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An Investment Bank That Cares? CODE Advisors Opens For Business

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Former CEO of CBS Interactive Quincy Smith has joined with CBS Interactive EVP Michael Marquez and music industry veteran dealmaker Fred Davis to launch CODE Advisors, a new Silicon Valley and New York based investment bank.

As with all investment banks, CODE Advisors will look to advise companies on mergers and acquisitions and capital raising, for a fee. But the company also wants to be a long term partner for buyers and sellers, acting as a sort of outsourced business and corporate development group. This is something most banks promise, but few deliver on. Unless you’re a high velocity buyer like Google or Microsoft, in which case you get all the attention you want and more.

And these guys are certainly positioned to do that. Smith, Marquez and Davis are among the most connected people in the media and technology worlds. Smith and Marquez spearheaded the growth of CBS Interactive and its acquisitions of CNET and Last.fm, both of which are seen as successful buys, and both have deep experience in those industries.

Davis, a former music exec, is known for representing just about every online music venture over the last several years. When startups want to do business with labels and the other players in music, they go to Davis.

These guys literally know everybody. And they are also opinionated on which exactly what the world will look like when the old media and new media worlds finally collide. I sat down with the three partners on Tuesday for what I expected to be a 5-minute interview on the launch of CODE Advisors. When we were done, we had well over thirty minutes of footage. The conversation was mostly hovering around the future of online video and online music.

CODE Advisors already has several clients, including CBS, Comcast and Spotify (which was in the news yesterday).

We’ll have a full transcript of the video up later today, but the video is below.

Update: Transcript of the interview:

¬Mr. MICHAEL ARRINGTON (HOST): I’m here with the three founders or three partners of Code Advisors, new investment bank. Partners are Quincy Smith, Michael Marquez and Fred Davis from left to right. Hey, guys.

Mr. QUINCY SMITH: Hey.

Mr. MICHAEL MARQUEZ: Hey.

Mr. FRED DAVIS: How are you?

Mr. SMITH: Thanks for having us.

Mr. ARRINGTON: Thanks for coming in. Great to do a quick video interview. Want to – we’ll have a post on this as well, but I want to hear you guys talk about the bank and what you guys were up to do and accomplish in, you know, the next couple of years.

Mr. SMITH: So the brief history of the bank and we, I think recognize that starting a bank isn’t necessarily most usual thing in the world, so thank you for your time on doing it. But the brief history of banking is, you know, about 20 years ago, when you and I were out there and lucky to be enough around companies like Netscape. There was, you know…

Mr. ARRINGTON: Twenty years ago I was in college.

Mr. SMITH: Now you need five.

Mr. ARRINGTON: Yup. When you were in Netscape, when you were in Netscape.

Mr. SMITH: Do math. Thirteen, 15 years ago.

Mr. ARRINGTON: Yeah.

Mr. SMITH: Can’t start as bankers.

Mr. ARRINGTON: Not that it’s really important.

Mr. SMITH: It’s more about the positioning of the numbers than the numbers themselves. So when we’re lucky enough to be in and around that company, you know, there was a bank called Hambrecht and Quist that was extremely good at what it did and that it was helpful for advise in and around transactions and often some of the best that it ever did never materialized in some sort of a fee around the transactions that got done with services, just some of the advise on a pile of other things. H and Q wasn’t alone, Robertson Stevens, Alex Brown, Montgomery that were known as the four horsemen if you read Wikipedia and that was in a time when there was clearly far less technology innovation and less need for media to come up and talk technology. We argued that now there’s – we already know it as a fact. There’s more technology in the nation going on today more than ever and there’s more of a need for me to speak technology to the extent that it represents multiple platforms, multiple ways to get paid for your content. And yet, there are fewer banks that have concerted efforts in the new media technology space. So we’re just hoping to be able to be one of those players.

Mr. ARRINGTON: Will you talk a little bit about your backgrounds? It’s pretty varied so – Fred?

Mr. FRED DAVIS: It’s actually coming from law in which it’s unusual to be going into banking but the recent history is working with a lot of additional media companies. We’re trying to figure out how to monetize content on the web. We’re kind of majoring in music and minor in video. And…

Mr. ARRINGTON: Is there any one you didn’t represent? Excuse me, quires included, you know, Google?

Mr. DAVIS: Yes.

Mr. ARRINGTON: Yeah, My Space, of course.

Mr. DAVIS: Correct.

Mr. ARRINGTON: You Tube.

Mr. DAVIS: Imeem.

Mr. ARRINGTON: Imeem.

Mr. DAVIS: Ilike.

Mr. ARRINGTON: Ilike.

Mr. DAVIS: Last FM, Spotify…

Mr. ARRINGTON: Everyone.

Mr. DAVIS: We do not represent Pandora. Do not represent Lala. That’s easier to answer.

Mr. ARRINGTON: OK. OK.

Mr. DAVIS: That way, yeah, for various music, but yeah.

Mr. ARRINGTON: Yeah. But you know all the labels intimately and…

Mr. DAVIS: Sure.

Mr. ARRINGTON: You’ve worked with the start ups – help.

Mr. DAVIS: We’ve never worked – we’ve never represented the labels, always represented the media companies trying to figure out ways and build business models to monetize music and that’s whether it was early downloads or subscriptions or free, you know, free ad supports, streaming, whatever the new models are, we focus on that.

Mr. ARRINGTON: Any of those work?

Mr. DAVIS: They’re all going to work.

Mr. ARRINGTON: Really?

