161 - Navigating the Intersection of Music and Technology in Business with LiveOne's Rob Ellin

Welcome to Listening with Leaders. I'm Doug Noll, lawyer turned peacemaker. I teach executive leaders how to listen to emotions rather than words so that they can become the leaders everyone wants to follow. And I teach those same leaders how to be authentically present, available, and connected to their families despite being insanely busy. I have learned that we are 98% emotional and and only 2% rational. Learning how to listen to emotions is, in my experience, the foundational skill of life. Stick around to the end of the show, and I'll reveal how you can be on our next guest in 15 to 20 minutes. So let's get started.

Rob Allen, welcome to Listening with Leaders. You are the founder, chair, and CEO of a company called LiveOne. Which can be found at liveone.com. Thanks for taking some time out to chat with us today.

Great.

You've got a really interesting background of sort of working— if you can think of a Venn diagram of tech and entertainment, you're in the intersection. You're in the Venn intersection. Tell us a little bit about your backstory and how you got into that.

Yeah, it's years ago. Years ago, when you think about San Francisco and LA, it was like oil and water. Right, right. Today it's all consolidated, right? Who would have believed that Apple and Amazon and Google would be the largest owners of content, right, in the world? And, you know, it was, it was kind of clear 40 years ago when I started where the direction we was going to go. And so I was fortunate. I met a gentleman named Jack Friedman, one of the great CEOs in the public markets. He passed a few years ago, but he built a company called THQ. Company called Jax, and they— there was this unique opportunity of the convergence of media and technology. And that started with software and gaming. And the software and gaming obviously was media and tech on its own. But then we found a technology firm called Catapult, which allowed you to play games across a phone line.

All right.

And, and an amazing story. We put literally the CEO of Blockbuster and John Davis, Marvin Davis's son, one in the LA Coliseum and one in the New York Coliseum. And literally it was standing room only. And the press picked it up everywhere around the globe as they played NBA Jam again across the phone line. And, you know, that's, that's, that's almost 35 years ago. All right. You know, today it's easy. Right?

Today we were doing with 2K bot over the phone line, dirty phone lines, and you never knew what you're going to get.

Well, you know, it's one of those things, live and learn, right? That experience was amazing, right? It worked perfectly for the event. But when the technology actually came out, it was a little early because it was this little problem which was called call waiting. And during that call waiting, your goalie would be knocked out or your, you know, your boxer would be on the floor. Right. So it was a little bit early and that technology became Xbox Live today, became Xbox and then Xbox Live. And that took probably 10 years longer to get there. But that convergence of media and technology Technology trades at multiples of revenues and media trades at multiples of earnings. Right. So if you could combine the two, right, you're going to get this very happy medium where you're going to get way higher multiples than just pure straight media plays.

Huh. And so that's how you got into it.

I got into it.

So what's, what's LiveOne do?

So LiveOne is a music subscription platform. We're, we're across audio, video, podcasting, live streaming. We believe we're the authentic voice of music, right? That missing voice in MTV across audio and video. So we give you all-you-can-eat music, that 50 million songs, right? We give you an amazing array of podcasts. We also give you live events from all over the world. And we've streamed over 3,000 artists to 5 billion engagements. And what I mean by engagements, not just that, that kids have watched it or people have watched it, they've actually repurposed that content and put it, put it back across the internet to their social media, to all their friends and family.

Mm-hmm. Wow. And, and what's the revenue model? Subscription based?

It's actually both. So we, we started off almost all subscription when we acquired Slacker Radio. So Slacker Radio was an old school radio company. You probably remember back to the days of Napster. One of the first players in the business, we bought it distressed. At the time I bought it, it was doing $20 million in revenues and losing $10 million with 400,000 subscribers. Today, proudly, I can tell you we passed 3.5 million subscribers. Well, we publicly just said our audio business will do $130 to $140 million in revenues this year with over 17 million of of cash flow and well over $20 million of EBITDA.

How do you do it? How do you, how do you turn these companies around?

Oh, this was hard, right? You know, it looked like, you know, so we bought it very distressed. We bought it with a lot of payables owed to the record labels and the publishers. We worked out deals with them to pay them over, over a long period of time. When COVID hit, they, they squeezed us. We had to fight through it. We had to survive, right? And it was a battle. Um, it was really difficult. Our stock came down and we battled through it and we've settled almost all those creditors. We've cleaned up everything. We, we built really, really strong relationships with every record label, every publisher. And most important is, as being a creator-first platform, the creators backed us. The creators believed in what we were doing and they backed us and blessed us and gave us a hand. And 3,000 artists performed on our platform. 3,000 hit their social media. And told their fans to listen and watch it live.

