Ghostly International: The Q&A

I’ve been wanting to do a Q&A with an entrepreneurial type in the wild and woolly underground music business, and I think we have a good one here: Mr. Sam Valenti IV, of the independent avant-pop/electronic record label Ghostly International (Matthew Dear, Tadd Mullinix (aka James T. Cotton, Dabrye), Mobius Band, etc.). My Q’s and his A’s follow on subjects such as: founding a label “on the fault line of mass culture” while still in his teens, why branding matters for a music company, how a record label is like an art museum, what it takes for a new artist’s first CD to break even, and dreaming up new projects and new revenue streams like the USB-as-CD-alternative Ghostly created for the famous design store Moss. Here goes.

Q: So let’s see if I have this right. Ghostly started in 1998/1999, when you would’ve been around 18 years old, basically because you heard and really liked Matthew Dear, and decided to record and distribute “Hands Up For Detroit.” 500 copies, on vinyl I think. How did you go about executing the basics on this, like locating some entity to press the records, and another to distribute them? And wasn’t Napster-mania pretty much full blown by then? Did that have any kind of impact on your thinking about what Ghostly should be, and/or might become?

A: Matthew and I met at a house party. I was a lonely wayward freshman and had been DJing house parties, and he was making music for fun, but we both wanted to make records. After a year of making tracks together, I took a DAT of songs that he did, along with some from our mentor, Disco D, to London, where I found a place that would cut and press your record in one shot. I guess it was wish-fulfillment in a way, that’s how I view my college years, as very fortunate, in that meeting a group of people allowed something to happen.

The idea of Ghostly was there, but Matthew was the inspiration to take up arms and create it. When we started, I felt that we missed our chance twice, in both the beginning with the P2P revolution and then a few years later with 9/11 and the death of the “good times.” I had envisioned a luxury electronic “brand,” but the idea of both pushing high-end goods and running a profitable record label seemed far-fetched after that.

I think Ghostly was founded on the fault-line of mass culture. We use the term “Avant-Pop” to refer to some of our output, in that what we make is popular music that has been subverted by our personal beliefs and preferences, which aren’t in line with what the word “pop” means. This attitude applies across all of our output, this sense of art/entertainment that is not pre-prescribed or “destinational”. There’s a great freedom in not being treated like a demographic or a Consumer, and that’s what Ghostly is about. It’s the only way I could see being able to achieve the kind of projects that we wanted to make and consume.

I think I read that your dad is a venture capitalist, and you were able to convince him to put up the initial investment to get Ghostly off the ground. Was he skeptical about the wisdom of getting into the music business at that particular cultural moment? Did you have to put together an actual business plan?

The investment came after we released the first record, I was fortunate in that my father recognized the value. We received a little seed money after there was a sense that this could be a real business, which was enough to get us going.

There was a great deal of impatience early on. I’ve always been a jump-in-head-first sort of person, so you make mistakes but at some point you have to get the ball rolling and learn. I’ve learned some important lessons, most importantly, how to deal and interact with the people that mean the most, our artists and our team. The business started as an art project and my repressed creativity really exploded when I was able to work with the right artists. I just worked hard and kept trying to establish a reputation of quality and good taste. We wanted it to look like a big company, but with a backbone of underground art.

My friend Cousin Lymon is the sort of music buyer who is very aware of labels. I’m not. There have been times when I’ve noticed after the fact, but I’ve never paid attention to labels as brands, per se. Is that just a consumer divide — some people think this way, some don’t — or is there something you as a label can do about it, to try to get people like me to pay attention to something simply because it has the Ghostly imprimatur? And is that changing, as in: Is the consumer segment that pays attention to labels growing or shrinking?

I think the importance of good record labels, while the industry is notoriously shrinking, will continue to grow. With the information glut, we need consistent voices to show us the way, even if we are more empowered as listeners and seekers.

I’m aware most people don’t think about record labels, but it’s a road map for the people who do, and is important for those who want to dig deeper. Maybe I like Spoon because I saw them on MTV, and now I want to dig deeper and try other things on Merge Records, so there’s this whole pathway to great music that you can find just by going to their site.

Labels and independent record stores have always been the underground railroad for music, providing a shelter from the storm in a way. The experience of “mom and pop” record stores has become more rarified, and for many like myself, those who came of age via record stores and their clerks, it was a passage of information without which I wouldn’t have a label. The web needs to provide this interaction and I think that the service of finding and buying new music will be where the future is in the music business.

I know you put a lot of thought into what Ghostly is about — I think you used the phrase “an insider brand with little barrier to entry” once. So what does that mean? And why does a label need to be about anything besides good music?

A record label is like an art museum: the work changes, but the essence of a good museum always remains. The MOMA is a popular institution, but not just because they have a big collection of modern and contemporary art; it’s the sensibility with which they curate that people really care about. I think the same goes with good magazines or websites. There is a need for these institutions, and as companies that claim to be tastemakers, record labels have to adapt, to survive and bring good music forward.