Mr. DAVIS: Real question is…

Mr. ARRINGTON: Even free – free aid streaming…

Mr. DAVIS: Free…

Mr. ARRINGTON: My Space music current model, current one.

Mr. DAVIS: Free is not a dirty word in music. There’s always been free with music, it was called radio. Unlimited interactive free is the dirty job to play with. So we have to find out the right balance between limited free and monetization and that’s a balance – we’re not going to go overnight. It’s going to take a little time.

Mr. ARRINGTON: Luckily we saw a bit for it, right? So, unlimited free our demand needs. So…

Mr. DAVIS: Yeah, exactly. Yeah.

Mr. ARRINGTON: In the video space we talked about who were with you – added as well, just you represented broad and YouTube. So…

Mr. DAVIS: Yeah, you…

Mr. ARRINGTON: YouTube before the acquisition?

Mr. DAVIS: YouTube before the acquisition.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: YouTube through the creation of VIVO.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: And YouTube now and really focusing on the music video area. But – but, yes.

Mr. ARRINGTON: So with this great law practice, why in the world would you – you and your law firm, why would you stop to join these guys?

Mr. DAVIS: It’s a good question.

Mr. SMITH: He thinks money would say.

Mr. DAVIS: That’s a good question. No because evolving into the space, what I saw is having the intimate relationships with the companies.

Mr. ARRINGTON: Mm hmm.

Mr. DAVIS: And I saw all the transactions that were going around with VIVO than I worked with – with Imeem, with Ilike and the bankers were quite frankly getting the business that I should have been getting.

Mr. ARRINGTON: Well, be frank. I mean, not been for a while. People were coming to you for legal advise all the time. Most of the time, they’re coming to you for business advice. The same advice you’re going to be giving them at Code Advisors.

Mr. DAVIS: Correct, right. These are very natural – logical evolution would be to play the banker role and…

Mr. ARRINGTON: Correct. Michael?

Mr. MICHAEL MARQUEZ: So, my background, I started out as a computer programmer with Anderson Consulting and their center of excellence. Did that for several years and then went into banking at Robertson Stevens and so that’s kind of where a lot of history is – when Quincy referenced as well with Hambrecht and Quist. Same way that Robertson Stevens was really kind of getting back to the heart of relationship banking. And then from there, spent the last portion of my career in corporate development. First with Yahoo and then as head corporate development business fieldman at CBS.

Mr. ARRINGTON: What was it – the companies you brought at Yahoo? Well, you formed that project fraternity, the billion dollar acquisition of Facebook. You topped it.

Mr. MARQUEZ: I can’t speak to the specific ones that we didn’t do. But I can definitely talk about the ones that we did do. So adpost, Fair Chase, Delicious, (unintelligible), these were some of the acquisitions that I did.

Mr. ARRINGTON: OK. Great. Quincy?

Mr. SMITH: I started at Morgan Stanley. I joined Netscape. Then started The Barksdale Group, then Barksdale Bureau carried Dan Robert and joined Allen Company and then joined CBS for three years and the reason I left in January but never really left as CBS is our first client.

Mr. ARRINGTON: You actually – you’re – all those years at Netscape, where I was actually your attorney.

Mr. SMITH: Yes.

Mr. ARRINGTON: Junior attorney and you’re in corp of – all those years, you just served some of these, Netscape. I mean, those were some trying, dramatic years.

Mr. SMITH: I was, by the way, Jay, so you want more coloring, yeah, it was hard, man. I mean, the Netscape experience was an unbelievable thing. And I just – sort of schizophrenic job that I don’t think is wiggle anymore. We had corporate development as you point out.

Mr. ARRINGTON: Yeah.

Mr. SMITH: But also investor relations. So mainly it meant working for Peter Currie.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: And it was awesome. We did 16 transactions. We did nine joint ventures. We did a pile of investments and it was a whirlwind time with a great group of people. So yeah, no, there’s – I mean, the Netscape experience was an unbelievable – and so they – well, we decided to start the Mercer group…

Mr. ARRINGTON: Yeah.

MR. SMITH: And then move from there.

Mr. ARRINGTON: So, it’s all right. Quincy and Mike, the time you spent at CBS, you bought CNET, right? Was that first acquisition you did for…

Mr. SMITH: Last FM.

Mr. ARRINGTON: Last FM.

Mr. SMITH: And Wall Script.

Mr. ARRINGTON: OK.

Mr. SMITH: And CNET.

Mr. ARRINGTON: Wallstrip..

Mr. SMITH: Yeah.

Mr. ARRINGTON: OK. So Last.fm then CNET. How do you feel about those acquisitions? How they’ve done since you acquired them? Do you think that was a right strategy for CBS? How did it go?

Mr. SMITH: Yeah. So at that time, CBS, in the split from Viacom, didn’t have a huge online presence. It did have SportsLine. And the thing that we learned about SportsLine, it ranked (unintelligible) about 140th worldwide units(ph) per month overall its property. SportsLine was amazing because of its fantasy sports. We talked about this before. The beauty of fantasy sports is it shows the web as a new medium, people play from Tuesday through the following Thursday. And on Sunday, they’re more than excited to watch the football game in a regular flat screen television environment. So we thought about what’s the fantasy of music, and Last.fm very much fit in that category from our perspective. It was discovery, it was as much as about streaming stuff, it’s about learning more and things that are added to the existing medium. Plus, it had a great international footprint. CBS, I have to say, 90 percent (unintelligible) diversify outside. And then CNET. What we always thought about CNET was CNET was only bigger than CNET Networks, which is to say, CNET but was also BNET, GameSpot and all kinds of other things. Plus, it had a really good team, an adult team. They talk about how to make money on the web in categories that CBS understood.

