Is The New Music Business Model About Joint Ventures Between Musicians And Labels?

from the maybe-sorta dept

Wired is running a very interesting interview with Tom Silverman of Tommy Boy Records, where he gives his vision of the future of how the music industry works. You may remember Silverman from earlier this year, when he looked at the Nielsen Soundscan numbers and pointed out that it didn't look like very many non-label bands were breaking out. Of course, it turned out that his numbers were very suspect. Part of the problem is that Nielsen isn't very good at counting what's going on in large parts of the industry today. The folks over at TuneCore totally debunked Silverman's claim about a lack of artists breaking out, by showing how their numbers (which aren't counted by Nielsen) show many artists selling an awful lot of music.

In the Wired interview, Silverman brushes off TuneCore and its results as mere "hobbyists," but I think he's making a big mistake there. Ignoring the hobbyists who are making a living is to ignore what's actually happening in the industry. In fact, later in the interview, Silverman points out the obvious point that we've been making for years: "It doesn't matter if you don't have a top ten record anymore -- it just matters that you make enough money." If that's the case, why dismiss those on TuneCore who are making enough money?

The other big problem is that Silverman is measuring the wrong thing in his initial example. Again, at the end he says all that matters is if you make enough money, but all of the numbers he presents before that to push forward his thesis are record sales. He ignores all the other business models that are making many artists money these days, and I think that's where some of his analysis goes offline.

That said, the second part of the interview is a lot more interesting. In it, he suggests that a better model than the ridiculously adversarial model of record label deals, is to set up a joint venture between the labels and the band, owned 50-50, so that the relationship is more of a win-win relationship. This is definitely the right general thought -- creating solutions where everyone benefits. And it sounds quite a bit like what Terry McBride from Nettwerk has done for years, where it helps bands set up their own record label.

However, before everyone sings happy campfire songs together, it has to be pointed out that the details matter a lot. Silverman, in describing this new setup, compares it to the movie industry:

The model that looks most promising is to set up an LLC, just like a movie company -- they set up an LLC for each movie. Every artist is a business, and has its own corporation under this model, and all of that artist's creative equity goes into that -- not just music, but everything they do.

Bad comparison. As we recently discussed in great detail, the whole reason that Hollywood sets up those LLCs for each movie is to play accounting games, to make sure that each of those LLCs lose money. So, just watch as these new "joint venture" LLCs just happen to include some huge "distribution and management fee" to the record label, that makes sure that the corporation itself (i.e., the musicians) don't make much money.

Filed Under: business models, music industry, predictions, tom silverman

Finding The Long Tail In Music

from the it's-out-there dept

In the past we've had an ongoing discussion with some folks on this site concerning whether or not it's now a better time to be a musician than before the internet became central to everything music-related. We've argued that today there are more options and more opportunities for bands than ever, and that's only a good thing. It doesn't mean that every band will be a success or can make a living. That's never going to be true (and has never been true, either). Many will still fail, but there are more tools and opportunities that if you learn to embrace them, you can absolutely do much better than you ever could under the old system -- which required massive backing to become successful. It was the golden lottery ticket story of musical stardom.

Last week, we wrote a post about an interview with Tommy Boy Entertainment boss, Tom Silverman, claiming that just 14 unsigned artists "broke the obscurity line," -- which was defined as sales of 10,000 albums. Amusingly, three days after this post, I met Silverman on an airplane over the Atlantic... and only realized it was him when he started talking to the guy seated next to me about my post not realizing who I was (small freaking world). We had a brief, but quite enjoyable conversation, and while I see his point, I'm still not convinced his conclusion is correct on the issue of breaking artists (his view of business models, however, seems right on). Meanwhile, in the comments to our post, Peter Wells from TuneCore disputed Tom's numbers. Since then, both have expanded on the discussion.

Tom provided more details on the number of totally independent success stories (decreasing the sum from 14 to 12 due to the fact that they had mischategorized 2 of the bands) over at the MusicianCoaching.com site. He then went on to claim that the long tail doesn't seem to be working for the music business:

Clearly the ease of making and distributing music does not benefit "breaking" music. Breaking music requires mass exposure which requires luck or money or both. I can say with great authority that less new music is breaking now in America than any other time in history. Technology has not helped more great music rise to the top, it has inhibited it. I know this is a bold statement but it is true.

Certainly bold words, though they did not address my original criticism with the point -- which is that number of albums sold is a poor measure of "obscurity" (or non-obscurity, as the case may be). As I said then: "You don't have to sell albums to become well known, and just because you're well known, it doesn't mean you sell albums. It's not the best proxy for figuring this stuff out." This week, at Midem, musician Hal Ritson of The Young Punx put it much more succinctly: "Sales are not how you measure success any more. You figure out how to get as many people as possible to hear your music, and then you figure out if you're profitable." Also, I still think it's wrong to only count totally independent artists in this list, because many artists signed to labels (both indie and majors) may use new technology to help breakout (with or without massive support from their labels).

