Sex, drugs and rock ‘n’ roll. Nowhere in that holy trinity is there any mention of online retailing or community building. And no wonder: for decades, they were irrelevant to anyone intent on living the lascivious life of a rock star.
But along came the Internet. And then came Kevin Leflar.
Leflar is a former band manager turned tech entrepreneur who envisioned a marriage of worlds when he founded OfficialCOMMUNITY (The Official Community Corp.) in 2001. His proposal: turn aging but still active recording artists into their own retail brands, sell prime concert tickets and merchandise on their websites, and facilitate fan and artist interaction in a branded community setting.
Leflar thought that he’d found the stairway to financial heaven, but he’d neglected to account for the tendency of rockers to march to the beat of their own drummer. “The music business is weird, because you have to allow for heroin addictions, anti-social behaviour and some arbitrary rich-dude behaviour that’s kind of flaky — and those are your core customers,” says the 43-year-old president and CEO.
When Leflar finally got in the door after years of rejection, proving to veterans such as Alice Cooper, Ted Nugent, Mark Knopfler and Blue Rodeo that his all-in-one solution was a winner, business soared. OfficialCOMMUNITY (OC) enjoyed 2008 revenue of $4.2 million, up from just $201,000 in 2003; that performance earned the company 39th place on this year’s ranking of Canada’s Fastest-Growing Companies.
But before Leflar could get on the growth curve, he had to surmount a common entrepreneurial obstacle: the inability — if not unwillingness — of prospective customers to see the potential in a revolutionary new concept for which there were no comparisons. Making matters worse were typical rock star hang-ups — either they’d been burned in bad deals before or they simply had too much money to care.
To save OC from being a no-hit wonder, Leflar tailored his pitch to the idiosyncracies of his iconic targets and demonstrated results that could rock them to their stadium-filling cores.
Leflar’s quest began in the mid-1990s, when he ditched the music business after serving as the manager for the Canadian hard-rock band Big House and as a substitute tour manager for Canadian folk-rockers Blue Rodeo. Big House’s albums delivered Nirvana-like edge without the album sales. And, as Leflar recalls, “I had a lead singer who had a penchant for public nudity, and it turned out the Germans didn’t think it was funny when you did it in the wrong place.”
Tired of babysitting rock stars, Leflar, a former mechanical-engineering student at the University of Alberta, transitioned to the tech sector and worked as a project manager and programmer. Then came his eureka moment: he realized he could combine his tech and music backgrounds for the benefit of artists and their devotees.
In 2001, Leflar began working with a sociologistand a psychologist to segment fans into groups from hard-core to casual, find patterns in their online behaviour and figure out how to serve all these audiences in a social setting. The answer, he determined, was to form “official communities.” By uniting people from various unofficial fan sites under one virtual roof, he could help them interact with one another and give them access to concert tickets before they went on sale to the general public. In return, he’d pocket a 15% service charge on each ticket sold.
Leflar raised much-needed startup capital from angel investors in the Waterloo, Ont., area who’d made their money in the tech sector. He knew he’d have a better chance of selling his concept to wealthy individuals who knew the online space, and he solidified their interest by promising solid returns and, naturally, some rock ‘n’ roll perks. “If you’re going to play in the angel space, this is cooler [than other investments] because you get good concert tickets,” says Leflar.
Then he called for a little help from his friends. Leflar asked Blue Rodeo to test his official-community concept in conjunction with their 2002 tour. He knew that bands typically have the right to sell 8% to 10% of the tickets for any of their concerts and could demand access to select blocks of seats — in this case, the best in the house, which he offered to registered Blue Rodeo fans through the band’s website. The tickets sold out once word spread that signing up for the band’s newsletter would give fans advance access to prime seats. The scheme generated $250,000 in ticket sales from a site that had previously moved about $2,000 in merchandise, while Blue Rodeo’s mailing list grew by 1,000% over the course of the tour.
