Ron Kitchener’s Open Road Recordings got its break when it signed country artist Taylor Swift, whose album Fearless has seen double-platinum sales in Canada. (CRAIG GLOVER/OPEN ROAD RECORDINGS)
The vitals
A music fan from an early age, Ron Kitchener founded Open Road Recordings when he struck a partnership with Toronto-based MapleCore Ltd. and distributor Universal Music Canada in 2003. A year later, he inked a licensing deal with Nashville label Big Machine Records, which gave him the right to market and represent Big Machine's artists in Canada - including Trisha Yearwood and Taylor Swift.
The intriguing idea
While Ms. Swift is now a double-platinum-selling artist in Canada, there was a brief time when it appeared Mr. Kitchener's bet might backfire. ''Radio didn't go nuts over it right away,'' he says. ''But there was an online swell - here is a great girl who appealed to everybody, who was writing blogs and had online video. She started getting all this online traction and social-networking traction as well. It's not completely new to the Nashville world, but we'd never really developed an artist through this era.''
The key decision
When he met with the Big Machine owners about licensing its artists for sales in Canada, he saw an opportunity to ride some powerful coattails. ''Of course, they are playing in a much bigger game with much bigger stakes, and there are larger investments and larger opportunities in the United States,'' he says. ''But they were doing similar things. ... It made sense.''
What's next
''Business is down, so we need to cut stronger deals with our retail partners,'' he says. ''When you used to sell a record for $16.99, there was more profit. But retailers want deeper discounts, and the consumer wants a lower price. So it's a struggling business. As an overall company, we need to have little pieces of a lot of things [such as publishing rights and management fees].''
By the numbers
2005
Year of Open Road Recordings' first gold record, Johnny Reid's Born to Roll.
2007
Taylor Swift releases Fearless.
400,000
Canadian sales of Fearless in 2008, compared with four million in the United States.
3
Average annual number of Open Road releases before Ms. Swift's success.
9
Number of Open Road releases expected this year.
Source: Open Road Recordings
From Tuesday's Globe and Mail — Ron Kitchener had a pretty good thing going, but the Toronto entrepreneur always knew he was one key deal away from expanding his music empire.
His Open Road Recordings country music record label had slowly built its name by signing Canadian acts such as Johnny Reid and the Road Hammers, and he watched with satisfaction as their albums became certified gold – a status bestowed on recordings selling more than 50,000 copies in Canada.
Mr. Kitchener's career was unfolding at a steady, if leisurely, pace when he visited Nashville and struck a licensing deal with another relatively small label called Big Machine Records.
Mr. Kitchener gained access to a roster of up-and-coming talent, and one fresh-faced young woman in particular caught his attention. She was a long way from last week's duet at the Grammy Awards with Miley Cyrus, but right from the start he knew that Taylor Swift was going to change the way his label did business: If he could exploit his licensing deal by marketing Ms. Swift properly in Canada and making sure her records flew off well-stocked shelves, Open Road would be poised for rapid expansion.
“Country music has a hard time selling units in Canada unless you get one or two genuine artists that do truly break through,” he explains. “There are plenty of superstar artists, who I won't name, that don't sell records in Canada. Having Taylor break out was a significant bonus for us.”
It wasn't a matter of incremental growth – before releasing Ms. Swift's Fearless album, Open Road was a one-man shop. Now, the company boasts 11 employees in Toronto and Nashville and has “significantly” more volume and revenues, he says. The album took the No. 1 and No. 2 slots on Billboard's 2008 Country Album Chart (Canada), making the 19-year-old singer from Pennsylvania the seventh-best-selling artist among all genres. The album went double platinum, selling more than 400,000 copies last year in Canada.
“Once people heard of her and saw her and got a sense of what she's all about – with her positive image and her good nature – she just began to shine,” he says.
And while his label has averaged three new releases a year since 2003, Ms. Swift's success and the corresponding bump in revenues for Open Road means it can release nine albums this year.
Mr. Kitchener likes to think he was sure of Ms. Swift's talent, but releasing any album in Canada is a risky proposition. It's a huge country, with divergent musical tastes, and misjudging an artist's appeal could be enough to sink a small label.
“We need to work with our distributors and retailers to make sure the product flow is something we can manage,” he says. “You manufacture thousands of units and ship them across the country and hope that they sell. And if they don't, they come back for a credit. And we certainly can't take a whole bunch of credit back after spending a whole bunch on marketing – we'd be out of business very quickly.”
The flip side of the equation is that if he botched a major release, it could be difficult to sign other big names to the Open Road label.
“There's nothing more frustrating than someone in Saskatoon walking out of a store without what they want, but knowing that in Regina there are 30 pieces that nobody wants,” Mr. Kitchener says. “And when you realize you have a big-selling record, you've suddenly got to have more attention to detail, more eyes on the game.”
While there are few industries that haven't been touched by the global recession, the music business has been facing particularly difficult times over the past five years. Digital piracy has taken a toll on sales, and fewer albums are making their way off store shelves. So while he may be releasing more music this year than ever before, Mr. Kitchener is cautious about his prospects in 2009.
The label isn't his only business – he has others that deal with different aspects of the industry, such as licensing, managing and publishing. The more aspects of the industry he can cover off, the greater the odds of survival.
“The music industry has been in a recession for three times as long as what's happening out there now,” he says. “We've got to be very careful. The reason I have five or six businesses now really is because of the changing landscape of the business. It certainly wasn't my endeavour to go out and do all those things, but it just happens out of necessity.”
Connect with Ron Kitchener
Ron Kitchener joins us for a live discussion about his company and its breakthrough on Friday at 1 p.m. ET. Click here to submit your questions. You must be logged in to submit questions/comments.
Expert Insight
"A dispute over breach of contract can be merely unpleasant or downright nasty. The worst-case scenario is expensive and possibly unproductive litigation," says Jeremy de Beer, technology and intellectual property specialist. On Wednesday, Mr. de Beer talks about the potential pitfalls of licensing deals.
Click here on Wednesday to read the full interview.
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