Either way, even beyond that, it looks like Silverman's numbers may be suspect. Peter Wells Jeff Price (from Tunecore) followed up Peter Wells' comment on our site with a super detailed post about the problems with Silverman's numbers -- which rely on Nielsen SoundScan data, which Wells Price notes is massively incomplete. He quickly names multiple artists who sold hundreds of thousands of tracks, which aren't measured by SoundScan, and suggests the real issue isn't that new artists can't break, but that the measuring system doesn't take into account how they break these days.

I have to say that Wells' Price's post is quite convincing. It's incredibly well-detailed and provides multiple examples of clearly successful (and hardly obscure) artists that aren't counted by Silverman's method. I still think that the points raised by Silverman about new business models in his original interview were dead on (and even he made the point that sometimes it made sense to release albums totally for free and use other ways of getting money -- which under his own definition would have made them impossible to "break out."). But it seems like there's an awful lot of evidence that our original assertion is still true: there are plenty of artists that are, in fact, breaking out thanks to new technologies -- and many are able to do so without a label. Whether or not it's "harder" to break out today due to increased competition may be another issue, but I'm not yet convinced this is a real problem.

Filed Under: breaking artists, data, long tail, music, peter wells, sales, soundscan, success, tom silverman
Companies: nielsen, tommy boy entertainment, tunecore

It Isn't Easy To Break Out Of Obscurity In The Music Business

from the so-what-should-you-do dept

It's no secret at all that it's tough to become famous in the music industry. In the past, you had to hope for one of the golden lottery tickets from a major record label. Otherwise, after a few years of trying, you went back to something else instead. But is it becoming any easier these days? It seems there's some debate about that. Music Think Tank highlights some stats on artists who broke out in 2008:

In 2008, 1,500 releases broke the "obscurity line" (sold over 10,000 albums).

Out of [those], 227 artists broke the "obscurity line" for the first time ever.

Out of the 227 first-timers, 14 artists did it own their own; approximately 106 were signed to a major; the rest were signed to indies.

Interesting stuff, right? Now, the quick conclusion here is that you still need that magical golden lottery ticket to make things work. But I'd argue that's not necessarily the case. First of all, a decade ago, how many artists could have done it "on their own"? Yes, it's a small number now, but it's a trendline that didn't even exist just a few years ago, and the opportunities to do it on your own have only increased. In fact, I'm surprised that 14 artists were able to sell 10,000 albums without a label already. That's really impressive.

And, of course, "doing it on your own" isn't necessarily the point. We're all for artists using record labels or managers or whoever makes the most sense to help them handle the business stuff -- but just the fact that they don't necessarily have to is quite impressive.

The second problem with the stat above? It assumes that album sales are the judge of the "obscurity line." That certainly may have been true in the past, but it is really becoming less and less of an issue. You don't have to sell albums to become well known, and just because you're well known, it doesn't mean you sell albums. It's not the best proxy for figuring this stuff out.

In fact, that data above came from a great (and absolutely worth reading) interview with Tom Silvermn of Tommy Boy Entertainment, and in the interview he more or less makes that very point:

Tommy Boy is more than a record company; we don't consider ourselves a record company anymore, we're much more than that. Now we're sort of a strategic artists positioning company, and our job is to take an artist from where they are in revenues to a much higher number. If we work with Artist A that's making half a million dollars a year, our goal is we take them to a million in year one, two million in year two, and three or four in year three. That's our goal. And then we take a percentage of that revenue. And we're talking about dollars, not record sales, because we may decide to give the records away, and we may only make about 10% of our money from the music and master use or 20% and the rest of it will come from touring and merch, publishing and possibly sync and other things. We'e not concerned with where the money comes from as long as it comes.

Tommy Boy is known for building brands, from Queen Latifah and Ru Paul, to De La Soul and Afrika Bambaataa, Naughty by Nature, House of Pain, so many household names now that you know. When you mention the name, you can see them; like Digital Underground, when you close your eyes, an image of who they are comes up. Coolio ... they all became significant brands, and that's what we did. Tommy Boy is itself as a significant brand. We're not just a record company. Our business always was building brands. How we used to make money was selling records; but we don't see it as the way we can make money now. It's one of the streams of revenue that we can make money from, but it's no longer the most significant or even the second most significant way we'll be making money. We can no longer be limited in how we see artists to the music domain. It's more than the music. We have to work with the artist's positioning.

Exactly. It seems like he understands completely how the industry has changed and what's happening today. Selling music, alone, is no longer the business model. It may not even be a major part of the music business model. It's much more about understanding what that artist allows you to sell. It could be music. It could be seats in a venue. It could be t-shirts. It could be instruments or music boxes or something wacky. Or maybe it's a combination of them all. And, in that world, "album sales" might not be a very good proxy for who is and who isn't obscure. If you're goal is to make a ton of money selling some of those other things, it might make the most sense to give that music away as freely as possible to get over the obscurity hurdle in order to get more people interested in buying those other things.

Filed Under: albums, business models, culture, music, obscurity, tom silverman