November 12, 2013
Tom Silverman has made his presence known in the music business by being ahead of the curve. In 1980, he launched The New Music Seminar, which discussed and debated the challenges facing the music industry. A year later, he launched Tommy Boy Records, which put out releases by Afrika Bambaatta, Naughty by Nature and Biz Markie, among many others. The NMS attracted over 8,000 participants in its initial 16-year run, but it was revived in 2009 to tackle a host of new challenges facing the music industry. Here, Silverman discusses those challenges and what it will take to overcome them.
How do you compare the music business now to when you started the New Music Seminar in 1980?
- In 1980, it was the record business; 99.5% of revenues came from record sales. Today it is the music business; 25-35% of revenues come from non-unit sales.
- The value of the U.S. music business today in inflation-adjusted dollars is the same as it was in 1966.
- 50% less people work in the music business today than in 1980.
- 60% less artists are signed to labels today than in 1980.
- 21% of music sales were from the independents in 1980 and 79% were from the six major labels. Today 35% of music sales come from the independents and 65% come from the three remaining majors.
- Radio station ownership consolidated has reduced opportunities for new artist exposure
- Retail outlets consolidated, driving smaller retailers out of business and eventually reducing shelf space for developing artists
- Music promoters consolidated, reducing competition for new artist exposure opportunities
By now, do you think the major labels have "gotten it," so to speak, when it comes to dealing with the New World Order of the business?
Major labels are getting it. They understand that the unit-based record sales economy is never coming back and they are learning that a subscription-based music economy can generate more revenue for them and their artists than the a la carte record business ever did. I am a little concerned that they are favoring a small group of big players and not cultivating a diverse group of smaller players. Cultivating an ecosystem with both small and large players will prevent the over-weighting of a small group of revenue sources that hurt the industry in the same way that the consolidation of record retail did.
The New World Order of a web-based business is one of transparency and the majors seem to be fighting this inevitable trend.
Do you believe streaming can be the industry's salvation when many artists currently are complaining that the compensation is woefully insufficient?
Subscription revenue is already driving growth in the music business in Sweden and Norway and has the potential to quadruple the current music business revenue. If labels can quadruple their revenues, four times as many artists will get signed -- and they will make four times as much money overall as they make today from music sales.
But how does one grow that business by that much in the current economic climate with the prevalent business models, digital and otherwise?
The ultimate key to building a $100 billion music business is bundling music services with connected devices -- phones, cars, TVs, computers. SiriusXM has built a business in 10 years that is almost as big as the entire U.S. music business in revenues by monetizing the attention around music with a bundled subscription model. They charge 50% more than Spotify for a more traditional non-interactive, one-way experience bundled in automobiles. They have 25 million subscribers in the U.S. alone, which is more than all the world's music subscriptions in 2012.
So where does radio fit into the present and future business models?
As cars become connected, not just through Bluetooth or wired connections to mobile phones but connected through a SIM card directly to the web, radio will rapidly move from a one-way media to a two-way media as it moves to the web. This conversion will open up new advertising opportunities that will allow higher CPMs and even new non-advertising revenue centers to emerge. Online radio can eventually generate double the current $17 billion that terrestrial radio generates.
Radio has a window of opportunity to lead the charge to the online two-way experience, but outside of Clear Channel, most of the radio business is largely fighting the future instead of embracing it -- like the record business did from 2000 to 2010.
But hasn't the digital revolution, where consumers can access a seemingly countless number of acts simultaneously, made it more difficult to break new music than in the old days, when practically an entire nation were exposed simultaneously to the Beatles at the same time on Ed Sullivan?
Ironically, most music still breaks through FM radio. No other medium has the combination of reach and frequency necessary to break music. The consolidation of radio since 1997 has not increased the number of rookie artists' exposure opportunities at terrestrial radio. The digital revolution has made possible more ways to consume music and actively discover music, but passive exposure is the key. Proof of this is Bit Torrent research, which shows the top downloaded files are the same songs that are being played at radio and selling everywhere else.
We need more passive, high-frequency high-reach music exposure platforms, or a tiered system where songs can achieve a threshold of success at a limited reach platform and then graduate to a higher reach format. Like falling dominoes, each song would graduate to the next exposure level automatically until it fails and does not hit the next domino. The problem now is that there are not enough platforms yet at each exposure level to allow all the music that qualifies to rise to the top and there is no inter-platform mechanism to insure that a song that meets the performance requirement automatically graduates to the next bigger platform.
By the way; the Beatles did not break on Ed Sullivan nor did any other act other than Topo Gigio. Almost every pop music act to play Sullivan was a top-10 radio phenomenon already. Ed Sullivan was simply the final domino with the biggest national exposure reach.
How do you find those missing dominos?
This is our industry's challenge for the next decade. Creating a system of dynamic exposure platforms that automatically graduate qualified music to the next level.
How do indie labels survive and prosper in this difficult economic and promotional environment?
Independent labels have survived better than other labels because they have low overheads and also because they are forced to take chances on music that pushes the edge and lives on the fringes. Independent labels represent the diversity that makes a strong, healthy music business.
Some indie labels, such as GlassNote, have going into revenue sharing ventures with radio groups - most notably, Clear Channel. What's your take on that?
This is their attempt to solve the domino challenge. They want to find a way to graduate moves of their artists to greater exposure platforms, and they believe that these direct deals will improve their ability to graduate more of their artists to traditional radio, which is still the final domino.
Finally, the New Music Seminar originally focused on indie labels, many of which had punk/new wave rosters. You also started Tommy Boy Records, one of the early hip-hop records. Back then, both hip-hop and punk were seen by many as a form of rebellion against mainstream commercial music. Is "music as rebellion" relevant anymore?
The New Music Seminar exists to help more artists break through whether it is rebellious or not. The concept of rebellious is relative. When a scene develops outside mainstream genres the way hip-hop and punk did, those in the movement don't see it as rebellious. Those outside the scene label it rebellious.
The real question is can a scene develop organically in an Internet world? Can a new genre have time to gestate the way rock and roll, reggae, hip-hop, and house did before being sucked into the mainstream? When a new scene develops, it needs a gestation period to mature and develop. Today, any new sound spreads through the web before it has had a chance to mature. Like a bird thrown from its nest before it develops its wings, these potential new genres die as infants. There has been no significant new music scene that has emerged in the Internet era.
This is a great topic for discussion at NMS: How to gestate a new genre in an interconnected world. Thanks for the tip.
You can register for the New Music Seminar at www.newmusicseminar.com.