Wow.

Second is we focused away from a B2C model. I had owned Kazaa previously. So when you started this call, you ask, you know, what are your learning experiences and how do you succeed? I owned Kazaa. It was a great run, except for one problem. I could never make a dime. $80— buying $80 subs with 30, 30% breakage. You got to be as brilliant as Daniel Ek and raise billions and billions of dollars and be prepared to lose that money. It's genius what he did. He built the 11th largest brand in the world now, recognizable brand, right? For us, I just, I can't, I can't focus on the B2C market. I gotta focus on the B2B. So one of the great things we saw in that acquisition, right? And every time I acquire a business, I look for what are those, what are those 5 chess pieces I could really move directionally that can change the business? And one of 'em was a company called Tesla. Elon Musk and the brilliance of what he was building. And we went out to the facilities and we met the team and we built a stronger and stronger relationship. We came to him with 3 great chess moves, right? We had a little contract with them. We were doing a little bit of business, right? Probably $1 million in business. We've grown that dynamically, right? And so what we did was we did 3 things. One is we priced it way lower than everybody else. We're 1/3 of the price of our competitors. Number 2 is we service them better than anybody else could service them. We're nimble, we're small, we fought through and we give them whatever they need. Anything he needs. Elon wants his, his girlfriend to be the number 1 rock and roll star. We'll make it number 1 rock and roll star on every, every Tesla call. Whatever he needs, we're gonna do. And number 3 is we offered him the opportunity, right, for it to be white labeled. That doesn't have to be called Slacker Radio or Live One. Call it Tesla Radio.

Mm-hmm.

We'll be your white label solution. We'll be your partner. Will be your eyes and ears and will help you to make sure that you have the coolest music in your, in your cars and have the best technology. And I think we've proven now in our 11th year of our contract, we've proven that we're, we've been an amazing partner. We've done the same with Verizon, T-Mobile. We've had Samsung over the years. And right now I just publicly announced we have over 35 B2B deals, right, that are in the works that are billion-dollar to multi-trillion-dollar company. In all these verticals, my humble opinion is they all need live and they all need music. If we can land a couple of those, this will be a quickly be very much like my last company, Digital Turbine, will be a billion-dollar-plus company. Wow.

So what's it, what's it that gets you excited in the morning to get out of bed?

Well, for a little bit it was survival, right? Because COVID hit.

Yeah.

Yeah. COVID hit, right? And I got 4 kids and, you know, you know, and a big family and, you know, to support. So the first thing that happened is, is I had to get into the bunkers, and I had to get my team to get into the bunkers. And we had to, we had to rethink our philosophy because we lost all of our live partners, all of our live streams. So the first thing we did is, is we weeped a little bit. And then we got in the room and said, what could we do that no one has ever done before? And we said, we've streamed the biggest festivals in the world, Rock in Rio for 5 straight years, Right? Outside Lands in San Francisco, Hangout in the South, right? EDC in Vegas, Mexico, China, Japan. We streamed all these. Why can't we build our own festival and stream the first ever digital festival that will be the single biggest festival ever made in history? And we, we got into the bunkers, we fought through, in 30 days, we put together 136 artists, 72 hours of music and streamed to billions, billions, okay, of engagements, hundreds of millions of live streams and billions of engagements. And we successfully proved that we could build a digital strategy that was the forefront of what we were building anyway. We could do that and actually bring the talent together. All right.

So in those days, were all your creators, they were all virtual?

So they, they, well, they weren't, we were taking them live. So really the, the passion, the vision was, could we take the relationships with the creators? We're a creator-first platform, having the licenses with the record labels and the publishers, right? And move that from audio to video and create the ESPN of music, right? When MTV left music, they left this massive void that no one I've ever met, including 2 heads of, 2 presidents of MTV that joined me. Neither one of them could tell me who was the authentic voice of music.

Wow.

So if I could roll up, and we rolled up 2,500 of the biggest music events, build a newsroom which was hiring hosts around the world who were gonna host and anchor those just like ESPN, we could build that authentic voice of music across audio and video.

Hmm.

