Jimmy Iovine, one of the most powerful figures in the music industry, has been lining his walls with gold and platinum records for decades, so when he declares that he's found "the next big thing" it's worth lending an ear. This time, though, his passion project has nothing to do with radio hits or album sales -- and that alone says a lot about the state of the recording industry.
Iovine is chairman of Interscope Geffen A&M Records, and he has stars such as U2 and Eminem on speed dial and a career that dates to the 1970s, when he was a recording engineer for John Lennon and Bruce Springsteen. But today Iovine will be at the Consumer Electronics Show in Las Vegas selling audio gear instead of albums, a surprising twist that may speak to his nimble entrepreneurial spirit or perhaps his digital-age desperation.
"This is different, but these days everything is different, period," said the 56-year-old whose voice retains the Brooklyn bray of his youth. "But what we're doing with Beats, this is really exciting, it's really taking off."
Iovine was referring to Beats by Dr. Dre, a line of audio headphones that bear the name of the rap icon who had a hand in designing them. Dre and Iovine are partners in the venture, and they've used their celebrity connections to hype the product -- Lady Gaga will appear at the electronics show today while the Black Eyed Peas, David Guetta and Robin Thicke have lent their star power to previous Beats events.
The high-end centerpiece of the varied audio line, $350 headphones that have been worn in public performances by Eminem, Guetta and Dre himself in a heavily aired soft drink commercial, are a budding success; holiday sales were well above projections, and Best Buy Co. has committed to creating a Club Beats section in more than 1,000 stores. Iovine declined to divulge sales numbers other than to say that Beats tripled its sales expectations in the fourth quarter. A source in a position to know, however, said that the audio line accounted for as much as $50 million in sales at U.S. stores in the quarter.
Still, it's difficult to imagine this sort of venture holding Iovine's attention in the years when Tupac Shakur or No Doubt were atop the charts and the recording industry had never heard of Napster.
On Wednesday, Nielsen SoundScan released a year-end report on 2009 music sales that showed total album sales dropped almost 13% from the 2008 figures. There were 374 million albums sold in the U.S. in 2009, down from 785 million in 2000. Digital download music sales are now vigorous, but the industry was geared toward the $14 album sale for so long that it's reeling in the new nickel-and-dime era.
Iovine, who co-founded Interscope Records in 1990, has approached the lean times with the philosophy that all along he has been in the business of selling pop culture and good ideas, not shiny spinning discs with radio hits.
Iovine has partnered with Mary J. Blige, the R&B star, on a line of high-end sunglasses. He has worked closely with the members of the Black Eyed Peas to position them with partnerships or projects with PepsiCo., Nike Inc., Target Corp., Avon Products Inc., Dish Network Corp., Hard Rock Hotels and a long list of other corporate powers.
Iovine also was a producer of Hollywood quasi-biographical films for Eminem and 50 Cent.
Iovine's not the only one looking for cross-media opportunities for his stars. Management companies and concert promotion giants such as Live Nation are also locking artists into contracts that capture revenue streams that go well beyond music sales. Also, not every artist can be a brand name.
"There are very few people that have the kind of credibility that Dre has with music fans," says Noel Lee, founder of Monster Cable Products Inc., the audio gear company that makes the Beats products.
Iovine said that Dre, one of the rare enduring and relevant figures from the genre's early years, "can be to headphones what Michael Jordan was to sneakers."
Iovine says the problems lie in the audio file quality, the computers themselves and the headphones or ear buds used by so many fans. Audio quality is an afterthought, he says, to computer makers.
A partnership is in place with Hewlett-Packard Co., too, to improve laptop audio spectrums and in October that company introduced a $2,300 laptop with the Beats audio system and pair of headphones.
"We're on this mission now to repair the entire ecosystem of audio," Iovine said. "People's home stereos are computers now, and the sound costs 50 cents. It's transistor radio quality. This is the start of a revolution."
For Dre, the venture has been a surprise career detour.
"It feels like a new beginning," the producer and rapper said. "If you spend all these long nights and years in the studio making the music perfect, you want the public to hear it the way you intended."
The venture began three years ago when Dre's attorney approached him with the idea of putting his name on a line of sneakers as other hip-hop heroes have done. Sitting on the beach, he told Iovine about the overture and the record executive scoffed.
"I told him, 'You know speakers, not sneakers,' " Iovine recalled. "As we moved forward with it I also told him that he had to get it right with the headphones. It would be the difference between Air Jordans and George Foreman's grill. It took us two years to get them right, but when I heard I knew it was going to be big. It's just like listening to a hit record."