In scouring the internet this week looking at all the breaking music news headlines, one headline stuck out to me. The article was describing the possible future of the new music business, and what it could hold for all of us who work in it. I have been in this music business for roughly 20 years (no – I am not that old, just been actively working in music in one facet or another for a big portion of my life). I have seen it from so many different perspectives. I have seen it from the eyes of an artist, working A&R, street team, studio work, management, and now in artist development for Fame Wizard. One thing I can tell you with certainty is that it has constantly changed. From the days of many numerous labels controlling and holding the careers of artists in their hands, to today’s “new music paradigm” of a DIY artist and a social media driven market. I will admit that on more than one occasion I have started to lose hope of having a future working in the music industry. For many years I could not see a bright future for myself. With a continuous decrease in album sales (which means a lack of revenue toward the traditional business side), to an over 50% drop in jobs within the music industry. I never knew how any of us could sustain a way to make a decent living. Not to mention trying to make millions (which was not my catalyst for following a career in the music biz). But, working in the realm of artist/business development for recording artists, I have started to have a complete rejuvenation in my outlook for a career in the music business. It is not by any means a dead business. It is actually a vibrant and flourishing industry. The caveat is that it is a new, DIFFERENT business. We as a group of musicians, record executives, and entrepreneurs need to continue to be innovative and find more ways to create revenue. I came across an article written by one of our senior advisory board members, Tom Silverman (founder of Tommy Boy Records, and the New Music Seminar http://newmusicseminar.com/). Tom breaks down his vision for how we can grow and adapt to the changing climate of the music industry and the new economics of this exciting business. Featured in Billboard.biz, Tom Silverman describes his vision on how to turn today’s music industry into a $100 Billion Dollar business.
Tom Silverman, known for founding the legendary Tommy Boy Records and The New Music Seminar (The New Music Seminar is a series of music showcases held annually in June, has a group of panels and exhibits, and is a music networking and educational extravaganza for people in the industry who are seeking to learn and understand how to help artists “rise above the noise floor” in a shifting musical landscape) took to a recent blog post to discuss how to grow the current music business and set a realistic goal of generating $100 billion in annual revenue that he feels we can achieve within the next decade. Tom points out that this year is the 12th year (since 2000) that we have seen either a flat line or a decrease in sales revenue of music. He attributes this to the reduction of artist rosters, a 50% decrease in signings and investments, as well as job losses in the music biz in the realm of about 60%. I agree with his point that this has created an environment where pretty much everyone within the music business avoids taking any sort of risk. I point this out to every artist I speak to. Labels and managers are not at the same spot they were in the late 90s and early 2000s, where the business was a burgeoning industry and taking risks was not only part of the job, but it was how you could make a name for yourself. This is not the climate we are currently in. Labels and managers cannot bank on the possible success of 1 or so artists to cover the losses they have incurred from many other artists on their roster. Tom points out that the only way we could get more investments into artists and create more jobs is to increase the profit that we make in the music business. For many years the predominant school of thought was to sell more records and increase the prices they are sold at. But this will not work in today’s market. What I have been saying for many years, which Tom articulates very well in this article, is that we need to focus on developing a new paradigm to generate revenue. Not rely on traditional streams of revenue seen in the form of album or ticket sales as the largest or main source of revenue for our business.
Currently the music business is valued at $7 billion dollars in the US, and $23 billion worldwide. Tom points at a very interesting stat to take note of. If you look at the overall music sales from 1995 and project those figures toward 2020, what becomes clear is overall revenues will continue to decrease, or at best flatten out. CD sales will continue to decrease, and digital albums will pass the overall total CD sales by the year 2015, but mostly sales of singles, not albums. The scary part is that although the digital sales will increase, the increased number in sales will be eclipsed or be negated by the declines in physical sales causing what Tom says will be “a ceiling on overall U.S. album sales of around 300 million per year.” They will essentially cancel each other out. Tom points out that “when you consider inflation at around 2% a year, you see that sales revenue cannot support a sustainable music business.” The problem is not in these numbers, it is in the fact that we are not actively working on a solution. Not adapting to this change. Every other industry changes and adapts, why can’t we?
Much like Tom Silverman is, I am actually excited about all this as well. There is actually some great news underneath all of these staggering numbers. But you need to be an entrepreneur, and innovative to see this. If you are stuck in an older form of business, you will be unable to see past the dreary numbers Tom presents. We need to find a source of revenue that can support a sustainable business in the music industry. But this will not be a music sales related revenue. Non music sales revenue is currently hitting a landmark figure. Recently it was reported that 25% of all music revenue came from “non-music related” sources. That is where I see the business going. That is YOUR job as an artist or a music business entrepreneur to learn how to generate income from these sources. Here are some ways that anyone could generate revenue. Not just major labels and publishing companies. You can! You just need to be willing to learn how to use these tools to your benefit.
- Music Licensing for film, TV, commercials etc. – take note, if you sound like Coldplay or Jay-Z, it will be way more affordable for music supervisors and production companies to license your song than it would be to license top-tier major label artists.
- Ad Revenue from your videos – many artists are able to earn income from getting advertisements on their videos. If you can learn to pump up your presence on sites like YouTube, Vimeo, etc. companies will pay you to put an ad before your video or somewhere on your page.