Mr. ARRINGTON: Yeah.

Mr. SMITH: So I’d say overall – and CBS just reported last Thursday, the interactive group has always been a strong group in there. What we think about first inside the CBS when talking about the internet is how the web can be added as opposed to how we’re regurgitating our television shows online all the time.

Mr. ARRINGTON: Yeah. All right. So let’s talk now about CODE Advisors. So you guys are differentiating yourselves from other banks out there. You’re not just focusing on jumping in, help remote transaction getting your feed. So you want to be a real long-term partner of these companies. When you look back, some of the banks (unintelligible) Robert and Stevens from the ’90s in particular. We worked with (unintelligible) and certainly, I think they were developing those kinds of relationships. But is it realistic today the service – I assume that you can do that talking about some of your clients and how you’re working with them already and things like that.

Mr. SMITH: Yeah, that’s a great question.

Mr. ARRINGTON: Do your clients say I want this kind of, you know, sort of long-term relationship with you? Are they embracing you how you want to be embraced?

Mr. SMITH: That’s the hope so far and keep in mind, we’re startups. So it’s hard to tell, you know, early on out of the box to get a (unintelligible) from a company like CBS on the (unintelligible), you know, companies. It’s great. I’m going to ask Fred to talk about modifying our relationship there.

Mr. ARRINGTON: Those are the two early clients here disclosing now.

Mr. SMITH: Yeah. So we do think there’s a need. We think there’s more need than ever for doing it and we think it’s important that we’re expanding the role of investment bank. We think banks are doing a great job today. We think transactions are hitting up. You know, whether the public markets with the lights have an open table, the unbelievable thing with Jeff Jordan is he will do it again and again, quarter by quarter to the transaction side of all the deals that have gone down the last (unintelligible) to the other transaction side and then we really productively and (unintelligible) both secondary markets as well as (unintelligible) and more innovation than ever, as you always point out. The role of the sort of second, third generation entrepreneurs, their CEO guys are going bad. They’ve been through this before, that kind of experiences make them so much more able. But we think there’s an opportunity to kind of expand the role of investment bank. We don’t think it’s a bad word. We’re (unintelligible) bankers, and we’ve been in a position where we think we can offer things like business development help, content rights help, help find board members, and be with companies all over the world.

Mr. ARRINGTON: You don’t charge that, right? You still charge just for…

Mr. SMITH: Usually, you get paid by a transaction. Now, you know based on your background (unintelligible) that, you know, there’s a whole process that has to go through with this first. You have to file (unintelligible), you have to make sure you get SEC approvals. In the meantime, by the way, we are pay backing the broker-dealer license of the Great Hammer(ph) so that we are (unintelligible) which, you know, more like we build a lightning rod for entrepreneurs in the community and always super smart on it. We also think working with him is additive and that he cares more about the capital markets for now and the internal…

Mr. ARRINGTON: Plus, he has a license.

Mr. SMITH: Plus, he has a license. Plus – yeah. But you know, we’re actively working with them trying to identify if we can do it together.

Mr. ARRINGTON: And you get paid for transactions. Are you going to try to get paid for other things as well in these relationships or…

Mr. SMITH: Well, ultimately, we hope that over the next nine months, 12 months, God willing, we get full approval by (unintelligible) to make sure that we have our own licenses to interact.

Mr. ARRINGTON: Your billing model is – your fee model is exactly the same as any bank. It’s transaction-based.

Mr. SMITH: It’s transaction-based. I’ll make (unintelligible) and I was lucky enough to understand this and get this (unintelligible).There is an engagement type of relationship you can have with some of the larger companies when I was at – out in a company I had. That was CBS and I also had it with Comcast. And those are the kinds of things we looked to emulate where you’re not working with them on transactions, but you are overall helping them understand strategically where they want to be in this space.

Mr. ARRINGTON: Are you already running a new conflict of interest where you’re working with one company, you just can’t work with someone else? It must be something you’re running into. Or can you represent both sides?

Mr. DAVIS: Well, representing both sides in conflict (unintelligible). I don’t feel that we are (unintelligible). Do you feel that we are at all? I don’t think that we are yet.

Mr. MARQUEZ: I don’t think that we are either. I think that…

Mr. ARRINGTON: Yes, you’re representing the (unintelligible).

Mr. SMITH: Chances are good. Yes, (unintelligible). There are probably some other relationships with larger banks. They’re ultimately used to do the actual transactions.

Mr. ARRINGTON: OK.

Mr. SMITH: So maybe there’s a chance to jump to the other side (unintelligible). You know, we are super sensitive about it, so I’d say we (unintelligible) more defensively there. And if we do think they’re conflict, we probably can’t work with them. But it is really – as Fred say…

Mr. ARRINGTON: Yeah. I wasn’t really trying to dig into that. It’s more of just – seems like (unintelligible) the side and that’s maybe – I was modifying and your two first clients here announcing you seem to be on both the (unintelligible) side. I was wondering…

Mr. SMITH: It’s a great – in an ideal world, and I don’t know who (unintelligible) this expression it was not – but we want to be bankers for the deal and I don’t know who’s coined this expression or whatnot, but we want to be bankers for the deal. We’re out there because we really believe in it. The deals that we’ve done in the past or point to like advertising.com data. Well, we did it because we thought it was the right thing for the environment. Not this even better for a relative individual and better for r.com, it was better for the users and better for the other outer world.

