Tech Talent Turns Tables on Music Labels

If anyone stood a chance of leading the record labels into the promised land of new technology, it was David Weekly.

As a sophomore at Stanford University, the teenage programmer built one of the earliest MP3 jukeboxes on the Internet. And when this self-described “music addict” wrangled a summer job at Time Warner Inc.’s music division, he envisioned being part of a revolution that would change the way music is bought and sold, using the power of the Net.

But Weekly’s youthful enthusiasm faded after encountering Warner Music’s resistance, turning him loose to the enemy camp of Silicon Valley start-ups that are upending the music business. “I felt like a court jester [at Warner]--there to amuse them and not be taken seriously,” said Weekly, 21, who graduated this month. “I just can’t imagine wanting to work for a label again,” he said, explaining that he won’t be pursuing job feelers put out by Sony Music.

In the biggest cultural and economic battle the entertainment industry has faced, record labels have managed to transform themselves into a creaky, fuddy-duddy playground that young techies view as the Lawrence Welk of today’s music employers. Unlike the flood of industries from which work forces have fled to the dot-com arena, the record labels have dug a deeper hole for themselves by depicting the tech-savvy young people they now are desperate to recruit as their enemies in lawsuits and anti-piracy campaigns.

These young techies now are working against the industry, thanks to a steady flow of cash and opportunity from high-tech start-ups such as Napster Inc., ICast Corp. and Scour Inc.

The result is a brain drain that record executives cannot plug and that could further weaken the industry at a time of downsizing, consolidation and a continuing threat from the free digital downloading of music.

“I can get the college kid who wants to break into marketing or the young advertising guy with little experience. [But] there are [technical] spots that I just can’t fill,” said a record company executive who requested anonymity. “I can’t get people to call us back.”

Label officials declined to comment about the issue or release statistics detailing employee turnover. But sources say today’s Internet economy has flummoxed the music industry and that it will have a hard time catching up without bench strength in technology.

So far, the music giants have been unable to develop any practical alternative to innovative file-swapping technologies such as Napster, which are training an entire generation to expect to get their music free. And while all of the major record labels are spawning online services with the hope of charging consumers to access music via the Internet, none has made the tools work for--instead of against--them.

Hiring the young is no panacea, of course. It was young entrepreneurs who, with great fanfare, spawned a host of now-mocked concepts, such as Internet-based soap operas and online auctions for movie roles.

Yet, for every kooky business plan, there are dozens of would-be Michelangelos of the New Economy and others like them who are tinkering on computers in their bedrooms and dormitories.

Just a few of the promising players include:

* Shawn Fanning, the 19-year-old who, as a student at Northwestern University, created the Napster software program to let his dorm-mates--and now millions of others--swap songs over the Net;

* Justin Frankel, the 21-year-old college dropout whose company created Gnutella, a data-swapping program that expands on what Napster started;

* Naveen Nalam, the 22-year-old UCLA student who engineered Scour Exchange, which allows people to freely swap music, video and data files;

* Ian Clarke, the 23-year-old Irish programmer who, for a senior project at the University of Edinburgh, Scotland, designed an anonymous file-sharing program; and

* Chris “Monty” Montgomery, the 28-year-old programmer who created a technology that rivals MP3, called Vorbis, while in graduate school.

Curiously, none of the traditional labels even tried to recruit--or even meet--any of these five entrepreneurs, not even after the media had trumpeted their innovations. Said Fanning: “I’ve never even received a phone call.”

Label officials insist they are hard-pressed to hire these workers because of financial limitations and the industry’s overall negative public image. Besides, technology has never been part of the equation for an increasingly corporate industry built on promotion and marketing.

Critics, however, claim that arrogance is the real problem. Record company executives--convinced that they could control consumers’ habits--refused to see beyond their traditional business models. What’s worse, they underestimated the allure of the Internet and the technical ability of young users.

“The labels are much less ‘cool’ than they were four years ago,” said Matt Wishnow, co-founder of Insound.com, who worked for Elektra Records for three years. “The labels can’t compete with the myth of the utopian dream--of being able to really make a difference--at the dot-coms.”

No one knows that better than Clarke. At a recent technology conference in San Diego, the creator of FreeNet told a packed lecture hall that the record industry needs more than money to lure savvy computer workers.

Clarke seemed bemused by the suggestion that a major label should have recruited him. “Like I’d take a job with them,” Clarke later scoffed. “Like anyone with any sense would do that.”