And that was the plan. So all of it was digital, but it was leveraging and partnering those B2B deals with Live Nation, AEG, iHeart, and the biggest independent festivals.

And so today, what gets you excited?

So today gets me excited is what I've told the Street is, is that I want to get 10 million subscribers. Okay. I want to get to 10 million subscribers. That would be all of my business. I try to find a wave that I jump on, find a TAM that is so massive, rather you jump on that is already built, but find it and grab that piece of it and that really unique piece. And that really unique piece was that authentic music, right? If I get to 10 million subscribers, there's gonna be 1.7 billion paying subscribers of music, which means there's probably 5 billion total users of music, maybe 8 billion, who knows, right? But 1.7 billion, if I could get 1% of those, Bye. I'll have a multi-billion dollar company, but I need to make sure that it's— the margins are healthy. So I have 33% margins versus the industry at 16%. I had to make sure that we're a creator first. So we're truly focused on the creators because I need their help to be able to stay in the game and make sure that we're really unique and special. Make sure we have the best host. We have over 500 music channels. And then the same thing on the podcasting side is to have those unique podcasters that this is their job, this is their focus, this is their number one. They don't have 17 other jobs, it's their number one focus, you know. And, and, and podcasting just has exactly like music, it has super hosts with super fans, right? If we could own a small piece of those super fans that are engaged, we're going to successfully build this. So what I wake up to every day is more subscribers, All right. More creators, which drives, which drives more traffic, which drives more create, more, uh, subscribers and more advertising. And it drives more ancillary revenue streams. Okay? And what I mean by ancillary revenue streams, off the same piece of content, we're launching celebrity brands off the same piece of content. We're turning podcasts into TV shows and movies, right? Off the same content, we're taking podcasts and turning into live shows. All right. And so we look at how do we continue to reach that, that superfan and give them more and more of their favorite artists and their favorite piece of talent.

I mean, that—

I'm a pretty big thinker, but that, that's pretty mind-boggling.

Thank you.

So how do you, how do you keep all this together?

Great team. You know, we have— I start with, you know, it's kind of a weird foundation. Sometimes some people would say it's the chicken and the egg, right? I start with a little company, right? I put together one of the most prolific boards. All right. So on my board, a guy like Patrick Wachsberger, who took Lionsgate up by $20 billion in value, and Steve Bornstein, who built ESPN and the NFL Network. I thought he was a great guy to help mentor me. If you're going to build an ESPN of music, right, who could better be doing that? All right. And Kenny Solomon runs Tennis Channel and Chris Wright, the president of a little brand called Mikey— Michael Jordan Brands at Nike. All right. So if we could put together that world-class team, right, we could be in a position of doing that and then acquire the right assets. A lot of time they're very distressed, like Slacker and like podcasts needed, needed almost a barbershop. They need a cleaning. Right? But they also had these brilliant assets inside of it. And before you acquire it, make sure you have 5 chess moves that can move the needle, that could change the trajectory of each of those businesses. And then when you consolidate them together, make sure they fit like a glove. Right? So PodcastOne, obviously we, we pioneered the acquisitions into podcasting. And then you watch $28 billion of acquisition, everyone from iHeart to Apple to Spotify to SiriusXM. Everybody rolled up all these podcasting businesses and we rolled them up. We rolled them up at, you know, 1x revenues, not 30x revenues like most of them did. Well, we have to be nimble and we have to be smart about it. We have to make sure that we can't, probably can't afford the Joe Rogans of the world, right? We have to afford those podcasters that really need our help and need that 360 support. And that's where our focus is. Creator first. More creators we have, the more revenues we drive.

Right. Well, you, you have a really unique background. I mean, I was kind of intrigued reading, reading the interview we did with you in Authority Magazine because you come from a financial world. And so a lot of this, it sounds like a lot of what you, a lot of your strategic thinking is deeply influenced by your work, your early years in finance. Would that, would that be correct?

