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Industry Insider: Tom Silverman of New Music Seminar

posted by Maressa Levy on June 10, 2013

New Music Seminar co-founder and music industry visionary Tom Silverman has been involved in music since he began working at his college radio station. First launched in 1980, the conference ran for 16 years before it went on hiatus. Silverman revived the seminar in 2009 to bring together music industry leaders in an attempt to create a sustainable and profitable business model, with the record business facet of the industry quickly declining. Silverman is also the founder and CEO of Tommy Boy Records, with current and former artists including Queen Latifah, Afrika Bambatta, and De La Soul.

With the 2013 edition of the New Music Seminar just days away, Silverman took some time to speak with Cultivora about festivals, the state of the industry, and the future of the music business.

NMS was launched in 1980 and ran for 16 years before it went on hiatus. Why did you decide to revive it?
I started it again in 2009 because the music business needed a place where people could discuss what was going to replace the record business, which was the traditional music business for the last 60 years and was clearly not going to come back. We saw the record business part of music was dying, physical CDs were declining, and although digital was increasing, it wasn't happening at a fast enough rate to even replace the loss of album sales and revenue was plummeting. We wanted to bring together the visionaries and leaders that would take us to a new music business that would be sustainable and profitable again.

Have your goals for the conference evolved since your initial launch?
The goals haven't evolved, but the ways to get to our goals has - we're trying to create a better, more sustainable music business that can support more artists and help develop more careers.

Originally [New Music Seminar] was focusing on the artist and do-it-yourself platforms, expecting that some of the new technologies would help artists break through and generate more revenue. Although there were great theories about this, like the long tail and 1000 True Fans that came out of the guys from Wired Magazine, it actually ended up not really working that way in real life although it made sense on paper.

We went back to look at the business structure because it's really an investor issue. Turns out that the music business is a high-risk business, like any business where you don't know what you're investing in until it develops. Artists are very risky, and it's very expensive, so they need a high return just like any venture capitalist would need. Record labels are venture capitalists, really. And unfortunately the return has become so low that [labels] have to be selective, and they're not taking any risks anymore, or not as many risks, and that hurts the development of artists worldwide. So we needed to figure out a way to make the music business profitable again so that people would have reason to invest in artists and develop more artists. We looked at different ways to try to monetize music and that's what we are focusing on now - rather than looking at the ways new technologies can help artists generate revenues on their own, we're looking for ways people will be more interested in investing in music and artists.

How does NMS differ from other conferences like CMJ and SXSW?
First of all, it's the only conference with a mission in the music business. It's a mission-driven conference - the reason I started it was I'm on the board of A2IM (American Association of Independent Music) and Merlin and Sound Exchange and RIAA, and there was nobody who was driving a vision to substantially change the music business so that it can be successful and profitable again. There are obviously incidents of success with big-hit artists, but the general revenue structure of the business is the same as it was in the 1960s, and the music business has shifted the way people listen to music and discover music. They access and acquire music in totally new ways and we need to really change everything to adapt to the way consumers and technology are working now and in the future. There are a lot of great opportunities that we are missing because we're stuck in the past.

I also put all the programming together, and I've run a label for 32 years. I have my own label publishing company, I've produced, I've done everything. I'm in a unique position, relative to people who run conferences and that is all they do, because I'm actually in the business. I have been in the business the whole time, and I understand the issues.

The focal message for this year's conference is "embracing technology platforms to help build the new $100 billion music business." Can you elaborate on this message? What technology platforms, specifically, do you see playing a part in the overall success of the industry?
Connected devices. Predominately mobile phones initially, eventually automobiles and televisions. There are 6 billion mobile phones, there are 1.2 billion smart phones. There are probably 3 or 4 billion music-capable phones. If every one of those came with a music subscription, the world would generate triple the revenue now that they make from music without any record sales at all - just by streaming services, buying in a bundle. The technology is a simple technology that everyone uses - everyone has a phone in their pocket. So everyone has access to all the music in the world. There are 25 million subscriptions to Sirius XM. That's just a radio station and they've generated $3.5 billion in the US alone, which is almost the whole size of the music business, and they've only been around 10 years. They've done that by tying in with automobiles. So, the bundling concept has been very successful for them - why can't that work for the music business? So that's the model, and I think that it really could work. And then there are other models too - those we'll add incrementally.

Nielson did a big study in March that identified that people are willing to pay $2.5 billion per year more on music products and artist engagement experiences, but they don't because these experiences don't exist right now. So we're leaving a lot of money on the table as an industry in America, maybe roughly half of the money that the music business makes in total we could make again if we figured out how to serve people what they really want. So it's an interesting model, too - it's not as big as the mobile phone bundling model but it's significant, especially in America.

The other area where we're looking for real growth from is the emerging world, the Brit countries and others - there are countries that never really bought music at all. Now, because of mobile phones and also because their economy is changing, it's possible to build music into all of their phones and generate revenues like never before.

What is your projected time frame to meet this $100 billion goal?
Somewhere between 10 and 20 years. I think we can go a long way in the next 10 years. I think it's going to move very, very fast because once the mobile service providers start to realize how great it is for them, once their profits start peaking on data and voice and text they're going to need to find revenue centers to generate more money. Most of the world doesn't have subscription phones, they have pay-as-you-go-phones. Out of those 6 billion mobile phone users, really there's probably well under a billion that are subscriptions. All the rest are pay as you go, where people top up their phone every month or when they run out of minutes, and they can use those minutes or that money towards data plans or toward music or video or whatever it is they want, and it's happening a lot, especially in the developing world. So it's an exciting situation, you just have to be a little patient. Once three or four of the big mobile carriers have had success with this, all the rest of them will come to the table, too, and everyone is going to be clambering to make sure that their phone, television, or automobile come with one of the music services.

We're at the bottom now of a 12-year cycle - I believe that the next 10 years are going to be the biggest growth years that the music business has ever seen. We're already seeing the beginnings of an "A&R Renaissance," but in 3 or 4 years it's really going to explode.

What role do you think music festivals play in the industry?
It's a way for people to discover new music. They go to see three or four bands, but while they're there they find four or five others. It' a great way to also get people more engaged with music - there is a whole peer thing where everyone is together listening to music. You get caught up in the energy around it, which is a great way to experience music, so that's one of the roles festivals play.

Our festival is more of an industry festival and it's still in the early days. There are certain challenges to doing a festival in New York, although there are a couple of them that happen. People seem to like festivals because there it is an emerging experience that people enjoy. It's different than just going to a concert, there is another dimension to it. I think the growth in the live business in America has been mostly because of festivals, not because of new venues. It's an important factor.

Our festival is secondary - if we're successful in doubling or tripling the size of the music business, the festival will grow as well, but we'll have achieved our mission and that's what we are trying to do.

Where do you see NMS going in 5 years? How do you see it growing?
I think it will be the annual place for anyone who wants to create something new or try something new. Artists, producers, songwriters, the creative community and technologies who are trying to drive music and technology forward in new and interesting ways. It's going to be sort of a music-futurist conference where people come now to figure out what's going to happen in a year or two, three years from now. We'll be talking about "What's the new musical genre, what's going to happen next in music-making technology, what's happening in music consumption?" We're always looking two or three years out - we are now. But I think as the revenues start to come in, instead of fighting the future we're going to embrace the future. I think the music business has really fought the future over the last 15 years, and were we proactive instead of reactive, we would probably be in a much better place right now. So the seminar will hopefully be that catalyst for change.

The New Music Seminar will run through tomorrow, June 11. Conferences are being held at The New Yorker Hotel and performances for the music festival portion of the seminar will take place at various venues throughout the city.

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