By selling the best seats to hard-core fans, Leflar inadvertently improved Blue Rodeo’s on-stage product as well: “I said, Look at these numbers,’ but [band member] Jim Cuddy looked at me and said, Who cares? That’s the best tour we ever did. You put real fans in those seats.'”
With proof of concept and a customer testimonial in hand, Leflar reached out to other acts. In 2005, he signed up Newfoundland’s Great Big Sea, whose members had been impressed with the online success of their friends in Blue Rodeo. That same year, Leflar met Bill Siddons, former manager of The Doors and Crosby, Stills & Nash, at the South by Southwest Music Festival in Austin, Tex. According to Leflar, the veteran manager has a contact list “I would kill for.” Siddons was impressed by OC’s potential and joined the firm to help market it to industry players in Los Angeles, opening doors that had previously been slammed in Leflar’s face. Leflar also hired a London-based ex-music executive to help approach acts in the U.K. and Europe.
OC’s watershed moment arrived later that year, when Leflar used another industry connection to contact Paul Crockford, U.K.-based manager of Dire Straits frontman Mark Knopfler. At the time, Knopfler’s solo website was untended and unprofitable. Crockford didn’t know much about the Internet, but he did like the thought of commercializing the Knofler site and making it more fan-friendly. Leflar made his pitch: he would take Knopfler’s website, charge nothing in up-front redevelopment costs and make it profitable in exchange for 15% of gross sales generated by the site.
“The key pitch for me was that they bore the costs,” says Crockford. “There was no risk for us. If it all went bust, there was no downside.” In retrospect, it was all upside: online sales of Knopfler’s merchandise and CD sales during his subsequent tour topped $1.7 million.
Landing an act of Knopfler’s stature opened the door to other still-popular artists. Among them: current OC clients Ted Nugent and Alice Cooper, and prospective customer George Michael, who is currently in the final stages of negotiations with OC.
“Once I got Mark Knopfler, it was a lot easier to get the meeting with George Michael, because they both play arenas and charge high ticket prices,” Leflar explains. “But up to that point, bands would say, We’d be the biggest act you have.’ Nobody wanted to be first, but it seems that a lot of people are interested in being second.”
Offering a risk-free, boutique service to artists is one thing, but meeting the heightened expectations of rabid fans buying directly from their favourite band is something else altogether. To satisfy their demands for the perfect retail experience, Leflar devised a plan to offer what he calls “super-high-touch customer service.” OC employees — who currently number 40 — routinely place direct calls to customers who complain about undelivered concert tickets or receiving damaged merchandise from their rock heroes. In both cases, the goods are delivered immediately or replaced without question.
As the business grows, Leflar is looking to max out his roster at 40 to 50 artists and is considering expanding the OC concept to include comedy acts and, possibly, sports teams. While the company posted a loss in 2008, Leflar predicts 2009 will end in the black as OC adds to its stable of highly profitable acts like Knopfler. “In 2009,” Leflar says, “most artists who have websites have tried something with one of our competitors, but they’ve produced minimal results and they’re looking for something more.”
Still, no matter how large the company becomes, Leflar says, he’ll continue to employ the same approach to selling that he did in the early days of OC: focus on the underlying value proposition.
“If you can offer [clients] some degree of control, you’re not asking for any money and you have good, credible references, you’re going to at least get to the maybe’ stage,” says Leflar. “You have to have enough of those that some will say yes.’ It’s a really hard road selling to fickle people who have never bought anything and don’t think they have a problem.”
Familiarity breeds respect: Leflar began seeing results when he pitched his newfangled service in terms his potential customers could understand. From the outset, he proposed a music-industry standard 85/15 revenue split, kept high-tech jargon to a minimum and offered a no-risk proposition: “I told them the worst that can happen is they end up with a better website and it costs them nothing. But if it works, I’m going to want to own some of it. They said, OK, we’ve got nothing to lose.'”