10 Questions with ... Tom Silverman
May 28, 2012
1) What inspired you to create the New Music Seminar
The record business was in a downward spiral and no one was discussing what the next music business was going to be. We had been disrupted and were headed for destruction and everyone had their heads in the sand. I wanted to convene the visionaries and leaders, the architects of the next music business. Initially there were very few, but now the movement is growing. This year's New Music Seminar takes place in New York on June 17-19 and we offer a 20% discount to All Access readers by using the code NMSNYCAA2341.
2) What do you feel is the most important issue facing recording artists and record labels in the current business environment?
The lack of investment in new music and artists is the most important problem facing the current music business. The poor return on investment in the always high-risk music business has chased away investment capital. The money invested by labels and others in new and developing artists drove the business for years. More investment must be made in new and developing talent.
3) How has the role of the artist's management changed in the new music business paradigm?
It depends on the artist. The manager in the new world must be responsible not only for managing the artist but the artists' relationship with the fans. The more connected the artist is with the fans, the more power that artist has. Amanda Palmer is a good example of fan relationship power in that she has raised over $850,000 on Kickstarter and is not done yet.
4) Can you explain the "Fan Relationship Pyramid?
The Fan Relationship Pyramid helps you understand that there are all types of fans and they can be divided by the amount of money an artist can earn from them. There are very few super fans at the top of the pyramid. They spend $60 to $150 a year on an artist. Active fans are more plentiful but they spend $20 - $59 a year on the artist. Passive fans spend between .99 and $19 a year on an artist. Potential fans like the artist but have yet to spend. They may have listened on Internet radio and contributed a few pennies though Sound Exchange or watched the videos on YouTube and that monetized them for a few more pennies, but because these passives are so plentiful, the amount they contribute to the total revenue stream is becoming more significant as passive fans are better monetized.
5) You also founded Tommy Boy Records. Can you give us some insight on starting this legendary label and some of the ups and downs you encountered running a record company?
This question is too open-ended to answer in less than a book, but here is some insight on starting your own label or business today. The more ignorant you are when you start the better. That way there will be no fear about what could go wrong or what you might be missing. Being in the right place at the right time is very important. Be sure to do this at all costs. Stay detached about everything and life will be more fun. Never trade fun for money; happiness trumps everything.
6) Cloud services such as Spotify are becoming very popular with music fans, but new artists are finding it very difficult to make a living on the small royalties they receive from these services. What can be done about this?
The artist share of revenues from streaming and subscription services is virtually the same as it is from iTunes or other download services. AC/DC is still not available on iTunes. There will always be Luddites. Some of them will be very well paid.
7) Do you believe that streaming sites and cloud services are a viable option for music fans who download their music from file sharing services for free? Will streaming services lead to the demise of illegal download sites?
Yes. As young music fans who download everything for free get older and their time becomes worth more than their money, they will quickly migrate to faster, easier, and safer alternatives than illegal downloading (like CD burning LOL!) I do not believe that illegal downloaders are directly responsible for very much of the downturn in the music business.
8) What trends do you see for radio, TV, broadcasting, online radio, satellite, Pandora, streaming, video on demand, and similar industries for the future?
Radio will migrate to online as soon as connected cars are ubiquitous. By 2021, 90% of all radio listening will be digital. In the United States, 18% of all time spent listening to radio is digital already. TV will migrate to online but it will take longer due to bandwidth and licensing issues. As brands and ad agencies better understand the burgeoning digital radio model, more money will flow into that model. Eventually the advertising revenues from digital radio will exceed terrestrial radio and tie-ins with daily deals sites and other new revenue sources will allow rev sharing that will drive even more profits.
Traditional radio will become very popular online as it masters the necessary social skills of the web and on-air personalities and programmers adapt to the one-to-one opportunities that the new medium affords. The broadcast model of one to many will fade as listeners expect a more personalized, integrated and connected experience. But some of the traditional radio powers will master this model and see real growth. Others who fight the new paradigm, will perish.