Mr. ARRINGTON: What, you are part of that deal?

Mr. SMITH: Yeah, we hope to settle our dot com to tell you and house it when I was at the Allen Company.

Mr. ARRINGTON: Okay, great.

Mr. SMITH: And part of it – and also, it’s coming of the idea, making it real – that the…

Mr. ARRINGTON: Yeah.

Mr. SMITH: Connecting the right people. Making it the right presentation and speak the right language on both sides, can even understand why they should be acquiring or be acquired. The technical actual deal part is a separate part of it that necessarily we don’t have to do what we can do.

Mr. DAVIS: But a lot of the work is done with the idea that any introductions and that we can do with both sides.

Mr. SMITH: But there’s a real need to not just understand the technology and how the services work but to explain them to people who don’t think about it as much day to day.

Mr. ARRINGTON: Do a lot of translated between the two cultures and the two industries. It’s a lot of the special source that we have. You have to feel…

Mr. DAVIS: It’s a lot of this special sauce that we have and that’s – you have to feel that. You can’t – you know, you can’t learn that.

Mr. SMITH: There’s no way we can credibly explain how we do that on the film without looking like it is.

Mr. SMITH: Well, we’re raise down and prove it.

Mr. ARRINGTON: You guys talk about being a startup, you get your raised capital or initial capital. Do you have investors?

Mr. SMITH: So, as you know, the advisory business is a strong and profitable business if done right, so you don’t need to require to raise a pile. We have no plans to raise a fund to the extent that we do have friends that want to be supportive of us. We know we might try taking some existing capital but it wouldn’t be material for the most part…

Mr. DAVIS: Friends and family we work at.

Mr. SMITH: Yeah, we’re up and running with nothing there.

Mr. ARRINGTON: And what about all these legal partners?

Mr. SMITH: Oh, this got to be start up. I mean, Marquez has his Amex Black Card. We’re in the business of making sure we’ve black coaching(ph) and we’ll see it all the time.

Mr. ARRINGTON: With the black card you’re referring to the American Express black card that Mike currently has so…

Mr. DAVIS: (Unintelligible)

Mr. ARRINGTON: I didn’t bring it up…

Mr. MARQUEZ: Nothing else to see right now.

Mr. DAVIS: This is first class.

Mr. ARRINGTON: I’d love to talk a little bit about the way you guys think about the future of media online. And I’m offline.

Mr. DAVIS: I would like to talk about that.

Mr. ARRINGTON: And that seems to be the area we’re really focusing on which makes sense to me but I love the idea. We’ll start – let’s start with video I guess and – let’s start with music I think just because of – besides the fact that you know and represented every single person in the music industry online and then know everybody offline as well. But putting all the sides of the people you know in the company to support. What you actually think is going to happen with music, you know, online and how these guys on labels in particular are going to make money in the future. Well, yeah.

Mr. DAVIS: So, that’s you know the $64,000 question.

Mr. ARRINGTON: And just give me your answer like 10 seconds or less.

Mr. SMITH: As in terms of the heat.

Mr. DAVIS. Is – it’s the monetization that will lead that ownership or access, that’s the heart of the issue and you have like very successful companies, iTunes, Amazon and Top Spin and you know, (unintelligible) store and real network store that you are focusing on ownership but that’s access. And then yeah, that’s why you get companies that dealing with access to free exports streaming into subscription.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: And that’s why you have this monetize with the world, into my spaces of the world and the mobs(ph) and the – the new – all the new breed of companies coming up and it’s got that music everywhere.

Mr. ARRINGTON: And you think access is the future of music everywhere?

Mr. DAVIS: Music everywhere because…

Mr. ARRINGTON: Not storing songs on your hard drive and buying them like…

Mr. DAVIS: As long as you can have access to it everywhere, it – both can exist.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: You know, the MP3 doesn’t have to be a transitory technology that as long as you can get your music everywhere is what the consumer is going to be thanked for. And right now, you can’t. Books would be a lot less valuable if you couldn’t take them out of your home.

Mr. ARRINGTON: Yeah. And what will consumers pay for access? I mean, given that there’s free options, although in legal, there’s always a radio. There seems like Pandora, but what will they pay for, what do you think?

Mr. DAVIS: I think there’s – there was one solution at the old school modem which was a CD. It doesn’t have to be one solution here. It could be different demographics they’re going to want different things. Some of the older generation will still want own – some it could do with our generation well, just want to be able to put it on their iPhone.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: And you don’t have to have a one sub solution will it be bundled into your eyes being at your home, or it will be bundled into your wireless service provider on your phone, will it be through apps, will – we don’t have to have one solution.

Mr. ARRINGTON: But seems like people who are to pay for mobile access in particular…

Mr. DAVIS: That’s the first thing…

Mr. ARRINGTON: But are likely to be showing…

Mr. DAVIS: Yes.

Mr. ARRINGTON: The people wouldn’t pay that premium as a 12 or 10 year fee for – particularly for the mobile access.

Mr. DAVIS: That is one say that Spotify is showing with real time data into Europe right now. And that’s why there’s so much excitement here about our company, you know.

Mr. ARRINGTON: What do you think is the right – what do you think, there’s a right fee for user to promote the premiere to have access to any you know, any recorded song ever on the phone, online, whatever you need – people pay $60 a year, $100 a year, what do you think is sort of a – the right point that are…

Mr. DAVIS: You know, I’m biased because I still don’t, you know, have – remember growing up and think that, you know, Led Zeppelin and Eric Clapton, you know, are very valuable.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: And it’s very difficult for the content of these to look at the history of word music only being worth $2 or $3 a month.

