Surviving in a shrunken music industry is challenging, but Grant Dexter, co-founder, president and chief executive officer of MapleCore Ltd., is having a great run, with the company reporting cumulative double-digit growth – and some triple-digit growth – in its varied businesses over the last seven years.
Founded in Toronto in 1999 with a vision of how musical artists could use the Internet to promote and sell their wares, the company first launched MapleMusic.com, an e-commerce site that now provides online stores for more than 1,000 artists, including Martha Wainwright, Kathleen Edwards, Jann Arden and Chantal Kreviazuk. It went on to partner with Universal Music Canada to create two record labels and a music distribution arm.
But the biggest key to the company's success was a strategic move in 2009 into other entertainment services. The 35-employee company is currently divided into a music services division and an online division; its umbrella of companies now includes its two record labels, Open Road Recordings and MapleMusic Recordings; the e-commerce site MapleMusic.com; online ticketing agency TicketBreak; music distribution company Fontana North Distribution; music publishing company MapleMusic Publishing; and Pheromone Recordings, a boutique label of which it is a partner.
Last year, non-music services accounted for more than half – about 60 per cent – of the company's total revenue of well over $20-million, Mr. Dexter says.
Mr. Dexter, 41, a former management consultant at PricewaterhouseCoopers LLP, particularly enjoys signing and developing new talent. Besides numerous music industry awards, MapleCore won an Ontario Business Achievement award, the RBC Royal Bank award for small business, in 2011.
Q: What's the damage to the Canadian music industry?
A: The music industry in Canada was worth around $1.3-billion in 1999 and we're probably around $400-million right now. Imagine that loss in 12 to 13 years. What happened was when the music sales stopped, the record companies stopped being able to promote, publicize and market the records. At first it didn't seem to matter because the record companies were still spending money, but then artists realized that their marketing money had been cut from a typical budget of $10-million to $2-million, or their tour support cut from $1-million to $50,000, so the whole eco-system started to fold in.
Up to two or three years ago, there were always naysayers about how the music industry had changed. The artists were naysayers at first but then they realized that all their budgets were crushed. Then it was the public saying no, we're not stealing music, but then we all realized that anyone between 12 and 25 doesn't pay for music. Not to mention books, movies and all the other intellectual properties that I adore. So when I defend music, I'm also defending authors, movie producers and people who work on sets. If people don't pay, there's no money to invest back into it.
I'd say in the last two years, more people can name songs rather than bands. Major labels, because of the pressure put on them, are all doing singles deals so there's all these bands coming out that are singles-based. An artist might do a bit of touring from that, but not build a career. The worry there is that they're not going to have a touring base, or a publishing or merchandise base. So the worrying thing in the industry is clearly the lack of music sales.
What's your strategy?
One is to be the best you can be in a specialized market. We're a boutique label so we've always handpicked the artists we want to work with. The tiny ray of hope is, just like when I was growing up in the seventies when there were only seven or eight TV channels, now there's 500. The audience is fragmented so it's allowed for specialization. We can handpick artists we want to work with who have decent-sized audiences and unique marketing abilities.
The second thing we've done is to diversify our revenue stream. Last year, over 50 per cent of our revenue came from non-music sales, whereas, three years prior, almost 95 per cent of our revenue came from music sales. So in three years, we've diversified our revenue base by 50 per cent. That includes ticketing, and VIP ticketing packages [offering exclusive seating, meet and greets and merchandise] with bands that we work with like Hedley, The Tragically Hip and Our Lady Peace. Instead of using an intermediary or third party like Ticketmaster, artists can build a transactional relationship with their fan base off their own website with custom-made tools.
Are those artists' Web pages all part of MapleMusic?
Yes. The artists have their own websites but we have tools that just build into their sites, that seamlessly create merchandise, VIP, and VIP ticket sale pages. We want them to control their own brand and messaging, but our tools tie in and allow them to start selling.
What are the biggest factors affecting your business right now?
The challenge on the music side is the shrinking sales market so you have to be very careful about bands you sign. But at the same time, you can't stop. Music is still a $400-million industry and we want our fair share of that. There are still great artists out there that people want to hear. We just have to figure out how to monetize and protect it and have it flourish using the Internet. That's a challenge no one has really been able to figure out yet in music sales and we're working on it with all of our partners.
On the ticketing side, it's about managing growth. It's a massive multibillion-dollar ticketing industry. Ticketmaster controls a huge percentage of it. Our job is to go out there and take pieces of it and show venues, festivals, casinos and sport teams that we're a great alternative to other ticketing solutions. We've had an incredible ramp-up in the business. So managing that growth, picking the right clients, and spending time and energy on clients who want to work with us long-term are challenging things but exciting.
Before you got into the music industry, what did you work at?
