March 28, 2024

DealBook: A Force Behind the Gaga Effect

Soon after Apple started its music-centric social network Ping last year, Steven P. Jobs reached out to Lady Gaga and her business manager, Troy Carter, for feedback.

At the company’s headquarters in Cupertino, Calif., Lady Gaga peppered Mr. Jobs, Apple’s chief executive, with questions about Ping’s design and how it would work with other social networks. The pop star and Mr. Carter voiced concerns over the lack of integration with Facebook, but they left respecting Mr. Jobs’s overall vision.

The meeting also gave Mr. Carter, a new technophile, an idea. He called his friend Matthew Michelsen, a well-connected technology investor and entrepreneur, to find a platform for entertainers that could help them manage their fan base across all major social networks.

“I said why try to find a platform, let’s try to build one,” said Mr. Michelsen.

Despite Lady Gaga’s demanding world tour schedule that fall, Mr. Carter and Mr. Michelsen quietly founded a start-up, the Backplane, with a team of seven. The company, which has not yet been unveiled, is a platform meant to power online communities around specific interests, like musicians and sports teams, and to integrate feeds from Facebook, Twitter and other sites.

“Backplane will provide a platform and tools for communities to socialize and communicate on a more focused level,” said Mr. Carter, sounding less like a pop star’s manager and more like an entrepreneur delivering the typical elevator pitch. “We needed a more concentrated base.”

While Lady Gaga herself — née Stefani Joanne Germanotta — is the artist and creative mind behind Lady Gaga Inc., her lesser-known manager, Mr. Carter, is leading the enterprise’s digital strategy. Unlike other managers who focus on a handful of big platforms like YouTube, Mr. Carter is trying to tap into a broad range of online tools to keep the Gaga machine in overdrive.

Backplane — a blend of music, celebrity and technology — was a natural evolution, says Mr. Carter, who has worked with Lady Gaga for more than four years. As traditional sales have dwindled, the Internet has become increasingly important in music management.

“There was a time when radio stations wouldn’t play Gaga’s music, because it was considered dance,” said Mr. Carter. “Outside of live performances, the Internet became our primary tool to help people discover her music.”

Mr. Carter represents an emerging group of Hollywood managers, actors, musicians and other industry players who are spending more time in Silicon Valley, as technology upends the way people consume content.

The worlds of technology and entertainment have often clashed, tested by products like the music-sharing service Napster, through which some users shared files illegally. Some critics in Silicon Valley are still skeptical of Hollywood people, whom they view as carpetbaggers overestimating their worth.

“Sure these guys can be helpful, but can Lady Gaga make a company? No,” said Jeff Clavier, a venture capitalist.

To Mr. Carter, the two industries are symbiotic. As he pushes to extend the Lady Gaga brand and his own influence in Silicon Valley, he has had many meetings with executives from Zynga and Larry Page, the chief of Google, whom Lady Gaga affectionately calls Larry Google. He is also an investor in several promising start-ups, including Bre.ad, Tiny Chat and Lumier, a company backed by Facebook’s first outside investor, Peter Thiel.

Mr. Carter’s own venture, Backplane, is attracting capital from prominent backers. The company has raised more than $1 million from a group of investors led by Tomorrow Ventures, the investment firm of Google’s chairman, Eric E. Schmidt. Lady Gaga, who has acted as an informal consultant, is also a major shareholder, with a 20 percent stake.

“I’ll never forget when I first met Troy” in 2009, said Mr. Michelsen, who at the time was helping the rapper 50 Cent with his online initiatives. After talking for nearly three hours about the intersection of music and technology, Mr. Carter ended the conversation by saying, “I’m going to get you out of music and you’re going to get me into the tech business.”

Casually dressed in dark jeans, a loose-fitting cream-colored cardigan and thick-framed glasses, Mr. Carter, 38, stands in stark contrast to his client, a paparazzi magnet in her pyrotechnic bras and towering Alexander McQueen heels. Mr. Carter is more comfortable out of the limelight, quietly brokering deals for his larger-than-life clients.

He has worked for Sean Combs, the late Notorious B.I.G. and Will Smith, whom he met in his hometown, West Philadelphia, in the late 1980s. Mr. Carter had come through a scrappy childhood, often subsisting, he said, on government-issued cheese. As a teenager, he lugged crates of records for D.J. Jazzy Jeff and Mr. Smith, then known as the Fresh Prince.

Today, as the chief executive of his own management company, the Coalition Media Group, he represents the firm’s talent, including the YouTube sensation Greyson Chance and the Bollywood actress Priyanka Chopra. But a great deal of his time is spent with his biggest client, Lady Gaga.

Her star power, combined with Mr. Carter’s aggressive deal-making, have made Lady Gaga a force on the Web. In May, she became the first Twitter user to reach 10 million followers, edging out the teenage phenomenon Justin Bieber and President Obama. Her Facebook page has 36 million fans. And in the last few weeks she has begun promotional deals with Google, Zynga and Gilt.

“Troy and Gaga are doing things with communications and fan relationships that we haven’t really seen before,” said Gary Briggs, a vice president at Google, who worked with Lady Gaga’s team on her recent TV commercial for Chrome, Google’s web browser.

