Karaoke company hopes to make a comeback after piracy

By Jen Aronoff

Staff Writer, Charlotte Observer

In a generic office building near Carowinds, Kurt Slep won’t stop believing.

He believed 25 years ago, when his younger brother, Derek, asked him to join and invest in a new business – which became Sound Choice, the nation’s leading karaoke music producer.

He believed through the 1990s, when the company’s fortunes soared, making the brothers multimillionaires.

And now that piracy has laid Sound Choice low, sending revenues plummeting, he believes still. Like Elvis in 1968, it’s time for a comeback. The company is filing hundreds of lawsuits against karaoke jockeys, or KJs, who have swiped their songs, with the aim of making them paying customers.

“I have no more 401(k), hocked up every credit card,” says Slep, 53, the company’s CEO. “I am back to 1985 again, debt as high as I can get. … But I believe in it. I can see a turnaround.”

Sound Choice built its reputation on meticulous reconstructions of rock, pop and country hits, as well as more obscure tracks from a range of genres, with and without vocals. In an industry where tinny, synthesizer-heavy backing tracks had been the norm, Sound Choice’s true-to-the-originals quality became the standard and helped lift karaoke into the cultural mainstream.

The company licenses songs from music publishers and then rerecords its own versions with employees and contract musicians, selling the results on CD – formatted to play lyrics on screen – to professional KJs, bars and restaurants, retailers and the public.

By 1999, Sound Choice’s best year ever, it had $12 million in sales and 85 full-time employees, not counting local musicians who worked on contract.

But then easy digital copying and online file-sharing took hold, and the bottom line began to steadily erode. By the mid-2000s, Sound Choice would release a new CD, only to see it show up on the Internet, for sale on pirated hard drives. The company could not sell enough to cover its costs.

It laid off most of its employees – only 10 remain. In 2007, it sold its 18,000-song back catalog, which cost $18 million to record, to a Canadian company for $4 million, and now licenses it back. It once cranked out 100 songs a month, but has recorded only about 120 new karaoke tracks total in the last three years.

Slep figures Sound Choice products make up about 70 percent of karaoke songs played. Yet like other media upended by the spread of content readily accessible online, and often for free, Sound Choice has seen its business model disintegrate. When the company started, people were willing to pay for music and got water for free, Slep says; now, it’s the opposite. In 2009, revenue was about $1 million. The company hopes it will be at least $1.5 million this year.

“We’ve gone through a lot here,” Kurt Slep says, sitting in his office at the end of a hallway lined mostly with empty rooms. “This place used to be full of people.”

Sound Choice’s future now hinges on converting pirates to paying customers. In addition to filing lawsuits against professional KJs, Sound Choice is selling them an exclusive package of 6,000 of its best songs, as MP3s for the relatively low price of $4,500. If that works – and, Slep says, it’s starting to – then the company once again plans to ramp up production of new music.

“People are asking for it,” he says. “But my answer is, ‘I’ll record it when you buy it.’”

Beginnings of a karaoke movement

Kurt and Derek Slep had never heard the word “karaoke” when they started Sound Choice in 1985. Derek, an audio engineer who’s now 47, wanted to open a franchise of a small recording booth owned by a man he’d interned for while a student at Middle Tennessee State University in Nashville. Located at Barbara Mandrell’s studios, the booth let visitors record themselves singing along to vocal-free versions of popular songs, the backing tracks pre-taped by Nashville musicians.

Kurt, then a chemical engineer with Celanese in Charlotte, sensed that textiles were declining and was looking for an investment opportunity. More than 20 banks had turned Derek down, but Kurt believed in the concept, devised a business plan and invested $25,000. Singing, the brothers figured, was one of the rare activities that people from age 3 to 93 enjoy. They opened their booth at Carowinds in 1985, and by the next year had expanded to two other theme parks.

Demand for new songs was intense and the owner of the original booth, in Nashville, couldn’t keep up. At the same time, they noticed people were interested in buying the background music separately. So Derek rented an apartment on Johnston Road in south Charlotte and converted the bedroom and bathroom into a studio, where the Sleps made their own sing-along tapes, as they were initially called.

At first, most of their business came from the pageant industry. But karaoke began to arrive from Japan in earnest in the late 1980s, and the company expanded to serve “drunks in a bar” – not the greatest connotation, Kurt says, and one that took years to overcome.