I was a management consultant at PricewaterhouseCoopers. We'd go into a company, analyze their business processes, reorganize them and then apply a software solution. I was hired by Mike Alkier [who had sold his own company to PwC). I went into Mike's office one day in 1999 and said, 'The Internet is going to be really big."
I told him my idea [for what would become MapleCore] and he and his partner gave me $60,000 to get things going, so I started building a website for Canadian artists. So Mike became a partner and co-founder at Maple. At the same time, Andy Maize from the Skydiggers played a corporate party for Mike and us and was also realizing that the Internet could become really big. He knew all these artists, such as The Cowboy Junkies and Sarah Harmer, who had music and merchandise to sell. So it all just sort of fit together, with Andy becoming a co-founder. Michael Bregman of Second Cup invested in us, too, as did Randy Lennox [Universal Music Canada] and then Gary Slaight from Standard Broadcasting in 2002. So we have an incredible board. That's been a huge part of our learning curve but also our success. When you have those kind of experienced people to talk to about things, it's amazing.
Is music in your family background?
Not beyond being massive music fans.
Is keeping up with the technology a challenge?
It is, because technology is ever-changing, but technology has never been an expense for us; it's always been a revenue generator. We're not like a traditional company. If you're just selling music, then technology is a massive expense, but if you're selling stuff on the Internet, that's really just research and development to lead you to more revenue. Being involved in cutting-edge technology is thrilling as well, from mobile websites and applications to using iPads and iPhones to swipe customers into events. Now we're developing technology for people to just use an iPhone app to manage their ticketing and entry management at a festival. You can do entry management in seconds instead of lining up to one swipe machine.
With all these changes in your industry, has your vision for the company kept changing, too?
In one sense, it hasn't. Our No. 1 goal was to use technology to help artists get closer to their fans and make money. Then Universal invested some money in us, so we ended up starting a few music labels which helped build relationships and helped grow our business substantially. We're good at it, and are continuing on with the technology development in the background, but it's always been about the artists and being transactionable on the Internet.
We sort of had it nailed early on, then veered a little bit at the end when we bought a ticketing company [three] years ago. So now we're into festivals, sports teams, venues and casinos, but the idea remains the same: that the Internet is your friend and you can use it to market, promote, publicize and sell your wares.
What's your strategy for competing with a giant like Ticketmaster?
We try to compete in every way. The axiom is that you never compete on price. The way we compete with anyone, not just Ticketmaster, is that the customer is king. We've been taught that from an early age and it's always true.
What kind of boss are you?
Someone said the other day that they'd never seen me get mad in 12 years. Once you hire great people, you create an environment for them to explode, then you get out of the way. If you can get all of your people firing on all cylinders, you're going to have a great company.
Paul Coffey [former NHL defenceman] once said to me that when Wayne Gretsky was on the ice, the real secret to Wayne was that he made you feel like anything could happen. That's the kind of boss I want to be and hope I am. I want people who are in charge of divisions or in customer service to take pride, be acknowledged and be the champions of their areas. I hate those bosses that take all the credit and run around the front. I'm kind of the opposite. I like being in the background and watching people succeed.
Are you hands-on with the hiring?
I do. I kind of have a sixth sense about people so I generally get pulled into some of the hiring on the medium and higher-level folks. We have a very high employee retention. Small– and medium-sized entrepreneurs can't make many mistakes because we're always living on life or death.
What's your advice to other entrepreneurs?
Hire brilliant people because those people are vitally important to your business. Also, watch your cash. We started off in my basement, then moved to 700 square feet, then 1,100 square feet, then we co-shared 4,000 square feet with another company. We didn't get our own office space until seven years in. I bought a used phone system for $6,000. A lot of companies blow their budget on superficial things like office space or Herman Miller chairs. We still have chairs in our boardroom that I got at an auction in 1999. I don't want employees to sit in them because they need great seats but you've got to watch your spending. We have a very nice rainy-day cash reserve and I'm still worried. The third thing is to have a great mentoring system. If you're an entrepreneur, every mistake you're going to make has already been made, so find a great board.
You've got to be constantly thinking ahead. Look at what happened to the music business in general. Look at Universal and Sony. These are massive companies that were making billions of dollars a year and they never diversified. When Netflix was tiny, why didn't Blockbuster go buy 50 per cent of it? It's easy to say when you're on the outside, but when you're on the inside making lots of money, you think it's not going to end, even when things start to ebb. I'm glad we moved into ticketing but it probably could have been a couple of years earlier. When you're managing a robust business, it's hard to strategize outside of that because you get caught up with the day to day.
Do you have a motto?
You can only control what you can control. I used to sit up at night worrying when I started the business because I'm a worrier by nature, but then I realized that we can just do the best we can do.