Mr. ARRINGTON: Yes.

Mr. DAVIS: Very tough. And it, you know, maybe it’s going to be channeled. Maybe you’re going to be able to buy rock music for a certain price and country music for a different price. Everybody only keep thinking it’s a one price fits all model.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: It doesn’t have to be that way and maybe it has one value at home and one value that’s mobile and you can window it, you can – you put it first stages of these.

Mr. ARRINGTON: Have the labels ever looked at the Archos (ph) of the user back at they hay day with the – it was, you know, it’s in 1995.

Mr. DAVIS: Yes.

Mr. ARRINGTON: Did they ever say, an average user of music say in their 20s.

Mr. DAVIS: Yeah.

Mr. ARRINGTON: They’re going to spend this much a year on concerts and CD’s. Was that ever done? I mean – and what was that number?

Mr. DAVIS: Well, there was a – there was the number that was only now, we’re looking at our back…

Mr. ARRINGTON: Yeah.

Mr. DAVIS: In the 80’s they were in big, you know…

Mr. ARRINGTON: Just you don’t – they’re not selling you – yeah.

Mr. DAVIS: It was just about selling. They never really analyzed how much free did you give away the sale. In the hay that you sold a million copies, but a hundred million people probably heard the song.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: All the waste that they – will – think about that. But you also had to buy 10 songs to get one.

Mr. ARRINGTON: Yup.

Mr. DAVIS: And it was that it was an artificial model.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: We’re back to the old days where you could buy tracks. The Beatles first came out as a single band. It’s a single’s band.

Mr. ARRINGTON: Yup.

Mr. DAVIS: Only later that the album start taking over what the singles were. But now they are looking at arpool and now it’s an artificial analysis because of – the balance is all over them.

Mr. ARRINGTON: Is there – what was it – what year the date with the labels. What year did they make the most money?

Mr. DAVIS: 2001.

Mr. ARRINGTON: 2001. What was the revenue, gross revenue then…

Mr. DAVIS: I don’t know that at all. Depending – they sold – in America, either about 750 million CDs sold.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: And now we’re about 3 8 – 380 million. It’s dramatically down from the U.S. sales of CDs.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: That does include all the iTunes tracks and the ring tones and the subscription business. Somebody has (unintelligible) as bleak financially is that. But you could see what the decline of the CD.

Mr. ARRINGTON: Do you think the music industry has made good choices with the benefit of right side over the last decade now or it’s your forced them at that or…

Mr. DAVIS: I think the music industry has made a series of mistakes only and it’s…

Mr. ARRINGTON: Based on being morons or based on just faced with what they were facing they made the right choices at the right time and it turned out to be the wrong choices?

Mr. DAVIS: No. There is, you know, it – you can’t be – with the trade, difficult to be judge and jury because…

Mr. ARRINGTON: Yeah.

Mr. DAVIS: You know, they have…

Mr. ARRINGTON: I thought it’s extremely easy to…

Mr. DAVIS: Yeah. I understand. But you know, there’s – there’s a consortium – they have a partnership with the artist that sometimes we don’t appreciate.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: And they have investments that they make and create in the music that we all love, and there are publishers that we practically know who have been song writers and producers in this entire eco system that sometime out here on the West Coast people forget about that the investment. Think of all the songwriters now who don’t benefit with the same way that they did to sell the CDs with the producers. That’s the affair.

Mr. ARRINGTON: Right.

Mr. DAVIS: It’s (unintelligible) with the directors and the screenwriters in the movies. Sometime we seem to appreciate their value in the ecosystem or so you know, their sympathetics – but they would never – the music industry was brought up learning how about to make records not how to distribute them. Nobody have the expertise and we’ve been very critical then to think that they’re going to learn this muscle overnight given the graphic changes that are going on. So, they had to make a lot of right choices there. And there (unintelligible) a few correct choices but at least they (unintelligible) and we have to give them credit for that.

Mr. ARRINGTON: Quincy we talked about your views on video and where it is going on online, and also the fact that the average that the offline guys are able to get though there is no real correlation to online where it was once reporting and the people are paying in different ways and offline they’re still paying in the old way and – how does it all come together? Does the offline reach the day (unintelligible) on it? As speak with off line or are you able to maybe add more value online and get better rates?

Mr. SMITH: Yeah, so these are all good questions as you said. We do talk about these ones a lot. It’s something we’ve spent a lot of time on hopefully it can be part of the thesis going forward . By the way, as a segway you know, I like (unintelligible) but these are the kind of thing we’re trying about for Code Advisors. We have to have points of view. In the old days you had bankers and you had research guys, research guys who generally with the best bankers in the planet ’cause they thought about a lot of bankers (unintelligible) going in for the business and I spoke if they were. In this particular case, the bakers in particular the bankers need to know what they are doing. So, you have to have them and we have to think about and we have to create thesis around that (unintelligible) in which way we’re going to go. So, the long winded way to segway to video. First thing is different from using – two minutes of CSI is (unintelligible) have it for 44 minutes of CSI which is to say song, can’t kill the album. It’s a preview that you’d actually monetizing and bump more preview with to begin with. So, it better suited in television for this kind of distribution to begin with. The second is which (unintelligible) you’re not going to go in the same way ’cause it’s very different, kind of an economic model, a different preview model. With respect to television, if you think about the future of television being video, you have a much better proactive aggressive way to extend your business going forward. If you think about online and TV as separate, you’ve got a problem because you’re setting up a dichotomy and you’re making it so your online buyers are different than your on air buyers. And as soon at that happens, (unintelligible) your online buyers with the same ones who buy in Google keywords…

Mr. ARRINGTON: Yeah.