Derek worried about how to compete with big Japanese electronics brands, like Pioneer. Then he heard their “lounge act” arrangements: One Beatles song, he recalls, even had Japanese-accented backing vocals. Sound Choice saw an opening and took over, sinking money into securing song rights from U.S. music publishers unfamiliar with the concept, building a catalog of hot songs and devising technology that would scroll the lyrics on screens.

When times were flush, the company jumped on popular songs immediately, sometimes even rerecording top-selling artists’ entire albums. Now, Kurt Slep says, it has to be more cautious, waiting for what it thinks will be hits people will want to sing for years.

But separating the next “Love Shack” or “I Will Survive” from the crowd is harder to do in a more fractured musical landscape, where boundary-transcending smashes are fewer and pop songs bubble up and down with greater frequency. Big movie ballads, a longtime staple, have fallen from favor, which may cheer anyone who’s ever had to endure “My Heart Will Go On.” Rap is also ill-suited for karaoke, with a few exceptions (see: “Baby Got Back”).

Sound Choice is especially known for its faithful recreations of rock and heavy metal tunes, but it also offers products for everything from nursing homes to daycare centers. A series for “mature singers,” called “Reminiscing,” contains songs from the 1900s through 1940s, with more simply arranged, larger-print versions available.

In each case, the company’s musicians pick out all the different instrumentation by ear, transcribe the lyrics – “We’re the only ones who really know ‘Louie, Louie’,” music director John Nipe says – and write production notes. Nipe, 37, and recording engineer Paul Jensen, 48, serve as audio archaeologists, decoding how songs were originally recorded, and with what equipment, so they can work to reproduce them exactly at Sound Choice’s studios.

A common misconception is that karaoke makers simply take the original tune and pull out the vocals, but that’s not possible, says Derek Slep, in a control room filled with racks of equipment, two lava lamps and charcoal portraits of John Lennon and Bob Dylan on the wall. “It’d be like looking at a cake and being like, ‘OK, can you pull out the sugar?’”

Instead, they create a completely new version of a song, rerecording all the parts, including vocals, and putting it back together. Sound Choice sells versions with and without vocal tracks, in case a singer wants to hear how a part goes, or a commercial or TV show wants to use a cheaper, soundalike version of a big song.

The process takes about 22 man-hours, on average. Some tunes, like the Beastie Boys’ “Girls”, which is just vocals and a xylophone, are relatively easy to pull off. But try figuring out a Jimi Hendrix song partially recorded backward, or reproducing Queen’s “Bohemian Rhapsody” with three-part harmonies and a singer who’s a dead ringer for Freddie Mercury.

“It’s the ultimate in reversal,” says Derek Slep. “It’s like going to a fabulous restaurant and trying to reconstruct it at home.”

But don’t necessarily ask the Sound Choicers to do karaoke themselves. Kurt has only performed at company parties and trade shows, and only as part of a group, singing either “Old Time Rock and Roll” or “Twist and Shout.” Derek can remember only three attempts: Once just to try it, another time on a dare and a third time he can’t recall.

“Just because I own the chocolate factory, I don’t have to eat it,” he says.

Motown of karaoke bands

Sound Choice’s struggles come as karaoke is arguably more popular than ever and demand for new songs is strong, industry observers say. But few manufacturers are producing much music right now, because there just isn’t enough money in it due to illegal distribution, says Peter Parker, publisher of California-based Karaoke Scene magazine. Fly-by-night, unlicensed knockoffs with cheap instrumentation are cropping up, too.

Sound Choice’s attention to detail and red-lettered logo made it one of the few recognizable brands in the karaoke world, one that brought legitimacy to a medium others didn’t take seriously, says Brian Raftery, a karaoke aficionado, writer and author of “Don’t Stop Believin’: How Karaoke Conquered the World and Changed My Life.”

“They really were kind of like the Motown of karaoke bands,” he says. “Like a hit factory that didn’t write their own hits.”

“What people who don’t do karaoke don’t understand, there really are a lot of terribly made karaoke songs out there, and it really takes away from the fun of getting up and singing,” he said. “You would get up with a Sound Choice song, and it would sound exactly like the song you performed a bunch of times in your head or at home, and that was incredibly empowering.”

Jeff’s Bucket Shop, a subterranean bar on Montford Drive in Charlotte, tells customers to pick Sound Choice tracks, even though it also has others in its 16,000-song karaoke catalog, owner Jeff Laria says.

“You can just tell,” he said. “There’s a big difference. … Sometimes somebody will pick the wrong version and it’s like, ‘What song is that?’”

