Vertical Integration – DS611

Hey, what’s going on? Welcome to the Doug Show. I’m Doug Huntington, and today I’m gonna go through some random topics. I have a handful of notes. I think I’m, perhaps I’m due for one of these random kind of episodes, and some will be. Stories of travel and conferences. And then another one I intended on maybe having it as a full episode, and then I realized I could just abbreviate it and hit the high points and still tell you about vertical integration.

But I’m gonna relate it back to music and maybe the music industry. I’m not part of that industry, but I listened to some podcasts with musicians and there are marketing stories within, also around the, the podcast, but the, the topics that I’m covering and the things that I’m doing, which I’ll just jump into that since it’s the last thing that I just mentioned. I. Have not been doing as many interviews recently, and part of it was like kind of scheduling and then I get a decent number of pitches, but usually those are not people I want to talk to and through.

Mentioning AI and using AI for apps, and developing apps and coding, a few people from the audience stepped up and said, Hey, I am using AI to build apps and I don’t have a software background. Or maybe I do have a software background and here’s what I’m doing. So last week I published an episode with Elliot, which was great.

Awesome stories. I’ll probably invite him back on because of his enthusiasm and he’s working on cool things and he was fun to talk to. And Tony is, um, coming up, I believe next week, and he has a few apps that he’s working on too. He does have more of a technical background, but that’s coming up for next week.

All that to say, there are plenty of, you know, different people that I can interview and it has been fun to chat with people again. It’s my own choosing and there’s a, there’s a pull and a push situation happening here where it’s fun to talk to people and have conversations. About interesting projects that they’re working on.

However, scheduling a bunch of stuff and having emails going back and forth, that is less fun and I don’t really enjoy doing that. That said, it’s not hard to schedule some, some interviews every now and then, and generally not a hundred percent of the time, but generally. People have better microphones these days than they did before.

Depends on who you’re talking to. But in chatting with Elliot and Tony, they had like pro level microphones, so like it worked out pretty well. Not everyone does. And sometimes I’ve done an interview and I’m like, oh shit, the audio’s a little, it’s a little bit rough. And I know it while I’m doing the interview.

I feel like, and as a podcast listener myself, I feel like most of the time if your audio is good, then the listeners will go along for the ride and every now and then, it’s not gonna be great. And sometimes you get a cool story from someone. They don’t have a pro level microphone. That’s okay. Because there’s some, you know, audio processing that I could do to make it a little bit better.

So we’ll see how it goes. And that said, if you think you have a, a fun story that could go on the show, and particularly if you’re not trying to promote anything specific that works best, I don’t, if you’re promoting something, then it’s a, we will have to talk about, it has to be a, a really good story. But if you’re just telling a story, um, then.

Uh, people wanna hear from you and, and what I want to hear from you. So feedback at Doug show. I mentioned it in the interview with Elliot, but like, kind of interesting. He’s a podcast listener, but he doesn’t sign up for email list, like he doesn’t, you know, see other pieces of the pie. He’s just a podcast person.

So it’s important for me to make the, the call to action here and ask for folks to shoot me an email feedback at Doug show. I do have a voicemail number too, so if you have questions that you want to send in, that is a welcome. Welcome way to do it. The other thing, speaking of recording podcast and not having ideal audio, I have two stories around that.

One of ’em is my other podcast Mile Hi-Fi, about personal finance and post financial independence. I recorded with one of my co-hosts that sits in occasionally and. Uh, I thought everything went fine. She, we were like, Hey, is audio fine? We always ask before we record and yeah, everything seems fine. In fact, when I listened to it, uh, briefly afterwards, I was like, ah, sounds fine.

I got maybe three emails that said, Hey, it sounds like your audio’s a little messed up. Like, there’s a blanket over you and there’s no trouble. Like something’s a little weird. And I was like, oh, shoot. And, and I have a, a little like preamp over here, which is not hooked up. I didn’t have the power supply, but it turns out, uh.

This Sure. MV seven, like I could just plug it right in and it should work fine. I don’t need to have extra processing, but this is a JHS color box, which I’ve heard good things about, and I was like, you know what, I’ll, I’ll try it out to just get the, you know. 1%, 2% improved audio. I’ll grab that and potentially if I’m recording, uh, music and if I’m plugging my guitar in, I could use that to, um, take care of some of the preamp equalization.

I really need to do that. It’s like practice more guitar, right? Like it’s not the equalization that’s holding you back and it could also plug it in and use it as a guitar effect pedal. But anyway, I think I had a setting wrong on there where essentially like almost all of the trouble was removed and. It was a little embarrassing after doing the whatever, 900 episodes of podcast and recording so much, and like many things, the more complicated you make something, the more likely you are.