- Music Cloud Lockers – iTunes Match, Google Music, Amazon, Sonos, Samsung Music Hub, Xbox Music and many others are new ways to for artists to have a continually and GROWING center for their music business.
- Subscription Services – this is where we are seeing the biggest growth, development, investments, income being generated, and where most music consumers go to find out about NEW music. Spotify announced over 1 million paid US subscribers. Cricket/Muve announced over 1.1 million subscribers. Rhapsody with PCS/Metro announced they have over 1 million subscribers. Not to mention new and upcoming services like the highly anticipated Beats Electronics Project ‘Daisy’, as well as Xbox, Slacker, Samsung Music Hub, Rdio, and many more. Not to mention Sirius/XM, which already has 23 million paid subscriptions in the US alone, have done so at a higher subscription price than any other music subscription services. Sirius/XM did it without the popular on-demand feature, no cloud locker, and absolutely no social integration features. I imagine Sirius/XM will eventually add some, if not all of these features into their service in order to be competitive.
Tom Silverman predicts that the music-streaming services which currently have approximately 4 million US subscribers, will eventually reach a minimum of 50 million subscribers, and possibly even 100 million at some point in this decade. Silverman points to what he feels is a probable figure, “50 million subscribers at $10/month, the industry nearly doubles with an additional $6 billion in gross revenues.”
A major industry where revenue can be generated in the music business is in both the cell phone market, and the auto industry. Bundling subscriptions in sales for cell phones and new cars can be a great source of revenue for the music business. This could be profitable for all parties involved. Artists, labels, publishers, mobile phone services, car companies, etc could benefit from this innovation. Stats show there are approximately 300 million music buyers in a world of about 7 billion people. There are 6 billion active cell phones; 1.2 billion of those are smart phones. 50 million new cars are purchased each year. Music subscriptions services are aiming to bundle their services in both the new cars and cell phones. This could be a solution for the loss of revenue in the music industry attributed to the increasing and continual decline in music sales. Silverman says, “Just an average monthly subscription of only $2 bundled into 3 billion devices would take revenues to more than $90 billion from our current $23 billion.”
It is easy to be discouraged by some of these staggering figures that I presented in this blog. Whether you refuse to adapt to the inevitable change in this business, or are confused like I am by seeing so many numbers, stats and predictions – try to see the light at the end of this tunnel. I agree with Mr. Silverman on pretty much all of his points. We both feel that there is more than “plenty of life” left in the music business. It is just a matter of all of us coming together in an organized effort to adapt and grow with the change. Our business did it before more than once. The music business and its technological sister industry came together to support itself and adapt to both bootlegging and the advent of the Compact Disc (CD). We all dreamt at one time or another of having a successful and fulfilling career in some industry of our choice. Many kids grew up wanting to be doctors, lawyers, presidents, athletes, action movie stars, models, etc. We, in the music business chose this volatile industry to see our childhood dreams come true. Some of us dreamt about being a rockstar or rapper, others wished to be the CEO of a major label. But many of us started to see the possibility of these dreams coming true start to slip away. I know at one point I was pretty much convinced that my dream of a career in the music industry was fading. But now, from the last two years working at Fame Wizard and helping artists learn how to run their own business and make money, I have begun to realize that there is still a chance of this dream coming true for me. With all of the advent in home recording, social media, online distribution, and digital music subscriptions, you can also see your dreams become a reality. It will just take a rejuvenated effort and a new approach by all of us still in this business to work toward it. As Silverman puts it in this article, “It will take an organized effort by the music industry and our technology, device and mobile service providers to make this dream a reality.” Success in any industry is directly related to the level of innovation from its leaders. As seen with the tech market, Steve Jobs of Apple did not stand on his laurels. He continually pushed the boundaries of technology. He did it with revolutionary devices like the ipod, the iphone, the ipad, among many other innovative devices. We need to adhere to this approach in the music business. Ya, some people might assume it would be great if time stood still and it were still 1995 when CD sales were flourishing. But time doesn’t stand still. Neither does the music business. The beauty of that is that we as both artists/musicians, and music industry executives and entrepreneurs have greatly benefitted from this. We benefitted from consistent advancements in technology and changes in the business. It is the reason we have a rich history of amazing music that inspires us to work in this business and make more! OK, imagine if time stood still and we never progressed sound quality from the 45? Or we did not have such cultural and social diversity in the types of music we have? Or if the Beatles did not have hi-tech recording equipment to experiment with? Imagine if the guitar was never amplified? Or if the turntables were never used to scratch on? Or if rap music did not grow to be such a cultural phenomenon. Imagine a time with no home recording, no social media, and every artist still having to be completely dependent on labels for their success and financial stability? Part of life is change. The key is being able to adapt to the change and be willing to embrace it so you can be successful in whatever lies ahead. The most exciting part for me is the fact that NONE of us truly knows what the future ahead holds. But what history tells us is you could have the chance to be on forefront of this change. You could be a leader who sets the new standard and actually creates the blueprint for what the music industry can become. I shared what Tom Silverman’s vision is. What is yours? I always said I want my name to be mentioned among all the other greats and visionaries in the music industry. I want to make an impression in the music industry and on all music fans that will leave an imprint long after I leave this world. In the old so called “golden era” of the music business, that would have been at best a 1 in a million shot. With the fact that I can literally control my own destiny through all of these great advancements and changes, maybe I could still actually do that. Maybe I could still see my dreams come true.