Rising above the noise floor with Tommy Boy's Tom Silverman
With the Internet and inexpensive digital production tools enabling anyone to record and distribute songs worldwide, the barriers to entry into the music business have effectively evaporated. But that's a double-edged sword, argues Tom Silverman, founder and chairman of Tommy Boy Entertainment. "There must be 100 Elvises and Beatles that are stuck in the noise floor," unable to attract the attention they deserve, Silverman said. Don't get him wrong -- he's optimistic about the chances for those artists. But he thinks the industry needs to take a new approach to recorded music, one that looks more like the 12-inch record model that helped establish Tommy Boy as an independent label in the 1980s.
I caught up with Silverman at a recent conference for music retailers. He was there wearing several hats, including those of a board member of SoundExchange (the agency that collects performance royalties from digital broadcasters) and the American Assn. of Independent Music (a trade association of indie labels). He was also pitching the New Music Seminar, a conference for independent acts and labels that he's reviving after 15 years of inactivity. (More on that later.)
According to Silverman, the music business historically had three costly choke points that made it hard for artists to succeed without the help of a major record company: recording music in a studio, marketing it to radio and the public, and distributing it to record stores around the country. Technology has eliminated the choke points for recording and distribution, but not for marketing. "Democratization has happened everywhere except exposure," Silverman said. In fact, opening the floodgates online to DIY artists has only made it harder for them to be heard above the din of the 5 million bands and solo acts with MySpace pages. "My great concern," Silverman said, "is that the cream isn't rising to the top any more."
One thing is certainly true: even the cream isn't selling as well as it used to. According to Nielsen SoundScan, of the 106,000 digital and physical albums released in 2008, only 1,515 had sales of more than 10,000 units that year. And only 110 sold at least 250,000 units, less than half the level in 2000, when there were only 35,500 new albums. "That's an all-time low," Silverman said of the quarter-million sellers.
So what should bands be doing? In Silverman's view, the business is shifting to more of a periodical model from the current album-every-two-years approach. "Consumers want to digest music single by single," he said. That's the way music was sold in rock 'n' roll's formative years, before bands like the Beatles stopped touring and started living off album sales. The trick is to deliver singles in a way that will make as much or more money as albums. Silverman's formula at Tommy Boy was to sell longer cuts as 12-inch singles, which retailed for $5 to $6. They did so well that "album sales became ancillary revenue for me," he said. "Fans care about great songs, and great artists may have only one hit. What's wrong with that?"
Consider a few more statistics from Nielsen SoundScan. Consumers may be buying ever fewer albums, but if you tally up the number of albums, tracks, ringtones and music videos sold online and off, they're making more music purchases than ever: 1.3 billion in 2006, 1.5 billion in 2007 and 1.7 billion in 2008, by SoundScan's count. Also in contrast to albums, top sellers in the singles market are growing in number. The number of million-selling downloadable songs grew from 41 in 2007 to 71 in 2008; 2-million-sellers grew from 9 to 19.
One non-trivial problem, though, is that Apple's iTunes store established 99 cents as the de facto price for single downloads. Silverman argues that 99 cents is too low a price because it not only leaves money on the table, it leaves profit margins too slim to support low-volume competitors to iTunes. There should be a hundred specialty online retailers promoting different music genres, he said, but instead there are only a handful. His theory about price elasticity is being tested today at iTunes and Amazon.com, which are six weeks into an experiment in charging $1.29 or 99 cents for new or popular tracks and 79 cents or less for older songs.
Closer to the Tommy Boy 12-inch model, some labels are also trying to sell small bundles of downloadable tracks -- for example, a single and a few remixes -- for significantly higher prices. And even without higher prices, singles can still serve as the backbone of a healthy business, Silverman contends. There are a host of licensing opportunities and spin-offs in the digital era -- ringtones, ringback tones, commercials, soundtracks, etc.
Offering consumers music in the right dosage units is part of Silverman's prescription; the other part is being creative in the making and the marketing of tracks. Rock 'n' roll, new wave and hip-hop emanated from artists who broke with convention and misused technology, he said, but "in a cut-delete-insert world, it's very easy not to make mistakes." That's part of the problem, Silverman argues -- even in a democratized industry, artists still have to break rules and be disruptive to break through.
That's the point of reviving the New Music Seminar, which Silverman helped launch in 1981 to bring independent bands and labels together to talk about how to succeed. Only this time the enemy isn't corporate hegemony over the means of production, promotion and distribution; it's the din created by the musical proletariat. The original New Music Seminar, which ran through 1994, was the model for such multi-day conferences as South by Southwest and the CMJ Music Marathon. Silverman said the new version would be a more modest one-day affair that travels to five cities, starting July 21 in New York. "This is for all the people who aren't being let in [to the music industry] because they're caught in the noise," Silverman said. "We're keeping it under $100 so all 5 million of them can go."
-- Jon Healey