using Window Media technology, they also had us listed as a Radio Station supplier.

Well not this year, or any year. That is actually the beauty of a niche market. You don’t have to spend Millions on marketing to reach your target consumer.

Our Marketing strategy is evolving, and unfortunately we don’t have a large Marketing budget, and I have just hired an individual to handle a new Marketing initiative. I must be the only dot.com in town doing any hiring. At this time, we are really trying to drive people to our site, without spending a lot of money.

With a niche market like Jazz, Classical and Blues, there are a lot of creative ways in which to do that. One thing we are doing is creating a print publication called JazzSteps Magazine. Our first issue comes out May 1st.

We are doing a test run in the Seattle market, after that we are rolling it out to San Francisco and New York in the next few months. And unlike the national Jazz rags, JazzSteps Magazine will focus on what is happening in your local market; who is playing, where are the playing, etc. By selling advertising within the magazine itself, we are able to cover our manufacturing and distribution costs.

Actually we will be giving it away for free, and the person that I mentioned earlier that we just hired, will be our Senior Editor. This person will be in charge of selling advertising, putting together the publication, and distributing it himself. He has taken that ball and is running with it. We will be mailing the magazine to all of our Washington customers, anyone who has bought something through our web site, or registered online as well. It will also be available for free at local Jazz Clubs, Coffee Shops, etc. Anyplace where a typical Jazz consumer might be found.

We are going to do that creatively, opportunities where we can most effectively spend our money. We are certainly not going to spend money on a SuperBowl ad; a sponsorship of a small local event would be great.

Well the Market place has made it very difficult to grow, as it has for most dot.coms. When this first hit one year ago, I recognized that things were going to become very difficult right away; as a result we have been running mean and lean for over a year! We have not only managed to stay in business, but to grow, albeit slowly. It is actually a blessing in disguise that we never raised the $5-10 Million like we tried to. Because, like all the other dot.coms we would have spent it, and our burn rate would have been so high that we couldn’t weather this market downturn. We have only grown as fast as we could afford to grow, and because of that, we are projecting reaching profitability in August.

Call me in September. Essentially, we feel very confidant that we can replicate this model to other music genres. We already have the partnerships, the infrastructure, the scalability, and the technology to roll out the additional sites. It comes down to having the funding to do so!

That is correct, the company is MusicSteps, and JazzSteps is owned by it.

I was a double major in college, majoring in both Marketing and Music. But as it turns out I ended up getting a BA in Marketing and a Minor in Music. I believe that this has given me a foundation for where I am now.

I actually outsource most of my work to keep costs down. I outsource Sales, Marketing, and Development. There are currently only three people who actually work for MusicSteps, not including our Board of Directors.

Well, lets start with Development. The salary of a good programmer, especially in Seattle is outrageous. I have been able to find very high quality developers at a very reasonable price, so it is making a lot of sense right now. Also, I don’t have the added complications of HR, and support for those people.

I am in the process with partnering with a company called AllAboutJazz.com. Michael Ricci, the founder started it in 1995, and has put together a great content site. He has a number of people who contribute articles, show reviews, music reviews for free. Like I said the Jazz enthusiast really enjoys sharing Jazz with everyone. At this time, I believe that he has about 150 contributors to AllAboutJazz.com. He has put together an incredible resource and database of current and archived information.

Actually, he has a day job. But this is why we make such great partners, he has the content side, and I bring the ecommerce/revenue model to the table.

Cash is King! Our goal is to capture the online Jazz market. Jazz makes up 3% of all music sales.

Anyone looking to enter this market at this time is going to need tons of cash. And to be honest, Amazon has done a fantastic job within their Jazz section. They have done very well, which is obviously one of our main competitors.

That is where we need to diversify and differentiate. We carry the same titles, and we use the same distributor. What we do, is that we provide the content that they are not able to. After all, they are also focused on selling Lawn Furniture and Power Tools.

Another way to differentiate is by working with these other 400 Jazz labels from around the world to provide the whole spectrum of what Jazz has to offer.

Correct. Amazon is so large, that I do not believe they have the want or the time to work with the small labels.

They need to show revenue.

Having the cash I need. Right now, I am taking customers from CDNow and Amazon, and I need the cash to be able to do this correctly!

I would love to hire some more people so that I could be back out there, but I am just too busy right now!