To make a mistake and today, uh, like my power supply is in another spot, and I was like, I don’t want to get it out. In fact, I’ll just plug this microphone directly in and it’ll probably be fine because that’s how I recorded hundreds of episodes before and I didn’t need the extra. Equalizer, um, settings in there.

In fact, it just gave me a way to fuck it up. So today we’re just plugged directly in and it’s probably, um, a little bit mid scooped is what I hear about these microphones, but probably you’re not gonna notice it all as long as I’m loud enough and. I don’t think that has ever been an issue. So anyway, I goofed up a little bit on the audio of that story one, story two, I was out of town recording something remotely and you know, another example of just making things more complicated.

I forgot my USB hub because my wife has been borrowing it for her iPad to hook up an external monitor. So I forgot to put that in my bag. It usually lives inside my bag. Where I keep my laptop and when I travel I can bring my little audio interface, a couple microphones, a couple cords, and I could plug it all in and essentially have like a mobile studio just like I have here.

I use the same software and all that kind of stuff. However, I forgot that USB hub, so I was, I was a little bit, um. Freaked out because I had a special guest, and I’ll tell you where I was at in a second. I had a special guest, kind of a big deal, one of the speakers at the conferences that I was at, and I was gonna record in the lobby, and there’s limitations with that.

So number one, I forgot a piece of my gear to. Plug everything in. So I was like, okay, what? What can I do? There’s a target right next door, I’m gonna go run over there. They didn’t have a USB hub, so I had to improvise, and I was like, I’ll just record it on my phone and I haven’t. Audio interface recorder.

It’s a pod track, P four, A Zoom, uh, pod, track P four, which is great. It works great in the studio. I’ve traveled all over with it. It’s very lightweight and kind of, uh, you know, almost plasticy, but I’ve thrown it in my bag and traveled and flown with it, and it’s totally fine, totally durable for like normal use.

I think. Um, if it broke, I would buy another one. Like it’s, it’s that good. So anyway, I was like, I’ll just record it on the pod track. I’ll sync up the audio and stuff later, which turned out fine. I was able to to do that. Not a big deal. But that was another case where I was recording in the lobby of a hotel and in fact there was like music playing in the background.

I asked them like, Hey, I’m pretty sure you can’t turn this off, but can you turn it off? And they said, Nope. We have to like contractually, we have to run this fucking music or whatever. And the lady was like, believe me, if I could turn off the music, I would’ve turned it off a long time ago. So anyway, we made do.

It was a little bit noisy. I do have decent microphones, so like, it was pretty good. You can hear the, you know, bit of background noise. Occasionally somebody walks in, but it was relatively, you know, a quiet environment and, and that’s a good example where like I was able to do an interview in person with someone who typically only does remote interviews.

Now some people don’t give a shit, but I believe. And it’s more fun, but like if you’re able to record in person, generally it’s gonna be a better interview. You know, I got to shoot the shit with a guy for a little while before. We recorded, I mean like for a couple days, right? Like, so we were hanging out a little bit beforehand and then the day of, you know, we feel the energy, you could see the body language.

There’s a lot less talking over each other because you can see the body language and the conversation is just a little bit smoother, in my opinion, overall. So that was at the economy conference in Cincinnati. I’ve been to that conference five outta six years. I missed the first one as I wasn’t really in the, you know.

Financial independence, retire early space at that point. And it was also like March of 2020, so everything shut down like the next week or something like that. So I have attended all of them after that. I’ve met some of the listeners out there of this show, which is kind of interesting ’cause like this audience is a little bit different than the Mile High Fi audience.

However, there is some overlap. Like a, I would say a decent number, but they’re generally separate audiences. But I did run into, um, one or two people, like the first year that I went that were like, yeah, listen to the Doug Show. That’s cool that you’re here. I didn’t, didn’t realize it. And they had like websites on the side and they were like digital nomad type folks and pretty cool.

So this conference is typically, um, sold out early, I think. You may have a better chance getting tickets this year because of the way that, uh, Diana Miriam. Release the tickets and that sort of thing. So I believe the supply and demand curve is gonna change a little bit. Superfund Conference, if you are into personal finance, especially the retire early portion of it, there’s probably a good, I would say 25 to 25% to one third of the audience.

And the attendees are retired, like early retirees. And the rest are like kind of on the path. So if you are interested in that kind of thing, you’ll find your people there. If you’re interested in like just saving and investing most likely in index funds, those are probably your kind of people. Lot of fun.