Mr. SMITH: And who generally generate targeted ROI as supposed to reach frequency engagement and part of the magic. So, one of the things that we really believe in at CBS(ph) was why structure our sales group so close to the network sales is this is to increase our television’s video as soon as Joanne Ross who runs network sales from CBS gets a client that ask whether or not they can buy something online as well as on on-air. Then the answer is yes, that’s called (unintelligible). And that’s the beginnings of which we embrace so early television, you know, TV everywhere authentication. If you really believe in its most elegant state what that really means is, it doesn’t matter what screen you watch Ghost Whisperer on and you know you do. It doesn’t matter what time you watch Ghost Whisperer what should matter is you watch this, it got counted preferably by some third party referee, like oh – I don’t know, Nielsen. And I do have the same Nielsen in this case because that’s what the major buyers listen to. And then you get paid for it. So, assuming you can create that kind of environment, that matters a lot more, right now unfortunately, that means, ideally pack them in ad for ad or get closer and the only way that you immediately get criticism of people who used to watch ads in television having make sure that they want to watch ads online. If the content is good, they’ll sit through when you have empirical evidence and direct evidence to suggest that. So, the rule number one of content is own your own rights of your content. Rule number two is, you know, make sure it’s good. Easy to say, difficult to execute on. Once you have that setup in infrastructure so that online and on air are sold in tandem. Then you’re pricing, cause you’re bright, you’re alluding to the fact that CPM online is much higher. I remembered, oh, we’re sold online. That’s great. You don’t have enough or you’re not selling enough to buyers. Not enough online buyers, right? We say the fastest going group of online video right now is – or the fastest growing market inside of online is online video. That’s great, it’s growing from 600 million to 1.2 billion by most third party estimates. 1.2 billion, I had 70 billion reasons of…

Mr. ARRINGTON: How much of that is CBS, how much of that is YouTube?

Mr. SMITH: So, you know, again, a lot of that stuff is relatively carefully concealed. If you could give us any kind of math on that you know in March Madness last year we did 25 million. Just for that event for 2 weeks.

Mr. ARRINGTON: What do you think Google’s revenue is right now?

Mr. SMITH: You know, again,

Mr. ARRINGTON: Are they a client? No, so, just guessing. What do you think their revenue is?

Mr. SMITH: I mean, I don’t know. I look at posts like yours on this.

Mr. ARRINGTON: I bet you do know.

Mr. SMITH: (unintelligible) a point of view. I mean you could tell you CPMs and whether they are matching but…

Mr. ARRINGTON: What’s your point of view?

Mr. SMITH: It’s – again, hang on a second.

Mr. ARRINGTON: So you just refuse to answer that question.

Mr. SMITH: I’m not refusing. I’m answering in a long winded way right? Jason who’s an extremely good guy, he’s a good CEO, strong in execution of this, happens to believe that the right answer to this right now isn’t impacting us with as many ads. I’m not saying he’s going to get, you know, 30 (unintelligible) and PSA’s.

Mr. ARRINGTON: Yeah.

Mr. SMITH: But maybe he’s going to go to subscription model or get paid on the (unintelligible)

Mr. ARRINGTON: He’s not monetizing as hard as he could.

Mr. SMITH: I don’t think he generally would by the way.

Mr. ARRINGTON: Do you think he’s selling all the inventory he has already?

Mr. SMITH: Maybe. But all the inventory is the available inventory for an online buyer. What I’m saying is go to the media planners who are in charge with television.

Mr. ARRINGTON: And they’re not doing that yet, as far as you know.

Mr. SMITH: I think you can start to scratch it but I don’t think you sell reach and frequency because those parts are what we’re looking for. I’m hopeful, that in the out fronts is the clients and the agencies who are coming and say, that’s great but I want it on all screens. As soon as you have that conversation, the answer is keep it from a reach and frequency to begin. Future television becomes to be about video.

Mr. ARRINGTON: Yeah.

Mr. SMITH: As a content provider, you love that more than ever. Because all that means is this have defense anymore, you’re not acting like a dinosaur. You’re extending the economics to television and online. And those are great economics and the model by the way, that seems to be working. So, if you get that, it sound – it sound defensive to say but it’s true. So, if you get that, I’d say take a 1.2 billion get rid of it. Give it back to Google Keyword ad buy. Go have fun with that. Take the 70 billion of the real advertisers and marketers in the television industry and expand that relationship to online as well and make sure that CSI isn’t just sold on air vs. online but sold holistically. That’s where authentication is at its core. So, the trust…

Mr. ARRINGTON: And revenue should increase by many times, right?

Mr. SMITH: Yes.

Mr. ARRINGTON: Because if you look at the revenue that hulu gets from video it can’t be more than cent or two right? I mean, looking at sort of normal CPM, right? Maybe a few cents, I don’t know.

Mr. SMITH: Yeah. So…

Mr. ARRINGTON: So – but if you look at like an average – at the top CBS show if you start dividing that sort of revenue of a show divided by the number of viewers you’re more into what, 50-cent range per viewer per show? I know you guys don’t think of it that way.

Mr. SMITH: We do. We do math on that log – you know, by the way, add – added it – you know, the thing about CBS interactive is close relationship with guys like David Poltrack who runs research for CBS. They’re all allies here. We’re trying to figure this out together.

