Steve Stoute On Kim Kardashian, Beyoncé, Brent Faiyaz, Hailey Bieber, & More

0:00Is gonna matter 15 years from now? No, you're right. Because if is relevant 15 years from now, this world is. Imagine if, what's her name, the girl from New Jersey, Jersey Shore? Snooki. Imagine if she had a clothing line selling out right now. We have a bigger problem. Entertainment is fine. The problem is if it has sustained, it then teaches the next generation what the bar is. Mediocrity is the new hot. Artists would ask me to manage them. I'm like, you think that I'm gonna tell my mother that you fired me? You know how crazy that sounds? You fucking fired me because you gained weight? Or whatever the fucking thing is, you decided to shoot me?

0:44I love artists and I respect artists. I also respect the fact that they're tripolar. No one has figured out how to truly measure cultural impact. Popularity is mistaken for cultural impact. Skims is cultural impact. The fact that she's popular and it's popular is not the point. What's up, everybody? This is Rich Kleiman. And today we are with somebody who's legitimately a friend of mine for over 25 years. Please welcome the commissioner, Steve Stout. Thank you for having me on the boardroom. I was on early when you first got going. When you first got going and very proud to see what you guys have built.

1:20It's amazing. Thank you. You honestly gave me some incredible advice very early on in the development of the brand and throughout, but I remember I booked somebody that was not aligned with the story I had told you of what I was building. And you called me and told me very quickly, like, you will kill this thing before you even get it off the ground if you start trying to reach and book whoever you can book or whatever star there was and to stay focused. And we did. Yeah, you did. You know, it's one of the things that we could talk about. Like, there's a very hot topic, which is my brand, your personal brand or a brand you're building.

2:04And the word has become synonymous with success. But I'm not sure people truly understand what it means when you have a brand, the commitment you have to that brand, especially in the early stages where you have to nurture it. And if you don't nurture it correctly and you don't make sure that you double and triple down what you stand for very early, it will soon escape. The narrative will soon escape you and you have no control over it. But you think you have control of it because it's your name or your likeness, but you don't have control over it because the perception just keeps moving. So being very thoughtful and disciplined with a brand very early in its inception is important.

2:52And I've learned that in advertising, obviously, for the last 30 years. And I've watched many great opportunities not succeed because rather than building the brand truth, you start chasing clicks or views or whatever the popular thing is. And in that pursuit, lose brand meaning. That was so eye-opening for me because what I realized right away, to your point about clicks, is someone will always have a bigger audience. The clicks, you don't necessarily even know what value or impact that they even have over time now. And in order to break through in any way, shape or form, to your point, you have to commit not just to the discipline, but to the time and the consistency and the continuity.

3:45Because without that, people reference these brands that they want to be like, and they're referencing hundred-year-old companies. Ultimately, I have such a long way to go still, and I know that the only recipe is to just literally keep going like day after day after day. After you make money, you're like, why do you keep going? There's something bigger in it. And the thing for me was always, how far can I go and leave the door open so that other people can follow? I'm genuinely proud of watching everything that has taken place around the convergence of hip hop culture and brands or technology or anything that hip hop has created new pathways for itself.

4:38And the fact that I played any role in that and I can continue to play a role in that is inspiring me and keeps me going. The book he wrote, Tanning of America, is aging so well. Man, I got a phone call from a lawyer, my lawyer, Kenny Masalis. His son was taking the LSAT and there was a question from Tanning of America on the LSAT. It spun me. I'm just so happy, again, that the evolution and the impact of hip hop, that it can't ever get, at least there's a document that captures why it happened and how it happened. and accredits it for the impact that it has in shaping the economy. At least the global economy, at a minimum, the American economy and the landscape.

5:31And the fact that no matter how much time passes, that can't get confused because there's something that centers that path. I haven't even taken the time to unpack what legacy means at this point. As things change so quickly and people's memories are shorter. What do legacies mean? I started to think that legacies are so maybe fleeting that you should probably start writing autobiographies at 40. Yeah. Like people would write their autobiography when they were 80, right? Like 80. My life. I think you should like start writing it at 40 because legacies are like fleeting. So you might as well write it while it's hot.

6:12Like it's one of these types of things. People at the end of the day, they do remember a thing though. Like, you know, a lot of artists have made bad albums, but people remember them having a great career. When you walk away from the game, they remember that you had a great career. Yeah, sports especially. All the bullshit narrative that happens while you're on the playing field is gone when it's over. Yeah. Someone like Kevin. So when you shut it down, I think it happens when you shut it down. Yeah. It happens when you shut it down. We'll see what it looks like when he decides to shut it down.