Like I said, I’ve been many years and I’m gonna go next year. It’s a great way to see a lot of my old friends and meet new ones. It’s usually. Very tiring for someone like me, I tend to stay up a little bit too late and I have a couple too many beers often, although I’m, I’m learning though slow, extremely slowly.

I am learning to. You know, say no to that, those last couple of beers and then just go to bed earlier. It’s hard sometimes ’cause you see, you know, more people are hanging out later and later. Um, and funny thing, my roommate, I always share a room with the, the same guy, or at least we have for the last four years.

He is, uh, he’s a few years older than me, but the guy, he stays out so late, like he was the last one in. People tend to hang out in that hotel lobby. He’s like the last one down there like almost every night. So in comparison, I’m like, ah, I, you know, I went to bed a little bit earlier, but he was down there until three or something like that, and he’s like over 50, you know, come on.

It’s crazy. But I’m right behind him. Yeah. Anyway, economy conference is pretty cool. They usually have it, um, I guess it’ll be March, like 19th ish for next year and keep an eye out. You could look it up. Um, out there I’ll put a, probably I’ll put a link in the description, but super fun. You’ll probably find, um, folks that you wanna hang out with and do other things with, and you may think, uh, people just talk about money the whole time.

That’s not really the case. I mean, some people are more interested in the nuts and bolts. I hardly ever talk about. Money. It’s a great filter. I end up talking to other people about music or beer or other stuff like that, and it’s a really great way to connect with people. And then again, just a reminder of the importance and the value of like going to in-person events.

I’m sitting some out this year because of several years in a row of going to many events. So I’ve been to FinCon several times, maybe five times as well. And I think I’m gonna skip it this year. I’m not excited about the, the location in the time of year, so it’ll be in Palm Springs, which I hear is lovely and everyone has great things to say about it.

I’ve been nearby, it’s very close to Joshua Tree, like a couple hours away, so it’s like, it’s kind of a cool area, but it is in September. And while some people have said, oh, you know, it’ll cool off a little bit in September. I don’t know, man. It’s still gonna be like a hundred fucking degrees. Like it’s the desert and it’s September.

It’s still gonna be pretty fucking hot. So there’s much better cities to go. Like last year, FinCon was in Portland in September, and it was awesome. The weather was perfect. It was probably 30 degrees cooler than it’s gonna be. In, uh, Palm Springs and if you dig the desert and you don’t mind the hot, that’s fine.

I know a lot of it’s gonna be inside, but still the, the to and from and I’m sure people are like, oh, why don’t we, let’s walk a while and go to this restaurant and all that kind of stuff. That’s how it was. And, um. Austin a few years ago, that’s when I went for the first time and it was very hot in Austin.

It was like a hundred degrees and there was a lot of walking for me, just the activities I was doing. I don’t like hot weather that that’s my thing. Anyway, the point is in-person events are a great way to connect. You have probably seen me record episodes out there in person at those events, and it’s a really great way to connect quickly and then.

You’re able to whatever do, if you’re a content creator, you’re able to create that content with other folks and it’s a lot more straightforward to just say, Hey, let’s meet tomorrow. We’ll spend an hour or two doing this stuff and you’ll have a nice time. You’ll have a stronger connection. Overall, the main topic.

That I wanna cover today, even though I’ve already talked for what should be most of the episode is, uh, vertical integration. So I was inspired to do this topic because I listened to a podcast called, uh, Wong Notes. So Corey Wong, he’s a guitarist and he interviews other musicians, usually guitarists like probably 90% of the time.

And. It’s many high level, um, musicians. These are pros. Basically these are studio musicians, uh, touring musicians. And he interviewed a guitarist, a musician named Joe Bonamassa. And the punchline here is Joe Bonamassa has made a great living through being able to. Own the whole supply chain vertical integration.

And I’ll link up to the episode because he goes through the details. The thing is, early in Joe’s career, who I think he’s about my age, he might be a year or two, um, older or younger, I can’t quite remember, but Joe’s in his late forties say. He might be 50, but right around there. And early in his career, when he was in his early twenties, he was touring.

And I mean, he was, uh, a virtuoso guitarist. He was in the news and playing with, you know, huge names at, at the time when he was like a teenager. So Joe was starting to tour and the music business was kind of falling apart, like constantly. It’s still falling apart, right? But like in 2000. Five or so. He was touring and he was like, you know, making some money.

And the thing is, it was kind of like flat fees. And when you look at the number of people that were getting a piece of the revenue, it was a lot of them. And that’s the idea with the vertical integration here. So for example, Joe maybe would have. An agent to help him book shows. So the agent would interface with the venue.

