Stories
Stories
The Vinyl Revival
Dan Morrell: Hi, this is Dan Morrell, host of Skydeck. When Caren Kelleher (MBA 2010) was at HBS, she started managing bands, mainly as a way to stay involved in an industry that she loved. It was right around the time that digital music was making inroads, and Kelleher started to notice the impact it was having on her bands, who were having a harder time breaking through the noise. At Google, where she helped launch Google Music and Google Play, she had a front row seat to the digital music revolution, but simultaneously she also saw another surprising trend taking place, a growing demand from both artists and their fans for vinyl records.
That ultimately led Kelleher to launch a record-pressing plant, Gold Rush Vinyl, in 2018, and dive headfirst into the world of analog music. In the last year, she also acquired Waterloo Records, an iconic music store in Austin, Texas. In this episode of Skydeck, Kelleher talks with senior editor Jen Flint about the resurgence of vinyl in the era of streaming.

Caren Kelleher (MBA 2010). Photo by Jeff Wilson
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Jen Flint: Why don't we start with your story? Tell us a little bit about what drew you to music in the first place, and did you always want to be an entrepreneur?
Caren Kelleher: My love of music, and I'd say entrepreneurship, started very young. I grew up in a household full of music. My dad was a real rock-and-roll guy, and started teaching me about The Beatles and David Bowie and Led Zeppelin and Rush, and it was a special language in my family music. My interest in the music business, though, came from pop culture, largely, at first a television show in the '80s called Jem and the Holograms.
Jen Flint: Yes.
Caren Kelleher: I love Jem and the Holograms. If you don't know the plot, it's about a woman whose father, who's a philanthropist, dies and leaves her an AI machine that turns her into a rock star, but she also runs a foster home. Anyway, I was just really interested in the business of music from that show, such an odd thing, and just business in general. When I was probably eight or nine, my parents started introducing us to the stock market. I was trading stocks with my allowance money by fourth grade. I'll tell you, you don't make a lot of friends in the cafeteria trying to trade stock tips, but it wasn't until the Beatles Anthology came out in the '90s.
I was so fascinated by the business of The Beatles and how they were able to take their rights back, and how creatively prolific they were and commercially successful. It was the first time I thought, "Maybe I could have a career in music business, because I don't have a talent for it, but I love entrepreneurship." I came up with my first business idea, which was a Beatles-themed Hard Rock Cafe-type restaurant called The Octopus's Garden. My parents were like, "This is a great idea, we should get it protected, the copyright and all that, your idea," and we got a cease and desist letter from The Beatles.
Jen Flint: Very quickly.
Caren Kelleher: That was, yes, my first foray also into business law. Yeah, from an early age, I think I just knew this is where I want to be.
Jen Flint: What was it about vinyl that made you decide to really devote your time there, having been on the other side?
Caren Kelleher: My time at Google was so incredible, and I worked with some of the smartest engineers on the planet. One thing I was seeing, though, was for the fractional royalty rates artists were making digitally and how easy it was to self-distribute, the democratization, so to speak, of digital music was making it really hard for artists to make a living, and yet at the same time there was this swing back towards physical goods. We've seen that with books, with video games, with now vinyl, that there was simultaneously a demand from consumers for physical goods and also an opportunity for bands to make more money.
I think the aha moment for me was I was giving a presentation at Google about the state of the music industry, and to just illustrate the monetization differences, had an infographic up that showed 100 vinyl records is equivalent to about 2 million YouTube views, when you think about the money in the artist's pocket. I was like, "I know that," because I've seen that when the bands I work with are selling vinyl at shows, that's real cash in their pocket to help them get to the next venue. They're not waiting on these royalty checks.
Yeah, it is a high-margin, albeit lower-volume business, but for people with super fan opportunities and fanbases, that presents a real opportunity. Yet there was no manufacturing capacity, so therein was the problem. Any of the artists I was trying to get vinyl made for were facing eight months to a year delay to get their records made.
Jen Flint: Say more about that. Tell us about that landscape of manufacturing, and what that looked like when you started Gold Rush in 2018 and what you've seen since then.
Caren Kelleher: Yeah. I started poking around in the vinyl industry to understand why these bottlenecks were happening, maybe like 2014, 2015. What I learned, understandably, is that as vinyl had gone out of fashion in the '80s and leading into the '90s, most of the pressing plants, a lot of which had been owned by major record labels, had closed. We'd moved to the cassette format, then to CDs, and suddenly there wasn't much manufacturing capacity anywhere.
