The Tommy Boy Records founder discusses the state of the music industry.
When it comes to the music business, Tom Silverman has just about seen it all. After founding Tommy Boy Records in 1981, he helped shepherd the careers of De La Soul, Queen Latifah and Naughty By Nature, eventually selling the label to Warner Bros. Records in 1990 and buying it back 12 years later. He went from pioneer to pundit in that time, too, founding the New Music Seminar in New York City. The annual confab arrived in Los Angeles last week and featured participants such as Craig Kallman, chairman/CEO Atlantic Records, Geffen chairman Ron Fair, James Diener of A&M/Octane Records, and Cal Nyantakyi, RocNation's head of A&R. Silverman spoke to THR just before the conference's kick-off on February 14.
THR: Before its relaunch in 2009, the New Music Seminar was held from 1980 to 1995, years when the industry was thriving. Now the term music business feels like an oxymoron…
Tom Silverman: The record business is an oxymoron. In the 1960s, there was an upside to selling plastic discs so labels took the risk -- they paid for the record, for marketing, promotion, publicity, everything it took to make the artist a star. But there isn't that upside anymore. Now we have to go back to the venture capital model. It's just risk versus reward. The business is stopping and everyone's complaining but you can't blame labels. It's a shitty business. You do it because you're passionate, or because it’s what you've always known. But if you lived through the nineties, nobody is thinking this is great compared to what it used to be.
THR: With singles outselling albums three to one, does that mean we have to look back to the 1950s as a business model?
Silverman: I think so. There are a lot of lessons from the way it was in the fifties and the sixties, in terms of its economic structures, that would make sense now. The music business is suffering because fewer artists are being invested in. And those that are get less invested in them. Labels are putting in less money, taking fewer risks and signing half as many artists as they did 10 years ago. They drop them faster, too. Everything is risk averse right now and there are two ways to deal with a business situation like this: either reduce your risk or increase your return. They're reducing their risk to the bone and looking for ways with their 360 deals to increase their return. They're still not making money. We haven't really balanced the system and created a stable ecosystem for music right now. Artists are suffering. Labels, or music investors, are suffering.
THR: Since NMS is held mere miles from Hollywood, what can the movie industry learn from what's happened to the music business?
Silverman: Not just the movie industry, but the book publishing business, the magazine and newspaper businesses, all the creative industries can learn what not to do. Whenever you have consolidation, you do that for more economies of scale and leverage in making deals. But when you start losing control, like with the web, you lose some of the benefits. You can't hold films or records back anymore because the internet has made everything available as soon as it's available. We have to learn to make money, and that's moved from a control model to a collaborative world. When I talk about hobbyists, those are consumers wanting to be creators. And there's nothing wrong with that. But maybe one or two of them could become the next superstar, but I can't wait for that. And the artists that are really doing something new and different, it's harder for them to break through because we are so risk-averse… I believe we should fight piracy, and we should find ways to make music more valuable. The first Beatles album would be $36 dollars today when you adjust for inflation. I don't think anyone would pay that much now, but how can we change the consumer value perception? We made it cheaper. How can we make it worth more?
THR: How do you define success these days?
Silverman: Quitting your day job is the first level of success. If you can do that, you're successful. The next level that we identify at the NMS is to break through the obscurity zone. That’s the space where the artist is known and breaks free of that clutter and the gravitational pull of the millions of artists who have Myspace pages and are making Youtube videos. You can quantify it when an artist sells 10,000 albums or 30,000 singles or if an artist can sell 300 tickets in five or more markets outside of their home turf. The number is different for everyone, but once you’ve passed it, at that point you can really start to run, since there's a clear field ahead of you. But it's really difficult to get from 0 to 30 mph. It's a lot easier to get from 30 to 50. The Seminar is really focused on helping artists get through that clutter and get from 0 to 30. That's why we're doing this "Artists on the Verge" program, to find 100 artists that are most ready to break. They're on the cusp, they're breaking through that obscurity zone to hopefully head toward greatness.
THR: You often mention the hobbyists as cluttering the music landscape, but some would argue that an artist like Owl City would not have emerged without the ease of posting and sharing music. What’s so bad about hobbyists?
What's bad about color by numbers? Nothing. It's great. I used to love doing it when I was a kid. What's bad about Photoshop? Everybody should be able to use Photoshop on their pictures, but it doesn't mean you're a professional. I think Tunecore is great. The fact that everyone can get their music out is really great, too. What's interesting to me is that 17,000 albums can come out every year that only sell one copy. Or 81,000 albums out of 100,000, 81% of the records released last year, sell under 100 copies. It's an interesting statement. It tells you a lot about what's going on and what's not. There's music being distributed that has no demand. It tells you that Chris Anderson's long tail theory
is not really working in the way he described it. The point I'm trying to make is that we thought the internet would create this vital marketplace for music where the cream would rise to the top and there would be more fabulous artists breaking through than ever before, but the facts are not that. In fact, they’re the opposite. Only 1,300 artists sold over 10,000 units. There used to be 20,000 albums released per year, now there are 120,000. There's 25% more needles in the haystack than there used to be, because more people have the opportunity than before, but we're finding fewer needles than we were 10 years ago.
THR: You've been in the business of over 30 years, how have you not yet run away screaming yet?
Silverman: Whenever you're in a chaotic environment, there are some of the best opportunities. We should have been building the next business five years ago. This downward spiral is a compounding one, but it’s also the most exciting place to be. Nobody knows where the music business is going, but I know one thing: it's going to be about fan-artist relationships and how you monetize that. The business isn't going to turn around the way we're doing it now.