6:49It's funny, like as I was thinking about interviewing you, it's always different when you've known someone for a long time and you speak to them quite a bit. But the idea that you actually left the music industry at that age and that point of your career and you didn't leave literally in that what you created became so powerful adjacent to the industry that like the joke was on the music industry because you were in it, but you didn't have to play by those same rules at the time. But you did leave. You were managing some of the biggest artists. You were running the biggest labels. Why did you make that pivot?

7:20Was the opportunity you saw in this whole like thesis around what Tanning of America was, even if it was before your book was just too big? You saw it? It's hard to explain what drives an entrepreneur. It's it's. I talked about this. I said, like, in the music business, it was like everybody was selling CDs. The business model allowed it to the fact that people would buy an entire album when they only liked one song. You've been a victim of that. We were selling it to you probably. You bought, you liked one song, and then you paid$16.99 for an album. You couldn't just buy the single song. So you've got to think about the margin in that.

8:03There's a lot of money. So all of the executives that were associated with the industry made a lot of money at that time. So to really know the difference between who was good and who was great was hard because everybody was successful. I'm better than that. I'm better than that. Right. So I'm not I'm not that I get it. I understand it. I'm cool with that. But I slightly would leave. Right. I just think there's more. You know what I'm saying? I don't want to talk about that. Like, I just think there's a bigger idea and you got to get out of in order to find a bigger idea, you have to do something that's uncomfortable.

8:43Yeah. Right. So going back to the question. Yes, I could have stayed in the music business at the current time. I would have done really well. I would have continued to do well. Right. That's cool. or I could have used my knowledge and reputational value and go find something uncomfortable that was different. That's the strength. That's the, that's the thing to always keep breaking new ground. So my only thing is with the podcast thing is like, if you're an artist or whatever it is, you have great brand recognition. You got value. Maybe that's crowded. Go use it and do something else. But you know what?

9:28How many people in that group of people that you're referencing in the music business left and did what you did? Nobody. Because the point is, is that. Well, now a lot of people. Now. And a lot of these podcasters will move on as well. But I now understand exactly what you're saying and exactly where you must have been at that point in your life. I even remember coming to pitch you on something in 1999. We've talked about this a million times. And as soon as the meeting was over, you asked a question about something so far out of my mind, another business you wanted to be involved in. And it was so clear that, like, you were never going to be the top dog at a record label.

10:06You probably might have seen an opportunity. But part of that for yourself was also, I would imagine, like, no, I'm not I'm not one of these guys. like I'm not one of these guys it is why I didn't want to represent talent anymore or why I didn't want to be an agent yeah I just felt like no I'm just not one of those guys and I could have probably made a lot of money just sticking with that I said that to myself too like artists would ask me to manage them I'm like you think that I'm gonna tell my mother that you fired me you know how crazy that sounds like you fired me that sounds wild to me yeah there's no way you're I'm not gonna fire them.

10:44I'm not gonna work. Like, I love artists and I respect artists. I also respect the fact that they're tripolar. You fucking fired me because you gained weight or whatever the fucking thing is, you decided to shoot me. And then I can't work with you again, right? And it fucks up our friendship or whatever, like whatever it may be. Like, no, I'm not that guy. I'm not doing that. And whatever the whatever the financial outcome is, it is what it is. I could have probably been more successful had I stayed in the music business at that time and followed it all the way through. Maybe. I don't know. I don't actually care.

11:28What I do care about is that my truth is I love innovation. I love new ideas. I like breaking new ground. I like using my intelligence, my wisdom and my energy to do something that is ambitious and different. That's what I like. And I'm not doing it just because. I do it because there's an idea in my head. I can see it. And I usually see it earlier than most. And I want to pursue it. And in the beginning, it always feels like, why did you do that? Or, nah, you're bugging. And then years later, everybody's like, oh, shit. All the time. And by the way, that's my brand. That's what I do. I see it early.

12:14You know, whether it's Carol's Daughter or selling sneakers or fucking independent music, I can see it early enough and follow through it. And that's my gift. And, you know, that's what I'm going to continue to do is craft the gift that I have. Did it happen again because you ran this agency so successfully for the last 20 plus years, still to this day, translation. And within that, I would imagine that like someone on the outside could limit it. So, you know, he's in advertising. But I understand what makes up that. Right. People have to give you a name. People have to. Yeah, they have. They have to.

12:55That's so they can sleep at night. Yeah. So the things you were behind and created, you know, it ran way bigger than having a brand as a client. but similarly then you decided to go back into the music industry right and i remember united masters being talked about in san francisco and looking back on it now it's even more kind of like damn he really did see it again because that was seven eight years ago right where you were in the bay the i think about being a visionary is the better visionary you are the longer you you have to wait. Mm-hmm. Because it takes, man, I've seen it early. That's the good news.

