When Russell Burke was leading a divisional finance function at Sony Music during the rise of Napster, he saw first-hand the disruptive nature of technology innovation in an industry. But Burke chose to embrace, rather than fight, the disruption.
Napster was the once-popular streaming service that created a peer-to-peer (P2P) distribution model that enabled listeners, without copyright ownership, to share music and bypass record companies.
"It ended up being essentially sued out of business," said Burke, today CFO of Life360, an app-based consumer safety company.
Sony's response to the upstart was to join forces with Universal Music to create its own online streaming service, PressPlay, which tapped Burke as its CFO.
"I had seen what was happening with the physical sales business to Sony Music and, frankly, that was a little depressing," he said. "It just continued to go down every year and it was substantially because of the disruption that piracy [by Napster and others] had provided."
Burke had been based in Europe, heading up Sony's finance operations there, and had become deeply involved in the company's response to streaming upstarts; he was a logical choice to lead finance at the streaming startup.
"I became fascinated with jumping to something that would be the leading edge of the business and help it recover and find its future," he said last week in a CFO Thought Leader podcast.
File sharing legacy
PressPlay proved more transitional than disruptive. Sony and Universal gave the company the leeway of a startup but it proved to be ahead of its time, Burke said.
"I joined a team of about half a dozen and we created the business model and then executed on it, which was a huge amount of fun and great experience and we built it up to about 800,000 subscribers," he said.
But it wasn't something its parent companies wanted to keep, and they sold it to a company called Roxio, which had bought what remained of Napster, and combined the two.
"Roxio really bought the name when they bought the assets of Napster at liquidation," he said. "The name had 96% brand recognition, but they needed a service to launch a legitimate music service. That coincided with us to sell PressPlay, so we sold it to them. That helped them re-skin the surface as the new Napster."
Napster has largely disappeared as a distinct brand, but working on the front lines of a disrupted industry gave Burke a taste for startups. After a stint as a division CEO at Weight Watchers, he joined augmented reality company Magic Leap.
"I was introduced to the founder when it was just an idea," he said. "There were a lot of crossovers that spoke to me in terms of my music entertainment experience and on the technology side."
Magic Leap was set up to work in a range of media, including music, but based on planning Burke did with the founder, the executive team chose to focus the business on gaming at its launch.
"The idea itself was so powerful, the challenge was focusing on a smaller number of use cases," he said. "I sat in a room with the founder and we went through potential revenue streams, fine-tuned these into the initial strategic financial plan. Gaming became the blueprint for how we [move] the company from the startup stage to one employing thousands of people."
Burke said he brought the mindset of building a model from scratch to Life360, which he joined in May, even though the company has been around for a decade.
"Magic Leap gave me a perspective to always look for ways to reinvent things," he said.
The challenge with a consumer subscription company like Life360 is building systems and bringing in people who can organize the large amount of data it generates into metrics that can drive business decisions.
"The characteristic of apps like ours is there's typically high churn in the first month or two because there's very little friction to download the app and register," he said. "In this case, after that first couple of months, users tend to stay around for a long period of time and we've been able to monetize them over that period, moving free users into paid and upselling paid users to a higher price point."
In the first earnings report he delivered to investors, in August, he designed and walked through metrics that, for the first time, tracked the company's revenue retention over a long period of time.
"I included charts that show the behavior of cohorts over time and the success of earning revenue over time from these groups," Burke said. "I then expanded this into unit economics to help investors become more familiar with the margins of the business, especially as we launch a membership suite of products."
His more immediate need is for short-term data that can be presented in a dashboard the executive team can use to run the business on a monthly and daily basis.
"The company has a wealth of data and a strong analytics team," he said. "I've been aligning these two, fleshing out the key data metrics and the best way to present those. It's an evolving process. There's so much data in this business that one of the challenges is distilling it down to these key pieces and having the rest of it available to dig in when it makes sense."
The analytics the company is generating so far show it's succeeding, even amid the pandemic.
"We saw an initial hit to new trials and registrations, but it recovered fairly quickly," he said. "We've been growing slowly ever since. We've been able to maintain stability and adapted well with sustained organic growth. We've been able to prove one of the strong aspects to our business model: user acquisition. That's s the lifeblood of a growth subscription business like ours."