Yeah, it even goes back further than that. You, you always got to look at who your mentors in your life. So the first one I would give is my father. I give him first, second, and third. And he comes with an accounting legal background, um, and I worked in his offices. And from day one, you realize that if you understand accounting, right, you understand real financial models, right, there's a lot of things that you can do that can be really unique. And that includes how you run your business, how to get the EBITDA, how to get the profitability, how to get the cash flow, but also how do you acquire companies in a unique way? And so, you know, it's number one mentor. And then I had the luxury of, of coming out of a, uh, out of a firm called Lombard Securities, gentleman named Bob Neff. And he was, he was a CEO of Flying Tiger and he was a partner at Goldman Sachs. So he had both Wall Street as well as operational experience. And I think when you have both of those, um, you get, you get, you, you can go the distance. And the third thing you got to do is you got to have a couple of bruises. All right. You got to take a couple of Mike Tyson punches. All right. If you don't take the— if you haven't taken a few of those punches, we're taking one right now. Right. We've taken a 3-year punch where our stock, you know, has gone up and down like a, like a heart attack. And people made fortunes right from the beginning when we first took it out from the private investments, taking it public. And then when COVID dropped, you know, when COVID hit, our stock collapsed. All right. And we rallied back, went for a big run. And then when the market collapsed and small banks went out, They just annihilated microcap stocks, right? It's just an opportunity, right? So we took that opportunity and, you know, to go from a story stock to a growth stock to where we had to start making real cuts, real consolidations 2 and a half years ago that most CEOs weren't gonna see. It's not 'cause I'm smarter, it's 'cause I've taken that beating, right? I went through the exact same thing in Digital Turbine where literally I was skiing down the mountain. I'm not a very good skier. I'm skiing down the mountain in March of 2008. And my stock drops from $600 million to $40 million, right, in the 12 minutes it takes me to get down, down the mountain. Yeah, I could tell you, I could tell you it wasn't an easy ride down. The phone's ringing off the hook. But what you have to do is you have to, you know, afterwards, you got to grab a cocktail probably, but you gotta then 10 minutes later, you got to go, okay, what am I going to do to turn that?

Right?

So we did is we took 30, $540 million of costs out of the consolidated businesses. Some of that was going to happen anyway, right? So it was going to happen because of the 7 acquisitions, now 8 acquisitions we've done. But some of you had to do and you had to move quick and we moved quick and we moved nimble and we survived and we rebuilt our balance sheet and we got great partners both on, again, on the board side and the management side. And we had to, we had to lose some really key employees that were brilliant people, helpful, but they were unaffordable. During this time, and they were more set for the live business than were for the digital business. Right? And so when COVID hit, you had to make those changes and they're hard. Right?

Absolutely.

They're, they're learning experiences and they're hard.

Right. I'm curious, you move quickly, especially when you're thinking about acquisitions. What's your due diligence process to be able to find those distressed companies where you can find the 5 or 6 chess pieces that you can immediately move around to start getting things to work. How do you go about checking companies out?

Remember, I mean, we were in the most robust market in the world an hour ago, right? It was like, it was really hard to find anything, but there's always a diamond in the rough. And, you know, we've been good to people. We've been— bankers have made a lot of money with us and, you know, and Wall Street's made a lot of money with us. So a lot of things come our way and, you know, and we look at assets and, you know, candidly, when I bought PodcastOne, when I bought Slacker, right? You had 3 massive funds, Columbia, Mission Row, right? They saw a better opportunity to ride with me and for me to take the baton and really spend the time trying to build this than trying to do it themselves and continue on their journey. They had already spent $180 million on the company and hadn't figured out how to get profitable, right? We took it to profitability in the first year.

Wow.

Right? When we bought PodcastOne, I bought it from a mentor and genius named Norm Pattitz. Norm had built Westwood One, had been a pioneer in radio, had been a pioneer in podcasting, really the founder of the podcast industry. And he brought Adam Carolla in, right? It was the first, really one of the first podcasters ever moved from radio to podcasting. And, you know, when we, um, he had a banker, they came with a big valuation. I said no. I said no 7 times, and the bankers weren't happy with me. And then I got a phone call from Norm, and Norm called me, and it was a, it was the beginning of COVID We walked with masks on, but literally for 3 days, spent hours together just taking a walk and talking. And we shared the same passion— creator first, right? Number one, if you focus on creators and you treat creators right, you got a chance of really winning. So we shared that same passion. And, you know, when he had done enough due diligence on me and we decided to roll it in for all equity, so we merged that, merged the companies in, and Norm wasn't going to take a major role. I made some changes and helped him with his life to create some things for him and bring him back and bring him back in in a capacity where it was great. He was a great help to me and educating me on the radio. And for that, he's unfortunately got sick again. And he's now passed. For that, in honor of Norm, we changed the brand of the company, right from we we changed it from LiveXLive to LiveOne using his Westwood brand, his PodcastOne brand, and honoring him and honoring his family and all the great things they had done in radio and great things they'd done in audio. And, you know, I just hope I, I hope I could do 10% of what he's done in audio. If we do, we're gonna have a very, very successful company.