13:32The bad news is it's fucking nine years. So you better have the financial runway to sit it out because it's not going to be nine fucking years. And I will say ego-wise, because I have felt this. I don't know if you've ever felt this. You don't drink the water. You just look, is this for the show? It's just for the show. Oh, okay, cool. In those nine years, you got to deal with the fact that other people are going to jump in and share in the praise for what you saw earlier. You mean copy? Copy. I'm trying to make it a bit more diplomatic. But yeah, they're going to get into the same vision you had earlier because it's not reserved for one person, sadly.

14:05Right? So you identify it. You know in order for it to work, it's going to probably take nine years. You had programmers that you spent money on first to build the tech, right? Yeah. You knew you couldn't rush. No, I knew I couldn't rush. Well, you know that because you were around. You knew I... I mean...

14:25I don't care about, my only thing about people copying.

14:34What's funny is I wanted to sit for that second. I was like, this is going to happen if I do that. The only thing about copying that I dislike is when people don't acknowledge. It doesn't hurt you to say, yo, Steve was on it early. Shout out to Steve or whatever. Like I give, I'm not saying I discovered independent music at all. And I will give it, I shout out Ghazi and what he's built over at Empire and others who have been in the independent space for a while. I certainly had a different take on it because I wanted to build tools with software leading it in technology first and then obviously having the advertising agency i understood the connection between brands and artists so i had a different take on it than other people but i don't know why like people would copy my and just not say yo it doesn't take away from you yeah it doesn't matter to me it's like and when i see you i know how you look at me.

15:44You know I know. So why are we even doing this? Just say it. It doesn't fucking matter. Even if it's just saying it to you. They don't have to say it publicly. Say it to me, man. It doesn't matter. It's fine with me. I know that I have a gift. It doesn't bother me that people borrow from that gift. I actually try to share the gift. I'm not hiding it. It's for everybody. And as far as I'm concerned, if you're entering a new industry, others being successful as well as yourself helps make the industry thrive. So for now in independent music, now the Goldman Sachs, Fidelity, KKR, BlackRock, all these guys are now looking at independent.

16:33So now you have the financial markets in it. You need enough volume, enough activity in the business for all of the financial institutions to pay attention to it. So now there's money. If there's just one successful person, you don't get that. Now you get it. Now it's a sector. The majors are now trying to act like independents. How fucking crazy is that? I knew it. I knew it. I knew it. How were they doing? So tell me. They're buying all the independent companies. They're buying. Universal just bought downtown and Fuga and supply chains. And they're buying all the tools that the independents are building, the software tools, because they realize that that version of the industry has changed.

17:14But will the economics then for artists through a major label be similar? Oh, no, that only now. In order to build the economics that way, okay, it's very simple. When you have monopolistic economics, people can get paid$25 million salaries and the office space is big and low because you're making so much fucking margin. When the margins aren't there, you have to adjust the cost basis of the business. And if you're doing it right, now you share equity. Because now you're trying to build value for everybody, not incentivized by cash, but incentivized by building value. That's a different financial model that the labels now have to institute.

18:03But how? How can they even get out from? Well, the first thing they're doing is firing everybody. That's the easiest. Right? You fire everybody. And then you kind of restructure the compensation. So you take, you know, the CEO is now getting paid$2 million versus$18 million and getting equity. So as you build value over time, because if you don't do that, what ends up happening is if you have a five-year contract or three-year contract, whatever it is, and get paid all this money, you're not making decisions for the health of the company long term. you're making decisions for your contract. Yeah.

18:38Yeah. Which is why tech CEOs historically when they're building don't take any money. Yeah. Because you're building value enterprise that outlasts you. But if you're only incentivized for the next five years, of course you will sign a bunch of bad deals. Yeah. Because you just want market share during your tenure. Yeah. You want some fake number at the top so you can redo your contract. You want market share during your tenure. That's all you want. Yeah. That's what the incentives need to be aligned. Yeah. It's like a coach. and you're not trying to rebuild because unless they've told you you're here for the long term.

19:10That's right. You know what I'm saying? Yeah, of course I understand what you're saying. Yeah, if you're a coach on a short string or a general manager on a short string, what are you going to do? Overspend, try to hire the best team to win right now. Because, like, you're not certain that you're going to be here three years from now. But if you're trying to build something and you have some certainty in it, what are you going to do? Go to the draft, build in the draft versus acquiring in order to move quickly. And like, that's a mindset. But it also, it comes from trust, obviously, and management incentives.

19:44Yeah. Back to the talent conversation. That feels to be a challenge as well, right? Because that doesn't seem to be in a much better place. The same stars seem to be the same stars. You're doing a really good job. By the way, you've gotten much better at this thing. Thank you, bro. No, it's great. It's less an artist business, and it's dominantly a song business. And then all of a sudden, that artist song is just competing with any other song in a fair market. In TikToks and dance challenges and whatever it may be, in competing for popularity. because it's really, they're not the artist developed brand that you rely on.