In the venue. Let’s say it’s a bar that has a, a space for a stage, they would take a cut also. So maybe they sell the tickets and maybe they, they get a cut of the tickets, maybe they get, um, the bar revenue. So there’s that portion. Then Joe also. Maybe has a manager, so like a business manager to handle contracts and that’s separate from the agent.

The agent and the manager could be the same, but sometimes those are separate. So all of a sudden you have all these different folks that you have to pay and they’re not even performing. Maybe Joe has a couple other musicians with them, maybe bassist, guitar, another guitarist, whatever. There’s other folks there.

So there’s, um, the rest of the band to split the money with as well. So. You would end up. With a situation where, you know, Joe’s in his twenties, he probably never had like a normal job, right? As a musician. And they’re saying maybe the agent and the manager are saying, Hey, we can get you, you know, a thousand bucks to play the show tonight.

And you gotta split that with the band, but you get a thousand bucks and then you know the other. $1,000 is split among the other, um, people that are taking a piece of the pie. So the agent, the manager, maybe there’s the venue who’s taking some money as well, but you’re like, you get a thousand bucks and that’ll be good.

And I’m just making up numbers here, but at the end of the day, Joe’s making a maybe a few hundred bucks. The other band members are making a little bit, everybody gets a little piece of the pie. The venue makes a lot of money. The, the agent’s making a decent chunk out of that as well, and he is barely making ends meet, right?

He’s just happy he could play music. Joe is only, you know, trying to play music and he loves that. And then he started. You know, like, who, who is this? Why am I paying this person? And started to realize, hey, I’m, I’m actually filling the room. They’re bringing in, well, whatever, $8,000. I’m only getting a few hundred because of the way everything’s going down.

So he essentially said, I’m gonna, I’m gonna get rid of the agent. I’m gonna book my own shows directly with the venue. And then he is like, why have. Taking some liberties in the story here, but let’s say he has a bit of a following because he has been touring with other big musicians, so maybe he has an email list.

You know, in the, in the early two thousands, people are putting together an email list. Maybe they’re on MySpace and they have a following. People are watching them. They know when they’re touring. So Joe’s like, I know I can get, um. Enough people selling or, or enough people in the seats to watch the show.

There’s gonna be, you know, a thousand people in this venue, and I know I could fill the seats, so he would negotiate. With a stronger position because he knew people wanted to come and watch him. So he was able to say, I want, um, all, whatever, a much higher level of the ticket proceeds and I want half the bar or something like that.

Right. I’m just, again, making up the terms here, but essentially instead of getting like some flat rate that is much less than what is the overall. Revenue for the night, he’s able to negotiate a much stronger position because he knows he could fill the seats. And there are other examples where people are like, Hey.

And he, I think Joe gave the example in the, the podcast. He didn’t mention who it was, but I think people in the know realized maybe it was Phish, but I’m not a hundred percent sure. So. The story was the band said, Hey, we’re gonna be here. We’re gonna play for three nights. We won 125% of the ticket proceeds because they know that the venue is gonna make a shitload of money from the bar.

Um, revenue ’cause it’s, you know, people are drinking like crazy. So they were able to negotiate higher than what the ticket sales were and earn a lot of money. And, and maybe they say, Hey, we also want some percentage of something else. Again, if they’re, if they have leverage to be able to fill the seats, then that’s gonna go very far.

The whole idea here is like removing the. The other pieces of some of the, the business model to streamline it. And there’s not a direct application that I’m, I’m gonna prescribe here or anything like that, but it’s just something to pay attention to when you’re looking at like a business model and maybe opportunities out there.

Now when I apply it to myself and just think about how I worked at a corporation and I earned a decent salary. Nothing crazy. It was, I was probably like average for someone with my experience. Nothing crazy. It was a normal, um, consulting company and. There’s a lot of waste. I mean, they were charging a lot more than what I was earning, probably like three x on like an hourly rate, and that’s just how the business model worked.

However, when I got laid off and I’m working for myself, I see there’s no waste. It’s me, it then whatever waste I create, there’s a couple. VA is helping me out in certain areas. Again, the primary amount of waste is my issue. Something that I’ve created with either inefficient communication or unclear instructions and job aids.

But generally there’s very little waste in a system with just me. As the sole employee and then a few contractors helping out here and there. So it was very clear from my, in air quotes, vertical integration. But in this case, I mean, you know, when you think about my specific business model where I’m, I was creating a website and I.

