Napster tunes in to a new attitude

Just as Las Vegas went from being a gangsters’ paradise to a big business destination, so too is Napster in the midst of a remarkable transformation.

The story arc isn’t complete, and who knows what Napster’s third act will bring? Anything from Yahoo!’s recently announced music service to security failures to a Supreme Court decision could flat-line the firm with the famous feline logo. But right now, the cat is still in the picture.

At last report, Napster claimed 410,000 customers, spent $30 million on an ad campaign that included a Super Bowl spot, cut deals with record labels and universities, and was Nasdaq-listed.

Leading this digital-age revival is chairman and CEO Chris Gorog. Variety readers probably know Gorog from his studio days, when he worked for Disney and Universal and ran ITC Entertainment Group. Gorog moved on to lead Roxio, a compact disc recording concern that in 2001 he helped take public.

After Napster’s fall, Gorog’s Roxio snapped up the pirate co.’s name and logo, as well as the legend — and baggage — that came with it. Soon, Gorog and colleagues shuttered Roxio and adopted the Napster name to revisit online distribution. None of this was done lightly, Gorog explained to me when I visited him at Napster’s music-themed Westside Los Angeles headquarters.

“We were waiting for the right time,” Gorog explained. “We were waiting for the deal-making and the policy-setting to get right.”

By “getting it right,” Gorog meant that the record labels had to acknowledge that early file-sharing was, in his words, a “miserable consumer experience” saddled with “deplorable residuals.”

Napster was ready to reanimate, Gorog said, as soon as the labels realized: “We’ve got to cooperate with the legal distribution, or we’ll just have our business destroyed by piracy.” He added: “I always took the view that we weren’t going to spend a lot of time marketing to the stealers.”

In retrospect, Gorog’s plans and execution make sense. But at the time, they carried serious risks. That’s no surprise given Gorog’s history — the man’s a corporate daredevil. It’s a trait that dates back to his previous jobs — as well as the reason he departed from the Hollywood establishment.

“What I do is very entrepreneurial; (I act) very much as a change agent,” Gorog said. A veteran of Disney and Universal in the 1980s and ’90s, he didn’t think either company was sufficiently brave.

“It can be very dangerous being a courageous person in some of these organizations,” he said. “It can be deadly for an organization to have a culture that persecutes the courageous.”

Gorog said he practices what he preaches at companies he operates — rewarding certain failures and not punishing mistakes. Gorog also said he’s confident that he does one thing well: intervening within an organization in an entrepreneurial manner.

So how big can Napster become? Does he aim to turn the firm into a creative conglomerate?

“I think the upside for Napster is enormous in the online music business alone,” Gorog answered. “That said,” he later acknowledged, “I think the opportunity is considerably more expansive than that.”

Will Napster launch a record label? The company has “no immediate plans.” Will Napster deliver videogames? That’s a direction to “consider very seriously.” How about Hollywood’s holy grail, Web-based motion picture distribution? “It’s not on our immediate roadmap,” Gorog said.

In politics, the above might be labeled nondenial denials. Anything’s possible from this maverick businessperson, who’s reformed a potentially highly profitable former pariah.

Pressed to explain his plans for films on demand, Gorog said, “By the time we look at entering the delivery of movies, we will have a massive subscriber base that’s interested in entertainment products. So I think it’s going to be a very easy leverage point for us to consider moving into electronic delivery of movies.”

Competitors, this could be a feint. But consider yourself forewarned. It might be time to consider an acquisition of Grokster.

(Stephen Unger is a leading exec recruiter. At various times, he led the media and entertainment practices of the world’s three largest executive search firms. He can be reached at sa.unger@verizon.net.)