Subscription services will be successful with the most active music listeners who have the time and patience for the lean-forward experience. The masses will prefer to set it and forget it. New technology will bring us closer to "one-click" where anything anyone wants to own or access is never more than one click away. Radio will migrate to the smart-phone which is the most portable and connected possibility. Wire-free devices like headsets and large screens and keyboards will become commonplace and everything on the phone in your pocket will beam to peripherals that enhance the experience and also allow sharing with others.
The future is about faster easier connection with everyone. The future is about self expression. People will want to be able to easily and intuitively interact with everything.
Creative rights holders must understand this future and easy fast licensing models must evolve that will allow the creative community and their investors to maximally monetize that creation. The idea of on-demand already seems like an anachronism. The world is on-demand.
9) Many young artists are now forced to sign 360 deals with their record labels giving the record company a piece of all their revenue sources. What advice can you give to musicians who are faced with these types of deals?
Musicians have the option to do it themselves. There has never been more access to exposure, direct to fan monetization and distribution of both audio and video than there is now. It has never been cheaper to make music. If an artist believes they need the funding attention and expertise that a label can offer, they should consider what their choices are. (It is a huge amount of work that takes you away from creative).
The more buzz an artist has, the more leverage they have making a deal. I personally don't think there is anything wrong with the concept of an all-rights deal, but I would prefer a 10 page contract that is fully transparent and included an equity vehicle like the venture capital model I call the "Holistic Joint Venture." Music business contracts are relics of 40 years-ago and should be scrapped and re-conceived from the ground up.
10) What's next for the New Music Seminar?
We will be holding our New Music Seminar at the Webster Hall in New York City from June 17-19th. Next year, the New Music Seminar will begin international outreach beyond technology. The NMS will include more music. We will forge an alliance with the creative community; artists, producers songwriters, labels, publishers, and PROs to increase the value of music and remove the friction from businesses who want to license music. The NMS New York Music Festival will continue to grow in importance.
The NMS "Artist on the Verge" program will continue to improve and become the focal point for new artist breakthroughs. Artists and labels and music business associations will use the New Music Seminar to drive growth in the industry as a whole.
What made you want to get into the music business? Who were your early mentors?
I was the music director of my college radio station and loved music. But my college roommate convinced me to leave graduate school in Environmental Geology to launch a newsletter for DJs with him. This was the foundation for the New Music Seminar and Tommy Boy. My early mentors included Mo Ostin, Chris Blackwell, Ahmet Ertegun, Seymour Stein and Morris Levy.
What's was the most exciting project you've been involved with?
"Creating Planet Rock" with Afrika Bambaataa and the Soulsonic Force and Arthur Baker has to be one of the most exciting. Also, launching the New Music Seminar was one of the other most exciting projects.
Do you believe that independent projects that are funded through sites such as Kickstarter and Pledge Music could be a viable new business model that gives some serious competition to major label chart topping artists?
It's still too early to say, but Amanda Palmer's record-breaking raise of over $850,000 approaches the average investment that large labels make on new artists. Those labels have economies of scale and institutionalized relationships that can help with things like traditional radio and television in addition to their spending. Amanda will have to cobble together a team of experts to market and monetize her project and manage that team. Perhaps we will see more "rent a label" services emerge for artists that have the funding and want to fully control their masters and their destiny, a turn-key solution.
Do you see a future where an unsigned artist can sell a significant amount of records on their own to build enough of a fan base that they can actually make a decent living without the help of a label?
I would say absolutely. There are already many examples of this and it is indeed possible. However, selling a lot of records is no longer the goal. Making a lot of money on your own terms is the goal. Check out Hoodie Allen for an example. Many artists have their own labels like Corey Smith, Sufjan Stevens, and Ani DeFranco. An artist wants to maximize revenues from all sources. Record sales may be the least significant. Corey Smith had built his business to $4 million a year a few years ago by giving his music away. He goes fishing with his kids whenever he wants to. That's the new definition of success.
What is the one truth that has held constant in your career?
"No problem can be solved from the same level of consciousness that created it." - Albert Einstein.
We must constantly strive to grow and change our perspective to see things in new ways if we are to be able to continue to create, grow, and improve. The New Music Seminar helps us all achieve that new perspective.