A little after midnight on a recent Saturday, two guys in jeans, one in a button-down and the other in a polo shirt, take the stage. “Livin’ On a Prayer, in the style of Bon Jovi,” flashes on the screen, the Sound Choice logo below it. As the well-worn intro kicks in, the crowd, most of whom appear to know the performers, begins to scream and clap.

They skip the spoken intro and end up coming in too early, so they’re already off, but no matter: People holding Bud Lights and Miller Lites pump their fists and sing along, while one guy on stage grips the mike intently, eyes squinted. “That sounded just like the CD,” KJ Charlie Penn deadpans after they finish. But really, it did – except for the singing.

A song or two later, Penn makes an announcement: “Always pick SC,” he exhorts, with “SC” being the abbreviation for Sound Choice in the catalog. “It’s better.”

The rest of the night brings a parade of humanity to the stage, proving the Sleps’ belief in people’s innate desire to sing: A guy in loafers and khaki shorts, cell phone clipped to his waist, intensely tackles Lynyrd Skynyrd’s drug-themed “The Needle and the Spoon”; then, a young woman in skinny jeans emotes Mr. Big’s “To Be With You.” A short, goateed man with longish curly hair and a backwards cap steamrolls Christina Aguilera’s “Beautiful,” and at about 1:25, an impromptu sing-along to Hall & Oates’ “Rich Girl” breaks out.

Sales and lawsuits pick up

Sound Choice put a lot of faith in the fact that people would want to do karaoke well, writer Raftery says. But he fears its painstaking approach to song selection may be holding it back at a time when it could capitalize on new technology, like online crowd-sourcing and fundraising, to better discern which songs people want, and quickly.

“They need to heighten the process in terms of how they interact with people,” Raftery says. “I hate to speak of them in the past tense, because I worry, as a lot of their fans do, that they won’t be able to get back to their past glory. I’m rooting for them, and I think a lot of other people root for them, too.”

The company takes input from fans, Kurt Slep says, but it usually comes in the form of one request for an obscure song. Even 50 requests for a track are not enough to justify recording it, he says; Sound Choice would need to sell 30 times that number to make a profit. Customers have, however, provided helpful inspiration for themes and compilations.

Though Sound Choice has recorded a handful of tracks in recent months, including Carrie Underwood’s “Undo It” and a Taylor Swift song, its last full album came out in March, filled with top hits of 2009. Slep says he knows the company can’t survive forever on its back catalog, which is why its business model has shifted, for now, to recovering assets.

Investigators around the country are searching for KJs playing pirated music. Lawyers working on contingency will then file a lawsuit asking them to prove they’ve paid for it. The goal is to encourage defendants to settle and become paying customers. Sound Choice asks that they pay what they would have if they’d bought the music legally, not punitively.

About half of the 120 suits filed this year have been settled – one man in Florida, for instance, was running 40 shows a week with eight systems, and settled for $60,000. Another wave of suits, more than 300, is set to be filed this month.

At the same time, the company has also started a sort of amnesty program for KJs, offering 6,000 of its most popular songs in MP3 format for $4,500. People Kurt Slep suspects are pirates will call to order discs, claiming they’re just getting into the business or that their car was broken into. Sound Choice, he says, doesn’t care about their reasons, as long as they pay.

Both sales and lawsuits are picking up, Slep says. But he estimates there are about 25,000 pirates operating, so there’s still a ways to go.

To generate extra income, Sound Choice is renting office space and studio time to outside clients, aiming to create a little music row. Nipe and Jensen are also working with up-and-coming bands, using the knowledge of different musical styles they’ve gained from karaoke.

Renting studio time, however, doesn’t generate the same profits as making karaoke songs, which bring in income for years – which is why Sound Choice hopes to resume karaoke production soon. Because of its reputation, Slep says, the company is still in a better position than competitors to capitalize on karaoke’s popularity.

“Music touches people’s souls, and it moves people,” he says, pointing to an e-mail from a woman who wrote him to say that karaoke “made my life more wonderful.”

Sound Choice is reassembling its musical team and aims to begin recording new releases again in October, by which point the new lawsuits should be paying dividends and improving cash flow. The release time, Slep says, will be sometime around Thanksgiving.

Like the immortal lyrics of a song that’s spawned many a karaoke sing-along itself, then, he’s rolling the dice one more time, trying to hold on to that feeling. And so, the journey continues.