656: A Taste for Disruption | Russell Burke, CFO, Life360

Once again, the instant imaging that our conversations often render appears to be strangely prescient of the finance leader’s future career chapter.

“Before that piracy, I hadn’t really understood the concept of disruption,” explains Burke, who occupied VP of finance roles at Sony Music in both New York and Europe in the late 1990s and early 2000s.  

At first, Burke was tasked with helping Sony to lessen piracy’s bite by leading a series of cost optimization initiatives, including setting up joint venture distribution agreements and putting in place shared services facilities.

“After dealing with that for a time, I decided that I wanted to join the disruption,” comments Burke, who in 2001 was named founding CFO of PressPlay, a music streaming service formed as a joint venture of Sony Music and Universal Music.

“Even though this was a joint venture formed by two massive companies, it was in many respects a true start-up—we sat down and created a business model and executed on it,” explains Burke, who adds that the company would grow to serve 800,000 digital music subscribers before it was sold in 2003 to Roxio, an early streaming service that helped to legitimize the streaming seas as it rolled up streaming assets, including those of pioneering pirate Napster.

“PressPlay was really set up by the record companies to battle the Napsters of the world, and, at the same time, these companies were suing the pirates,” remarks Burke, who recalls that PressPlay opted to sell to Roxio as the firm sought to rebrand Napster as a legitimate streaming service—signaling an end to the music industry’s choppy seas. –Jack Sweeney

As I dug into it, I was sort of fascinated by the flow. Life360 has built up this large and loyal base of free users of the app over a long period of time, and then we introduced premium paid products to start monetizing it all. In general, one characteristic of apps is that there’s typically high churn in the first month or two because there’s very little friction involved in downloading the app and registering. In Life360’s case, though, after that first couple of months, users tend to stay around for a long period of time. We’ve been able to successfully monetize them over this period, moving free users into paid and upselling paid users to a higher price point.

We needed to flesh out this for investors, which really hadn’t been done up to this point. In my first-half yearly earnings presentation in August, I spent some time focused on what we’re now referring to as revenue retention, including charts that sort of show the behavior of cohorts over time and the success in earning revenue over time from these groups. I then sort of expanded this into sort of overall unit economics to help investors become more familiar with the margins of the business, especially as we launched this new membership suite of products.

Value Quote: “First, we need to make sure that finance—both people and systems—is attuned to work as effectively as possible, especially in this new digital-first world. This is part of what we need to do to be prepared for a potential U.S. public listing. Since we’re already listed on the Australian Stock Exchange, we’re well advanced in that regard.” jb