Good for you. So as you think about all this, what do you think is unique about you that you bring to the table that has made this massive projects successful?

Well, it's great. I, you said before you read the article, so I outwork everyone, right? I take that line right from, right from Michael Jordan, right from Kobe, right? You know, I'm a big basketball fan, but I'll give you many others like that, right? Mark Wahlberg. My line is always, I just outwork everyone, right? You know, on my team, there's not a single person on the team who wouldn't go, Nobody works more hours than Rob, right? You know, we started this morning. I had a big thought this morning of something we could do. I started my team at 3:45 this morning, right? So, and I was in the gym, and I was in the gym at 5:45. So we just got work, everyone. And then the second thing is I'm dyslexic and ADD. So I had to figure out— I couldn't make it through school. So I had to figure out different methodologies, right? You know, my brother was accepted into Harvard Law School with a 48. I said, that guy, 2 years older than me, I'm not letting him get 4 years ahead of me. I better get working, right? Because, you know, I'm also, I'm also, I'm about winning. Right. And so I'm not going to give up winning. So, you know, I have this crazy methodology that I believe if you do great, 5 great chess moves a year for 5 straight years, you can create a multi-hundred million dollar business to a multi-billion dollar business. Make mistakes. Learn from your mistakes, but make sure you don't do anything tragic. All right? Don't, don't take a swing that's gonna put your company out of business. So be con— be conservative and aggressive at the same time. Step on the gas when you can and step on the brake when you have to.

Right now, it, it's so intriguing. I was smiling when you're saying I work harder than anybody else because when people used to ask me what made me a successful trial lawyer, I said, I just outprepare everybody. Not that I'm smarter.

I just work harder.

Yeah. And that's the truth.

That's, that's why, that's, that's why you and I are friends.

I know. I mean, you know, that's the secret to this and so many people don't get it. And they're not willing to work so they don't reap the rewards. One more question. I'll let you go. What's one thing about yourself, Rob, that we would never know about unless you revealed it to us?

Well, I would say the biggest thing I'm, is, is, is my family. Right. So that starts with my wife and my children, right? I live for them, right? I live and die for them, right? So, and I treat my team the same way, right? My company, everybody that works here. If you get an opportunity, if you ever come through LA, you'll see, you'll see, you know, my CFO comes with his kids all the time. My kids are all the time. So it's not just how hard you work and how much work you put into it. It's actually how much you care about each other. And if you care about each other enough, you're going to do something really special. And I truly believe that our team really genuinely cares about each other that much. And my management team, when you look at our podcast team, Kit Gray, Eli, and Sue McNamara, right, one comes out of iHeart, one comes out of iHeart with Bob Pittman, the other comes out of Howard Stern and, and Mel Karmazin, right, at Sirius Radio. And the other comes out of Norm Pattitz's team, Westwood One, right? Same thing, my Slacker team, most of that team was here before me. I, and so I try to treat everyone, I try to treat the people that are working hard for me and care about me. I try to treat them as part of my family and have them as my extended family. And yeah, that's how we run our company. And I think that's why, I think it's why we're still here. And I think that's why we're that special.

Wow. Well, thanks a lot. This has been a great conversation. Great meeting with you, Rob.

Really a pleasure.

Doug Noll here. Thank you so much for listening to Listening with Leaders. If you are a successful executive leader who would like to be on this program, please visit podcast.dougnull.com/podcast. If you got something out of this interview, would you please share this episode on social media? Just do a quick screenshot with your phone and text it to a friend or post it on the socials. If you know someone that would be a great guest, tag them on the social media to let them know about the show and include the hashtag #ListeningWithLeaders. I love seeing your posts and guest suggestions. We are regularly putting out new episodes and content. To make sure you don't miss any episodes, go ahead and subscribe. Your thumbs up ratings and reviews go a long way to help promote the show and mean a lot to me and my team. Want to know more? Go to my website, DougNoll.com, or follow me on LinkedIn, Facebook, and Instagram. That's @DouglasEnoll. Thanks for listening, and we'll see you on the next show.