I think when I started Gold Rush, there were only 16 facilities in North America to manufacture vinyl. The bulk of it was, and is still, manufactured in Eastern Europe. They had not given up on the vinyl format during the Cold War, so those factories were still up and running, but to get the machinery, the expertise in North America was really difficult. The artists that didn't have major record labels negotiating on their behalf for manufacturing capacity were having to go to brokers, waiting on these long lead times, expenses, the quality was terrible.
That for me felt like an interesting challenge and also an opportunity. Myself, I was getting burned out on working on digital products and keeping people glued to their phones, and so to have the chance to pivot into something where I could demonstrate I could raise money, I could manage a team, I could build a brand, felt like a once-in-a-lifetime opportunity for me at that time in my life to say, "Maybe there's something to this manufacturing side."
Jen Flint: At least originally, you were really focused on indie artists, and you found a niche there.
Caren Kelleher: Yeah. The original focus for Gold Rush Vinyl was high quality, fast turnaround, because the problem I had identified from working with so many independent artists is, as digital content moves so quickly, you could suddenly have a hit on your hands and then be waiting to get merchandise made. For example, I was working with a fantastic band out of the Bay Area called The Family Crest. They were discovered by Bob Boilen at NPR Music and got a Tiny Desk performance, and suddenly had all the things. It was like lightning in a bottle. Huge tour, commercials, and yet there are eight members of that band and a tour manager and an agent. If you're splitting that money on tour, you really need merchandise like vinyl to survive, and we just could not find anybody to manufacture it.
I thought, "What if we, instead of taking so many variable-quantity orders and dedicating ourselves to high-volume, low-margin business, instead didn't run the machines 24 hours a day, but left capacity for people who had a willingness to pay and a need for product in a timely manner?" The model I had drawn up was to do only turnaround times of four to six weeks and under 1,000 units, because typically that's what someone needs when they have a rush order. Gold Rush was the initial plan, and then the pandemic happened.
Jen Flint: Then the pandemic happened.
Caren Kelleher: The one thing I didn't have in my contingency plans for my business model.
Jen Flint: Talk a little bit about what happened to vinyl. What did the pandemic demonstrate about people's willingness to consume physical media?
Caren Kelleher: I've been right about a lot of things when it comes to the vinyl trend, and I was wrong about one thing and thank goodness. I was so scared when the pandemic happened that vinyl was going to go by the wayside, because so many of my clients, at least, were using it for tours. If artists weren't touring, they didn't have audience to sell it to.
What instead happened, thank goodness, is people were spending a lot of time at home and discovering new hobbies. If it wasn't making sourdough bread, it was buying vinyl records, and the demand for vinyl went through the roof. It also was really the only economic engine for musicians at that time really, besides putting out new music. You couldn't be in studios, so people were at home recording. You couldn't be on the road. Merchandise and finding new ways to package it was what was keeping artists paid. We saw such a spike in demand that our turnaround times ballooned.
Simultaneously, we had a global supply chain crisis where the inputs we used to make our records ... PVC, nickel, cardboard, all of those things ... were being stuck either in ports or gobbled up for other uses during the pandemic, such that we went from a six-week turnaround time to a twelve-month wait on any products put in at Gold Rush. It forced me to look at how we pivot the business model and also how do we diversify the business model, because we can't be just solely dependent on manufacturing revenue when so much in our supply chain is out of our control.
Jen Flint: Meanwhile, streaming subscriptions are still going through the roof. Think about the balance of the two, analog and digital. Are there any things that streaming gets right for music fans or for musicians, and what are the limitations?
Caren Kelleher: Yeah, you're certainly not taking a vinyl record to the gym on the treadmill. I joke with our team we should do an April Fool's video like that, "Portable vinyl." The utility of digital is important, and discovery too, right? The only reason we can serve what we would consider long-tail indie artists is because they are finding fanbases online, and you don't need that many solid fans who love you, whether you are in their city or not, to make a living. Where we're seeing the struggle with digital though is, because anybody can put their music up online, there's so much noise.
We're also starting to see the services really have the same functions. You can make a playlist, you can save it, you can share it with a friend, and so it makes the services really difficult to differentiate, and the competition in streaming is very high as a result. How do you make your product better when it does the same thing as the other products do? Whereas vinyl, you can be entirely creative with the packaging and the variants you make, and that presents new opportunities.