Amazon sold digital copies of Lady Gaga’s latest album, “Born This Way,” for 99 cents on May 23 in a heavily publicized move to promote its music service. Her fan base of so-called little monsters crashed Amazon’s servers on the first day of sales. The promotion, paid for by the retailer, helped her sell 1.1 million albums in the United States in its debut week, according to figures released by Nielsen SoundScan, the most for any artist since 2005.

Unlike most venture capitalists, Mr. Carter tends to invest in platforms that are complementary to entertainers. Backplane, along with Bre.ad, a personalized ad start-up, and Lumier, a design-oriented company, will prominently feature Lady Gaga for their public introductions.

Because of Lady Gaga’s reach, she is a valuable incubator to promote new concepts or products. Zynga recently began GagaVille, a special promotion that allowed FarmVille users to unlock her new songs and special virtual items like unicorns and crystals. Bing Gordon, a director at Zynga, called it a logical combination, saying “it’s all about entertainment.” He recently added Gaga crystals to his virtual farm.

The deal developed like many in Lady Gaga’s empire. Mr. Carter and his team negotiated the structure of the arrangement, hammering out a partnership in 90 days. Lady Gaga worked on the creative end, pulling visual components from her music videos and tours to bring a sense of “authenticity” to the design.

“Technology has long been the driver of growth in the music business from the invention of lacquers, eight-track players, vinyl, cassettes and CDs,” Mr. Carter said. “In order to continue the growth we have to go back to embracing technology and the way that people choose to consume music.”

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Detroit Auto Makers Topped Importers in Sales in May

Toyota’s 33 percent decline allowed Chrysler, whose sales rose 10 percent, to climb into third place last month. For the first time ever, Hyundai Kia Automotive Group, the South Korean parent of the Hyundai and Kia brands, outsold Honda, whose sales were down 23 percent.

Inventory constraints and higher prices combined to drag the industry’s annualized selling rate to its lowest level of the year as some shoppers decided to hold off in the hopes of finding a better deal or wider selection later.

“Some buyers looked at the reports or maybe heard something about it and decided to wait instead of going down to the showroom and look,” Jeff Schuster, executive director for global forecasting at the research firm J.D. Power Associates, said.

The Ford Motor Company and General Motors reported small declines in their sales but pointed to positive signs in purchases of smaller vehicles as fuel economy became a stronger selling point.

G.M. said its sales decreased 1.2 percent over all but increased 13 percent for its passenger cars.

Ford reported a 2.3 percent decline, counting year-ago sales of the Volvo brand, which it no longer owns; sales by its Ford and Lincoln brands were up almost 5 percent. Small cars and crossovers accounted for 27 percent of Ford’s sales, up from 19 percent a year ago.

“The market took a little bit of a breather,” Robert S. Carter, a Toyota group vice president, said on a conference call. Mr. Carter said Toyota is “well ahead of our recovery plans” in Japan and is adding more discounts in June to draw in shoppers.

“We remain very bullish on the direction of the industry,” Mr. Carter said.

Meanwhile, some carmakers reported large gains. Kia’s sales rose 53 percent to an all-time monthly record of 48,212, and Hyundai’s were up 21 percent. Volkswagen said sales rose 28 percent and that May was the company’s best month in nearly eight years.

Across the industry, sales were down slightly from a year ago, after increasing about 20 percent on a year-over-year basis from January through April. Toyota and Honda were affected the most by the earthquake and tsunami that struck Japan in March.

Don Johnson, G.M.’s vice president for United States sales operations, said “consumers sat on their hands” for much of May, but he was confident the industry’s sales pace would rebound later this summer.

“We continue to believe that the recovery remains on track,” Mr. Johnson said on a conference call.

Toyota and Honda said their plants were building more vehicles, but it would take time for inventory at their dealerships to approach more normal levels. Many of the most popular — and most fuel-efficient — Japanese models have become somewhat scarce on dealer lots, causing some consumers to either look at other brands or put off shopping until inventories can be restocked.

“Toyota and Honda lost significant market share in May after cutting their incentives drastically to preserve inventories,” Brian A. Johnson, an analyst with Barclays Capital, wrote in a report to clients. “This strategy appears to have somewhat backfired on them, and Toyota had to raise incentives back midmonth in order to limit the damage.”

TrueCar.com, a Web site that tracks vehicle sales and pricing, said incentive spending by automakers, which included cash-back rebates, subsidized financing rates and other deals, fell in May to the lowest level in nearly nine years.

At the same time, automakers have been raising prices to compensate for higher raw material costs; Ford this week announced the third price increase for its lineup this year. In addition, dealers have been able to charge more for many models that are highly fuel-efficient or for which demand is much greater than the available supply.

Mr. Johnson estimated that May’s annualized selling rate would come in at 12.1 million, down from 13.2 million in April. Most analysts and automakers expect sales for all of 2011 to top 13 million and are sticking with those projections despite the slowdown in demand.

Unlike in 2008, when surging gas prices cut deeply into auto sales, fuel costs are not expected to scare shoppers away from dealerships.

“Customers increasingly are demanding new products that deliver compelling fuel economy,” Ken Czubay, Ford’s vice president for United States marketing, sales and service, said in a statement. “Ford’s new fuel-efficient products and powertrains arrived at the right time.”

Article source: http://feeds.nytimes.com/click.phdo?i=6b6babb2e8d9e6a1fc030a9dcf0b2b1e