At the beginning, I was doing all the writing, so I, I own that portion. If I was doing the SEO, I was doing the outreach and the link building and all that stuff. Or when you look at the podcast stuff that I’m doing now, although I’m not earning much money at all, I. Hardly at all. And, and it’s a hobby at this point, but it’s like, okay, like I record this, I do some light editing, I own the whole thing.

Very little waste. So like if all of a sudden there were advertisers that, um, you know, want me to promote a G one, which, fuck, I’m not gonna do that. It’s like $80 a month for green powder. Come on. I don’t know. You can get it cheaper somewhere else. All that money goes for the marketing to pay podcasters.

Right. So anyway, AG one, contact me if you’re interested. The, the thing is, there’s very little waste. So if I earn money, like. All of it comes to me, right? There’s no one else sitting in the way. And that’s the, the sort of magic of what, um, I guess some portion of the music industry has changed into, again, I’m listening to a handful of like music podcasts and you know, gone are the days I hear people talking about it.

I don’t know this specifically, but gone are the days where like a band gets signed and they get a big, um. They get a big upfront bonus and then they get royalty checks in the background in the back, back, end there, and that that just doesn’t happen like it used to. Like streaming pays a tiny, tiny amount compared to selling records in the past.

However, you can have a following and you could set up a Patreon or buy me a coffee, and then maybe if you are a musician, you could sell your music directly to your audience. You can have, uh, memberships on YouTube. You of course you could tour, but you could also sell your own products that you maybe design and obtain on your own.

So I took lessons from a lady named Christina Vain and. She does have some records out there, but she also, I. Has like a merch and different stuff, which most bands do. So they bring around t-shirts and records and they have stickers and coozies and whatever else. And basically they buy that stuff and they, they travel around and they sell it to the audience afterwards, and the audience kind of understands, well, this is like one of the best ways for me.

To directly support the artist because they get the money like right there, and then it doesn’t go through anyone else. Versus like if you have to go through some merchandising through your record label or some, something like that. Again, a lot of waste in the system so Joe and other people like him are able to.

Have their audience, contact them directly, sell out venues, and basically be able to support themselves as artists without like hitting it big. It’s like a lot of people probably don’t even know of certain bands that can sell out, basically. Arenas and stuff. Like Corey Wong, he’s in, uh, vol Peck and I believe, I mean, they’ve.

I’m not a huge follower, by the way, but I wanna say that they sold out like Madison Square Garden, like multiple nights in a row. And it’s a band that probably most people never heard of at all. And I’m, I’m again sure that there are people or bands that go to Red Rocks, which is like only an hour away, and they’ll, uh.

They’ll sell it out for multiple nights in a row. And it’s bands you’ve never even heard of. So it’s kind of interesting, the, the, the shift where like there’s more like maybe smaller bands out there that can make a great living and like sell out arenas, but no one has heard of them versus like the huge bands that used to be out there.

Like I’m sure, I don’t know many. I mean, I’m in. You know, older, middle aged man now. So I, I’m not catching on to new music very much as it really hit me on the, on the head to realize it’s out there. So I think I covered the most important parts of the vertical integration. And I would just say like, as a, as an exercise is interesting to look at different business models, if you have a chance to think about that, like, ah.

Could this benefit from vertical integration? Is that helpful And. Otherwise you might be able to see something in your own business if you are running something and you’re like, can we, can we cut this person out of the process? Or, I mean, there might be opportunities to add yourself into the process and like.

Remove a vertical integration that is in place and maybe you’re adding some, some efficiencies, you’re bringing value. And I mean that, that’s the thing. It’s like vertical integration can be great at the same time. Vertical integration could be worse. It depends on, you know, what’s going on in the specifics of the scenario.

So that’s the show for today. If you have questions, if you have thoughts. Shoot me an email feedback at Doug Show. I haven’t asked for, um, any reviews in a super long time. I, I don’t even, I don’t even know if I do that on a regular basis, but if you wanna leave a review, that would be awesome. Apple Podcast is probably the most, um, effective, I think I’d have to look back at the numbers, but like the number of downloads that I see from an audio perspective.

It is dramatically more Apple users than anything else. For my other show, I, I, I think it’s like two thirds or so are Apple users, which is pretty dramatic because the Android portion is only like 15%, if I remember right. Which doesn’t make sense to me. If I understand, um, I think like half of the phone users out there are Android, so it’s just like a weird, um, it’s a weird disconnect.

I’m not sure why so many Apple users are listeners to audio podcasts. I mean, I guess they were the first. They were the first out there. Alright, that’s it for today. Thanks a lot for listening and we’ll catch you on the next one.