“I am getting pretty fucking bored of the vilification of YouTube. It’s like moaning about the weather or moaning about Brexit… We are living in a time of abundant opportunity and tech companies are putting music front and centre.”
Diluk Dias, founder of British music company AEI Group, had some firm views on the ‘value gap’ in his keynote interview at Music Ally’s Sandbox Summit conference in London yesterday. But his session ranged across the full history of his company: from the Great Ringtones Gold Rush to a new focus on health and wellbeing of its staff.
“This is a great success story of a company that has really innovated over the years,” is how Music Ally CEO and session moderator Paul Brindley introduced AEI, showing Drum&BassArena website screengrabs from 2002 as a scene setter which Dias was quick to shoot down as “shonky” looking.
The origins of the company date back to 1997 when Dias, then working doing sleeve and poster design for labels in Sheffield, found a drum & bass website online that was set up James Cotterill. “It was the top link for D&B on Yahoo and the Prodigy said it was one of their favourite sites,” said Dias. “I thought there was a business here.”
Together they set up a company and focused on livestreaming events. Navigating two rival formats (RealAudio and Windows) and hefty bandwidth costs at the time meant that getting anything off the ground had serious odds stacked against it.
“It was crippling but it was exciting that we were building a global brand with live video,” Dias recalled of those times. “It was a real hand-to-mouth existence.”
After the dotcom crash, salvation was to come in the form of a very unexpected format. Cockrell came up with the idea of selling monophonic and polyphonic ringtones, but not everyone was as effusive initially as he was.
“I laughed – as did everyone else in the industry,” said Dias. “A year later, I had a new car and a new house. Finally, we were making money while we slept.”
He said this, at a time of online piracy unlocked by Napster, was the lifeline the industry needed but was slow to spot it.
“The record industry ignored this ringtone opportunity but for us it was a game changer […] It got our business off the ground […] Before downloads and streaming, ringtones were the first digital format that people would pay for. I went to see labels [to start selling them] and they laughed me out of the building. It proved to me that innovation happens outside of the industry.”
A perfect storm was taking shape here as Shazam gave mobile and music and new synergy and could be used as a trigger to sell ringtones as impulse purchases. “Happy days for us,” said Dias. “We drove millions of downloads.”
From that, his company got an intensive schooling in CRM and analytics that stands it in good stead even today. “All the stuff you need to know now, we got our grounding in by selling ringtones.”
It was not to last, with two events driving a stake through the market’s heart. First was Jamba (of Crazy Frog infamy) that pushed mobile content subscriptions to an offensive breaking point (“That killed the confidence in the ringtone market”). Second was the arrival of the iPhone and the ability for consumers to create their own ringtones on their handset without going through a mobile portal or store. “Not so happy days for us,” noted Dias wryly.
The next evolution for the company came from meeting Luke Hood, then a teenager setting up a dubstep YouTube community in his spare time. He wanted AEI to let him promote their music to his audience. As an idea, it caught fire almost immediately. Within a year “it was a seven-figure business” and AEI shifted in a new direction.
“Luke is not working in Sainsbury’s any more. He’s a third shareholder in our company and he’s 20 years younger than me.”
For Dias, it is people like Hood that the industry needs to look to in order to understand where it must move next. “We should look to the next generation for innovation – not us old men,” he proposed. “Investing in young talent has been the defining thing about our business in the past 20 years… We were not making money on YouTube until we got involved in Luke’s YouTube channel.”
This led on to Dias’ views on YouTube and the ‘value gap’ arguments that continue to rage in the music industry. He firmly believes that we need to stop seeing YouTube as a monetisation channel alone, pointing out that for every £1 AEI makes on YouTube, it drives £10 in value elsewhere – such as premium subscription streams or gig tickets.
“The value is in taking that audience from YouTube and driving it somewhere else. It’s sitting there in plain sight.”
Like a repeat of the UKF story, YouTube channel NoCopyrightSounds – which provided royalty-free music for other YouTubers to use in their videos as long as they credited the source and artist – was to prove a catalyst for the next evolution for his company. Dias got approached by Billy Woodford to do for NCS what AEI had done for UKF and the company took a chance on him.
Proof of concept came in Alan Walker’s Fade (“It had a really annoying piano hook but it got used in hundreds of thousands of videos on YouTube”) that became a huge viral hit and was re-released as Faded to even bigger success.
“Billy is no longer working for minimum wage of a building site; he has a very solid business here,” said Dias. “Without YouTube, acts like Alan Walker wouldn’t have taken off. We are big fans of YouTube.”
He has no time for the current industry griping over the value gap. Dias feels that people are wasting time arguing that something is a threat when, if they looked at it from a different angle, they could see that it really is a huge opportunity.
“I am getting pretty fucking bored of the vilification of YouTube,” he said. “It’s like moaning about the weather or moaning about Brexit […] We are living in a time of abundant opportunity and tech companies are putting music front and centre.”
This involves record companies and publishers to work within a different mindset and rethink what they actually are if they want to unlock the opportunities here. “To succeed in the music business, you need to think like a media owner and not a rights owner.”
Dias ended by explaining how a recent serious injury that meant he had his leg in a cast for a year gave him a new perspective on the always-on culture that is gripping (and damaging) the music industry.
“It was a humbling thing for me,” he says of being forced to stop working for a long period.
“Health and wellbeing is probably the most important thing, followed by your relationships with your family, friends and colleagues. You really need to prioritise your health and wellbeing, and it’s made me somewhat evangelical within our company about that,” he continued.
“We’re in a creative industry where ideas and good relationships are really, really important. You can’t come up with good ideas and you can’t have good relationships if you’re working 80 hours a week, sending emails out of hours, not taking holidays and generally getting stressed and ratty.”
Dias feels that staff need proper breaks to be creative (“I went nine months without opening an email. No one died”) and that the music industry needs to have a proper sense of perspective on what role it actually plays in society.
“It’s only music – we are not creating world peace or curing cancer,” he said. “If you work in dance music, you are providing 25 year olds the opportunity to get drunk, high and laid… Most of the stress in the industry is caused by artists and their managers and people pandering to them. It’s not worth sacrificing your health over: no one’s going to die if you don’t respond to an email the same day or the same hour.”
To this end, he has introduced two 20-minute meditation sessions in the office every day and unlimited holidays for staff. Traditionally the industry has self-medicated with alcohol and drugs, but Dias felt now is the time to blow the whistle on that reckless culture and to stop it being seen as the norm.
“We have developed a strong meditation culture on the company,” he said. “I was quite cynical but it has had a transformational impact in our company.”