Mr. ARRINGTON: Yeah.

Mr. SMITH: What we’ll never say is CBS is hold-off until we figure it out. It’s there users want it. So you got to stream. But if you could be smarter inside this see through (unintelligible) think about the trusted partners in Comcast. I mean, people always say like, are you going to do an Apple subscription television model deal with CBS or something like that. I think it’s a question of inevitably yes, but the issue staging. How you going to do that relationship first versus that and where the bigger economics would fall now. And by the way, you’re looking at DVD revenue, you’re looking at syndication, you’re looking at international. All these things could be added if – if you could just figure out, you know, most holistically think about the spreadsheet. Spreadsheet says my CSI episode cost this much, I’m going to monetize it the final way on this, I’m going to use EST here Netflix there. No Amazon on blocks for that one because the audience didn’t go as well there. This is a little futuristic. Mobile me yes, MediaFlo there, Verizon that and may be bump into CBS.com here and TV.com and, you know, maybe syndicated out there, make it embeddable or not in YouTube, right? That’s the – the holistic way. By the way, Two and a Half Men, totally different formula, totally different audience, right? But the object is take the content to where the people want it and make sure you get paid for it in a way that makes sense.

Mr. ARRINGTON: OK. What’s the best show on television right now?

Mr. SMITH: According to numbers or according to…

Mr. ARRINGTON: Just your opinion.

Mr. SMITH: My opinion definitely doesn’t reflect the…

Mr. ARRINGTON: You won’t even fucking tell me – OK, let me cut that out. You won’t even tell me your favorite TV show. I mean, I can keep…

Mr. SMITH: We have totally different favorite TV show. My favorite TV show right now?

Mr. ARRINGTON: Is?

Mr. SMITH: 30 Rock.

Mr. ARRINGTON: OK. Mine too.

Mr. SMITH: 30 Rock free. But you know…

Mr. ARRINGTON: I got to answer only one question.

Mr. SMITH: Yeah. Favorite overall The Wire.

Mr. ARRINGTON: Come on, The Wire right now.

Mr. SMITH: Rip and run. Rip and run.

Mr. ARRINGTON: So, this was going to be a five-minute video, now over half an hour or so it’s great content though – what – what else do you want to say, you know, like potential clients out there?

Mr. SMITH: Well, there’s a big opportunity there. Best on the – TechCrunch, how about TechCrunch?

Mr. MARQUEZ: We can only hope…

Mr. SMITH: Let’s see that (unintelligible). Where is your content? Bring it over. We can have…

Mr. ARRINGTON: Do you guys have an office yet?

Mr. SMITH: Does it matter?

Mr. ARRINGTON: You don’t have an office yet.

Mr. SMITH: Well, wherever you need us to be.

Mr. ARRINGTON: Where’s your office? Did you take – I hear there’s an opening at Menlo Park office…

Mr. DAVIS: We have two offices.

Mr. ARRINGTON: Where CBS used to be. What…

Mr. DAVIS: We have two offices.

Mr. ARRINGTON: OK.

Mr. DAVIS: We’ll have an office in San Francisco.

Mr. ARRINGTON: Yeah.

Mr. DAVIS: We have at a…

Mr. MARQUEZ: Yes, we have office right now in Ferry Building, just north of (unintelligible).

Mr. SMITH: Yeah.

Mr. MARQUEZ: And then we have – we’re moving in a new space in South of Market in San Francisco.

Mr. ARRINGTON: OK. But you live in New York.

Mr. DAVIS: Yeah, offices – offices in New York, yeah.

Mr. ARRINGTON: OK.

Mr. DAVIS: Right there at midtown.

Mr. ARRINGTON: So, what do you say about giving maybe free representation of one TechCrunch client? You guys, you have a little competition?

Mr. SMITH: Always a…

Mr. ARRINGTON: Free transaction?

Mr. SMITH: Nothing’s free.

Mr. ARRINGTON: You’re not getting enough…

Mr. SMITH: We’re a start-up, man. We need to make some money.

Mr. ARRINGTON: Have you guys closed any deals yet? You could kind of…

Mr. SMITH: We’re like 11 days old.

Mr. ARRINGTON: No, you’re – well, you got…

Unidentified Man: We’re just launching.

Mr. ARRINGTON: But you didn’t answer the question.

Mr. SMITH: Have we closed any deals?

Mr. DAVIS: It’s an impossible – it’s a possibility.

Mr. SMITH: I hope we have organic on it (unintelligible). But no, there are no specific discrete transactions that have gone around…

Mr. ARRINGTON: You don’t get to pay the first…

Mr. DAVIS: But that’s implied that we tried and failed.

Mr. SMITH: We’ve gotten paid…

Mr. ARRINGTON: Wow, you guys are slippery. All right. There, that’s all.

Update 2: Press release:

Announcing the Formation of Code Advisors, a Next-Generation Investment Bank Servicing the New Media and Technology Economy

SAN FRANCISCO AND NEW YORK, Feb. 25, 2010 – Quincy Smith, Fred Davis and Mike Marquez today announced the launch of Code Advisors, which will be a next-generation investment bank focusing on the intersection of media and technology. The firm will draw on the partners’ extensive domain expertise and industry and deal experience to provide a new approach to investment banking. Code Advisors is currently working with CBS, Comcast and Spotify, among others.