I think that's what I'm hearing when I listen to earnings calls from a lot of the major music companies, is they're now saying, "Okay, we really have to pay attention to super fans and segmenting our fans, knowing that some of them are just going to stream and that's totally fine, and some are going to want the box set and the limited-edition merch, and there's a whole mess of fans in between that we can serve."
Jen Flint: From the outside, it almost looks like analog and digital are in opposition of each other, like a David and Goliath situation, but are there ways in which the two formats are working together rather than in competition with each other?
Caren Kelleher: Yes, certainly. I think that vinyl is for in-depth playing, and it's sentimental. It says something about you when you own a record. Streaming is really a mechanism for discovery for a lot of these artists. I listen to a lot of digital myself and it's convenient, and has turned me onto tons of artists I wouldn't have known otherwise through smarter recommendations. Vinyl, it's not a convenient form of listening. I love it, but you're dedicating yourself to 20 minutes, you're going to get up and move that record needle and flip that record. It's a very active listening experience whereas streaming is very passive, unless you want it to be more active.
Jen Flint: Another big development for you in the last year is that you have become a co-owner of Waterloo Records, which is an iconic store in Austin. Talk a little bit about that decision, and what it means that a store like Waterloo has persisted in spite of so many shifts in retail and technology. Talk about what physical music stores mean in the future.
Caren Kelleher: The opportunity to own Waterloo is such a once-in-a-lifetime dream come true, and for anybody who's been to Waterloo in Austin, it is such a special place in that community, as all record stores are. What I'm starting to see with physical, and what interested me in Waterloo, is here you've got a record store that's been around for 43 years, has loyalty from artists and from the community, and simultaneously people looking for a third place where they can go and gather that's not a venue.
In a town like Austin that is a music town, there isn't really much music tourism. You can go to shows, and that's kinda it. We really want Waterloo to be a place where not only do you buy music, but you interact with other people. We have artists in there, to make it a place in the community that's really important and serves as what John Kunz, the longtime owner of Waterloo, has called the town square for music.
We're seeing that trend across the country. Just recently, Rough Trade, which is a highly respected record store, reopened in Rockefeller Center. We're seeing more stores popping up in small regional pockets. Just a really interesting development alongside books, like Barnes & Noble expanding. All kinds of indie bookstores opening. There is just something really interesting happening with analog media right now, and I'm thrilled that we had the opportunity to buy Waterloo and to take it into its next chapter.
Jen Flint: You've built your career in music because you love music. Has that changed your relationship with music? What is it like to work in the industry that you love so much?
Caren Kelleher: It is really hard to love music when you know how it's made and all of the pieces of it, but what I love about music still even on my most cynical day is, if I go to a show or go into Waterloo and see especially young girls really taken by music and seeing one of their favorite artists, that to me is what makes music special. To be able to facilitate those moments keeps me going when I feel like, "I just can't go to a show, I'm going to run into too many people I know and have to talk business," and I sometimes just want to be a fan. I did recently go to ... I felt silly ... I went to a psych fest in Austin. I love psych rock music, and I had a hat on and glasses and went by myself and was like, "No one talk to me about business, please. I'm going to pretend I'm an incognito here," just so I could enjoy the music, just take in a show.
Jen Flint: Yeah. Are there any other moments for you, whether at Waterloo or Gold Rush or at a show, that make you think, "This is why I'm doing what I'm doing"?
Caren Kelleher: When we have artists come back again and press records at Gold Rush, it reminds me this is having an impact on them. Because it's one thing when you say on paper, "Yeah, this will help you make money," but when we have independent artists, I'm saying ones that are not signed to a record label, that you might not know outside of the Austin community, who now are pressing their third or fourth record with us ... and I can think of at least three dozen that's the case for ... that makes me feel like this work is worth it, to help those musicians continue to live in a city that is growing rapidly and to find their way through.
One of the other reasons I named the company Gold Rush was I was really inspired by the pioneering spirit of San Francisco when I was living out there, and thinking about musicians today really are pioneers, driving across the country looking for gold, so to speak, as they're trying to figure this all out. This is a Wild West of an industry right now and so much is changing, especially when you consider AI, that what can you focus on? You can focus on your fans and the experiences you deliver to them, and that we get to be a part of that is incredibly special work.Skydeck is the Harvard Business School alumni podcast featuring interviews and insights from across the world of business. It's produced by the External Relations Department at HBS. Our audio engineer is Craig McDonald.
It is available on Apple, Spotify, and wherever you get your favorite podcasts. If you could take a moment to rate and review us, we'd be grateful.
For more information, or to find archived episodes, visit alumni.hbs.edu/skydeck.
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