As far as the “brand” idea, as much as I respect the success of the Bathing Ape model, or association by purchase, and even though I get that it is really (Bathing Ape owner) Nigo’s observations on consumerist youth culture, I think the idea of treating people like slavish zombies is over. If people these days are buying the brands they love, they are living alongside the ideals of these companies, and you can’t do that by making people bleed for your product financially with little return support. We are an “insider brand” in that we aren’t trying to please everyone, just staying honest to the mission and put forth good work of many kinds, but we are not elitist. We are here for anyone who is willing to explore with us.

What are the basic economics of a label like Ghostly? I assume the business doesn’t depend on having platinum records or huge hits on American radio stations (I’m guessing a lot of your business is overseas?), so what’s the sort of range of what you need to sell to break even on a particular release? And if you don’t mind my asking, are you in the black these days?

Money and records are not synonymous as everyone seems to know now. Because we started when the industry began to slide, there have never been any halcyon days for Ghostly, so there’s no romantic past to get stuck on — which keeps you moving.

I joke that the reason that we still exist at 8 years is that we’ve never had a mega-hit, relative to the size of the music market. This is often the death of many a label, as it forces you to scale up our staff and marketing to an untenable degree, making a huge gamble on your next releases. Because of this, steady growth is really the goal for us, to attract artists and fans who will stay with us.

On the business side, a brand new artist who isn’t touring yet and has a new name may sell 1,000 physical CDs, the manufacturing is about $1,000 for a jewel box and somewhere between $2,000 and $2,500 for a digipak (which is our preferred packaging type, as it ages and has character to it). For physical sales after distribution fees (in the 18-23% range) we need to sell about 3/4 of the order to recoup, provided there weren’t any expensive extra costs involved. The more challenging variables when thinking about profitability tend to be overhead and promotional costs. I have an amazing staff, which is entirely necessary to do our job as a record label (manufacturing/logistics, licensing/publishing, distribution/sales, web site/webstore, Artists & Repertoire (A+R)).

Success these days is hard to gauge. We don’t spend a lot to record the music or need to give our artists lavish recording advances — one of the definite “pros” of the electronic method of making music — but because the margins on CDs and vinyl are relatively slim compared to other consumer products, and with the decline of the number independent music retailers as a whole, we now have a variety of revenue streams to keep our operation moving. These include licensing (~35% of revenue for us last year) as well as merchandising and digital distribution (~20% of music sales for us last year). This has never been a philosophical burden for us, as the original mission statement called for Ghostly to be a record label/clothing company/magazine. This goal is becoming more true every year, so we feel it is within our scope and ability.

Speaking of which: I believe one of your early breakthroughs was a compilation, Tangent 2002: Disco Nouveau, which came with a 28-page hardcover book, designed by Kristian Russell. And now you sell a lot of things like posters and T-shirts and even slipmats, and the Matthew Dear release Asa Breed was a whole package of stuff — CD, 2 LPs, and T-shirt. What’s the thinking on how non-music products are relevant to selling music?

Music is related to identity in that it is a personal choice that often goes past taste and into expression. I remember being bummed that I couldn’t find a Redman or Black Moon T-shirt as a teenager amongst the hundreds of black Tool and Primus tees at my local head shop. I wanted to represent this facet of my personality and be “part” of the subculture I was into.

It seems that young people, including myself, have all picked up the concept that brands are a way of communicating ideas, both the creation and consumption of them. Its the language that we speak, and as we have been bombarded with brand culture since birth, it is the medium to express ideals via media. Ghostly was very much about the idea of playing with the language of corporations, which is the landscape of America. We have company mascots in BoyCatBird, who grace a lot of our projects. I like the idea that we are a “big little” company, the name Ghostly International was a pun of sorts.

I really like USB drive idea — with 13 digital tracks — that you did through Moss. I wrote a thing about USB drives that have been sort of converted into design objects, but here you’re going the other way, using it as a distribution method. How did that come about? And are doing other experiments with format like that?

Moss approached us about doing a compilation for the store, as they play a lot of our music there. We were elated to be part of this, as Moss is a cultural leader in their field. They have a “love it or leave it” attitude about their store and the music they play, in that if a customer doesn’t like it, they don’t turn it down. They treat music as part of the experience, just as much as the lighting, so who better to partner with?

The idea of making CD for them in the form of the “hotel bar” compilation philosophy felt tired. Moss being a design shop, we wanted to make an object that was reusable if the tracks are going into your ipod anyways. I guess Lyor Cohen (Chairman/CEO of US recorded Music for Warner Music Group) bought one and now is putting out albums on them. Whether or not that was related to our device, I was happy with the result, I like to believe we infected the mainstream with this one.

Murketing thanks Mr. Sam Valenti IV for the time and patience in answering these questions. Check out Ghostly International at www.ghostly.com. (Thanks also to the very first Subculture Inc. Q&A subject here on Murketing.com, Bethany Shorb of the Cyberoptix Tie Lab, for suggesting I talk to Mr. Valenti, like, a year ago.)