“We are honored to launch Code Advisors with such a strong team, and the fact that we have been able to sign stellar clients so quickly is testament to the market opportunity already,” said Quincy Smith, co-founder and partner, Code Advisors. “We established Code Advisors to extend the definition of banking partner, and as a startup we hope to match our clients’ energy and growth in these new businesses.”

Serving New Media and Technology Clients

Building on the team’s far-reaching expertise and track record, Code Advisors will provide high quality, independent advice to the senior management teams and boards of the media and technology industry’s established and emerging leaders. In addition to merger and acquisition advice, Code Advisors will draw upon the team’s expertise to advise companies on capital structure and capital raising alternatives.

I’ve spent my career driving innovation for corporations like CBS and Yahoo! by acquiring and integrating entrepreneurial start-ups,” said Mike Marquez, co-founder and partner, Code Advisors. “At Code Advisors I’m excited about taking that experience to the next level by working with even more corporations in addition to partnering with start-ups throughout their entire lifecycle.”

Code Advisors will tap into a broad range of backgrounds to bring a fresh perspective to investment banking. “Co-founding Code Advisors allows me to leverage the digital media expertise I gained while at Davis Shapiro Lewit & Hayes in a more comprehensive way that will include transactions,” said Fred Davis, co-founder and partner, Code Advisors. “I look forward to being able to do more with and for my clients in the shift towards the access of more content on more platforms for more eyeballs and eardrums. “

Tapping Industry Veterans

Founders Davis, Marquez and Smith are focused on assisting companies to design and drive their business strategies. Headquartered in San Francisco with offices in New York, Code Advisors will provide high-end merger and acquisition and corporate finance advice to media and technology companies worldwide.

Code Advisors is also honored to announce that Steven Machtinger has joined as General Counsel. Machtinger was previously General Counsel of Hambrecht & Quist, Associate General Counsel at JPMorgan Chase and most recently a partner at Bingham McCutchen.

In addition, the firm announced the formation of its advisory board, which provides insight into global financial services, venture capital and advertising trends. The Board, headed by Executive Chairman David Golden, partner of Revolution LLC and formerly the co-director of Investment Banking at Hambrecht & Quist, also is comprised of Peter Currie, former Netscape CFO and former CFO of McCaw Cellular; Danny Rimer, general partner of Index Ventures; and Alan Cohen, US CEO of OMD, a division of Omnicom.

About Code Advisors

Established in 2010, Code Advisors will be a next generation investment bank focused on new media and technology. Founded by Fred Davis, Mike Marquez and Quincy Smith, the firm will provide companies with a full spectrum of services, including merger and acquisition advice, capital markets assistance such as private placements, and business development, positioning, rights management and content management consulting. Code Advisors is passionate about the intersection of new media and technology and its members combine this passion with their relationships and industry knowledge to deliver top tier media and technology companies a comprehensive suite of strategic services.

Code Advisors’ business activities currently consist of strategic advisory services and do not include advice concerning the purchase or sale of securities. Code Advisors has applied for registration with the SEC as a broker-dealer. The principals of Code Advisors have entered into an agreement with WR Hambrecht + Co., LLC, a registered broker-dealer and a member of SIPC, and intend to become associated persons of, and to conduct any and all securities activities as registered representatives of, WR Hambrecht + Co., LLC while this application is pending.

For more information please visit http://www.codeadvisors.com, or soon follow them on @code.

About Quincy Smith

Prior to Code Advisors, Quincy served as Chief Executive Officer for CBS Interactive. Smith had been at the helm of the division since joining CBS, serving as president of the division from November 2006 to June 2008. Prior to CBS, Smith worked at Allen & Company. Smith is also founding partner of The Barksdale Group. He also spent five years at Netscape, where he ran Investor Relations and Corporate Development. Prior to Netscape, Smith worked for Morgan Stanley in their investment banking division.

About Michael Marquez

Before co-founding Code Advisors, Marquez served as the head of Corporate Development and Business Development for CBS Interactive. In this role he was responsible for acquisitions, investments and commercial partnerships across all the CBS Interactive properties on a world-wide basis. He successfully led efforts through acquisitions, investments and internal initiatives to build CBS Interactive into a top 10 Internet property that reaches more than 200 million unique visitors every month. Prior to CBS, he served as a senior member of the Corporate Development team at Yahoo!, where he acquired several companies and spearheaded numerous growth oriented strategic initiatives.

Marquez previously was an investment banker with the Internet M&A group at Robertson Stephens and the High Yield Finance group at Merrill Lynch. He began his career as a computer programmer at Accenture and was a founding member of its Internet Center of Excellence, where he led various technical teams that pioneered many of the early implementations of business on the web. He received a B.S. in Managerial Economics from the University of California at Davis with highest honors and an MBA from the University of North Carolina at Chapel Hill as a Bank of America Scholar.

About Fred Davis

Prior to co-founding Code Advisors, Davis served as founder of the leading Entertainment/New Media Firm of Davis Shapiro Lewit & Hayes, representing many of the leading companies in the new Digital Content Industry as well as today’s most successful and recognizable music stars.

Davis sits at the nexus of Content and New Media. He advises digital media companies to help them realize their goals of establishing new business models for music, film and television content in the new media space. His clients have included digital media companies such as MySpace, Hulu, iLike, Last.FM, Real Networks’ Rhapsody and Stardoll, among others.

Formerly an executive vice president at EMI Records, Davis has received the ACLU’s Bill of Rights Award and the UJA Music Visionary of the Year Award, and was a member of the Board of Directors for the 9/11 Fund. He lives in New York City.

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