20:30And everybody just becomes one song away. If you're not an artist developed brand I can rely on, then really, then everybody's just one song away. And that's the truth. It's no different than this business, right? That's why building a brand is important. If you don't build a brand properly, that anybody is one question away or one clip away from being your competition. Yeah. Like literally, like I interviewed somebody that doesn't matter and they said some crazy shit about Republicans in sports and fucking boom. Yeah. And then this brand is going to spend against them. And they have advertisers and you don't or whatever the fucking thing is.

21:08It's stupid. Building your brand is important because if you don't, you will put yourself in that predicament. So artist development. Now, artists have to want to develop themselves. You need to find artists that are talented that actually want to develop themselves. So they're not looking for the next TikTok song without the work. They actually want the work put in. And therefore, you're equally incentive. Like an artist, we have Brent Fires. It's fucking awesome. Talented as shit. He's in the craft. he's not fucking around trying to chase the next hot moment at all. He's in the lab trying to make classics.

21:53He's thinking about a much bigger thing. But think about this. If you said that fame has become bigger than talent, right? When you think about some of these TikTok stars that have massive songs, they may not actually even have the rest of the ingredients to be a brand. like someone that can get a massive song may not even be an incredible artist yeah so they sure as hell are not going to be able to create this entire ecosystem around them they may not even be able to perform live exactly just stand in front of a crowd and do they do they make money like do they still make money or do they get screwed if you have this massive hit oh no no no you're making oh not on an independent in an independent you can make a fortune through a major Well, it depends on the deal you sign.

22:41But like, we have a situation like that, and artists made$14 million last year. Last year. And it's TBD if they're committed to be an artist.

22:56But definitely have made some songs that have blown the fuck up. So when you see these things, we list it on Boardroom all the time, like Spotify streams. And I always say to our head of social, is this fucking number real? Like it doesn't, what does it mean to anybody to say that this person has 80 billion streams? Does it result in real money? Yeah. Depending on the deal you have, it can result in real money. And the other thing about it that's great, there's aspects to it that's not great, which is you would wish there was more money per stream. That's one part that's not great. The part that is great is it's not like you can lose the album or the album broke or your friend borrowed it and didn't give it back.

23:42So the repeatability of it is high. So if a song so if a song takes off, let's say a song has three million streams in the in the first week. You can predict. If it goes really bad, how long it's going to take for it to get to nothing. Right. because there's a certain this there's just a take rate right and that's good news and if it made more money obviously per stream that'd be great news but the fact that it matters that because of where the song sits in playlists these songs when they take off stick around for a very long time people and and when you add social media to it you have a long tail of revenue that comes in you You just wish it was higher revenue.

24:32Which is why these songs from the 80s and 90s, you have 10 and 12 year old kids. Which is the reason why, and why these catalogs are selling for so much money, because now you're looking at an asset that has long term value. It was much different in the physical business where obviously there was long term value, but there was less predictability. In this business, I know for a fact what this song is gonna do in 20 years. Yeah, well you're buying a catalog that's already proven to you what it did for 20 years. Yeah, and now, and you've watched what it's done in the last 10 years of streaming. Yeah.

25:08You've just seen what it's done for the last 10 years. So you have not, and that's how the insurance businesses are built or any, the financial markets are based off of understanding predictability and arbitrage, right? Shit, this is what it's going to look like over 15 years. This is what I could pay now. And I know what my return is going to be because of I can predict it. And there's that level of financial streaming has created that financial model where it looks like stocks. It looks like like like dividends on a business. Yeah. As it relates to your advertising agency, you said something a few years ago at Cannes on a panel.

25:46And you've said this before about trying to educate brands during a time like this on what it means to impact something and not being married to the views and audience and metrics numbers. Has that started to change at all? Have brands started to understand that you can't truly gauge what word of mouth used to mean and what like the feeling someone would have about a show or a product or an artist or a movement or a brand still married to seeing these top of funnel metrics that don't necessarily tell you the story? There are really good CMOs in the business and a lot of CMOs who are not necessarily, their job changes quickly as a result of the fact that they turn over fast.

26:33The real good CMOs know because it follows the same thing. What is really good long term for the brand versus what am I doing just to spark noise? So a lot of times you'll find CMOs who they'll do anything not to get fired. Same thing as the coach, for example, right? Right. So no one gets fired for hiring Beyonce. Yeah. Right. Now, she may be the best thing for the idea or not the best thing for the idea. But you know, for a fact, you can't get in trouble for doing that. Yeah. Right. All you want to do is bring attention to it. So you're going to do that kind of, you're going to make that kind of decision if you could, if she would do that, because it puts you in a good light.