It should never have come to this. The music business long was considered to be at the cultural vanguard--an industry with enormous cachet and opportunity and a crucible for unconventional thinking and new ideas. Work in a casual environment. Listen to the latest tunes. Hang out with rock stars.

But quarterly profits--and the Internet--got in the way. Massive consolidation has led to thousands of layoffs, giving prospective employees hesitation. Who wants to join an industry in the throes of economic turmoil, where job security is uncertain and growth prospects are poor?

When Universal and PolyGram merged in 1998, about 3,000 employees from the companies’ combined work force of 15,500 were laid off. And industry layoffs are expected to continue. Time Warner’s proposed merger with EMI Group could eliminate 3,000 workers or more in the year ahead.

Out of all the major labels, only Sony has specifically invested in technology companies that operate within, as well as outside of, the confines of the music business. As part of their digital media efforts, Sony is building a trio of incubators--in Los Angeles, San Francisco and New York--to house some of the digital start-ups.

The investments give Sony more than just a business edge, company officials say. It also gives the record label access to a bounty of young tech talent. “The point is, we need to be connected to pure-technology people in order to grow online,” said Fred Erlich, head of Sony Music’s new technology investment group, which sources say has an estimated $300 million to invest.

But many of those people are sprinting toward dot-coms, despite the new tightfistedness stemming from the wave of Internet failures. “Even with the vagaries of the market, that’s where a lot of wealth still is being created in a short period of time,” said Stephen Unger, a managing partner of media and entertainment at Heidrick & Struggles International Inc., a leading executive search firm.

That’s what drove Kari Abrams away from the labels. The 21-year-old worked for PolyGram and Sony as an intern and as a band promoter while at the University of Tennessee. When she graduated, she sought better pay--and, in her eyes, a better career payoff--at MusicBlitz, a Culver City dot-com.

“I kept thinking, ‘How much more consolidated could this market get?’ ” Abrams said. “There didn’t seem to be a strong [financial] future for me at the labels.”

Raises have been slashed at the major studios and salaries have remained low, especially for entry-level employees. When Insound.com’s Wishnow graduated in 1996 from Brown University, he took the best paying assistant position he could find at a label: in the New York marketing department at Elektra Records. His annual pay was $24,000 plus overtime.

“The labels are paying that little, even now,” said Wishnow, 26, who left Elektra in 1998 to launch his dot-com. “I know, because I’ve referred people to jobs, and I’ve heard what they pay.”

At the same time, Internet start-ups and new-media firms began poaching label workers of all ages, using fat paychecks and generous perks as bait. The labels and the movie studios “created a great training school, and then watched everyone graduate and move away,” said Jim Griffin, former director of technology at Geffen Records who left to start his own consulting firm. “San Francisco and Seattle have reaped the rewards of Hollywood’s talent.”

Those who stayed found technological innovation was a lost cause, said Lou Mann, general manager of Capitol Records for 11 years.

“Why bring a lot of new ideas forward when I might not be here next week? Or my boss may not be here next week?” asked Mann, who left Capitol last year to run House of Blues’ new media properties.

Technology companies emerged as a nurturing place for dreamers and social revolutionaries. Almost like arts patrons, some back developer teams working on technologies that may never yield a profit.

Take Montgomery and his Vorbis project. A strong supporter of online music, he became troubled that the German research institute that created the MP3 format quietly started charging licensing fees to anyone who built MP3 software and hardware, or sold MP3 downloads over the Internet.

While in graduate school, he tinkered with an audio-compression technology that sounded as good as MP3 but wouldn’t require anyone to pay royalties. Word of the project spread over the Internet and caught the attention of ICast, an online entertainment company. The staff at ICast contacted Montgomery and offered to pay him and a couple of other developers who were laboring on the Vorbis project free to continue their work.

No one will make money directly from Vorbis because it will be given away, said Jack Moffitt, vice president of technology for ICast. But maybe Vorbis will change, say, the Internet radio landscape and create a new opportunity. Or maybe Montgomery, once finished with Vorbis, will develop the next Napster. After all, Moffitt said, a new-media company’s success rests on the heads--and the ideas--of its employees. “It’s all about who you have working for you.” said Moffitt, who declined to say how much ICast is paying the developers. “We pay the developers that we think are superstars, and I think that’s going to pay off for us.”

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Times staff writer Chuck Philips contributed to this story.

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Music on the Web

More Online: a special Times report with articles about the growth of music sharing on the Internet is at https://www.latimes.com/musicweb.

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Coming in Business: Time Warner President Richard Parsons discusses music industry issues. For other stories about the music industry and the Web, go to https://www.latimes.com/musicweb.