Silverman Says….

Tom Silverman is a guy who has been in the music biz longer than I have been in IT. So he knows the trade and its tricks. It is refreshing to hear an insider to state that the current music model is broken —

One of the biggest problems with the old model, which has been going for 50 years, is thinking, “We’re the labels, they’re the artists, and we make money even if they don’t make money. We reduce our risk, they put their blood, sweat and tears into it, and we only give them money when we sign them and when they deliver a new album.”

In between, the only place where they get money is from their booking agent, because they’re touring. They all love their booking agent, because their booking agent gives them a check every month, or every week, and we only give them a check every year and a half when they deliver a new record — and most of that money goes to their lawyer, manager, the taxman, and making the record. Not much of it ever goes in their pocket, and that’s been true for 20 years. Unless they have a five million seller, most of that money goes into that project. Of course they don’t like the labels, because they’re not getting that reinforcement of regular cash flow. They see the labels making money, and them not making money on records.

He also considers the use of the Internet and social networking much a waste of time. Even though in this same article he admits that Susan Boyle broke thorugh on the basis of internet presence. –

No, I think you have to be out there. You have to spread the word to get exposure, but I think the problem is context. When you’re in a glutted environment, you need to differentiate yourself more than ever, so you need a great story. Story is context; it’s not content. The songs on Susan Boyle’s record are forgettable, and her performance is just okay. There are a million singers who can sing that well at least. It’s just the story that sold it. If people could learn from her, regardless of what kind of music they did — “How can I make my story so that when people hear it, they have to spread the word?” That would activate the medium more effectively than trying to get another 50,000 followers on Twitter, which doesn’t seem to do much at all.

Silverman also suggests a different management model. Using LLC’s and Silicon Valley type investment techniques. Oddly we suggested that very thing on this blog well over a year ago. And it is right.

But there are some pieces that Silverman I think is missing –

• The first is good talent is extremely common, and extreme talent is in good supply. Go into any good size church in the USA and there are probably 2 singers in the choir equal to or better than what is screamed out of Hollywood. Is that the case?

  Empirical evidence. Neil Sedaka held a contest with several radio stations as part of a record tour/sale 5-6 years ago. Thousands were screened by the radio stations. Sedaka was floored that several hundred were good enough to be considered by his measure of talent. Anecdotal I know, but good talent recognizes that in others.

  Value in many ways is a perception, especially when the goods are of a nonphysical nature. So when the perceived supply of the goods rises dramatically because consumers perceptions are altered by the sheer volume of good choice the cost curve must drop. Its supply and demand. There is a huge talent supply and only a finite consumer supply.

• The other is this one. Silverman sees it, calls it the ‘clutter the marketplace’. He is of course, right. $3k and you can foam a garage, buy mikes and stands, a 2yo PC and a midi/mixer card and have the equivalent of what a decade ago cost $500k. So anybody can be in it if they want it enough, such is modern technology.

  But again that is not the biggest issue as I see it. Look the big labels are soon to be gone. They are right now where the major studios were back in the 60’s. Then as now, every release had to be a mega blockbuster as that what the audience expected but the costs were beyond belief. The end game will be the same too. Fundamentals now are also different.

  A band, even if it does not break thru to the levels that Silverman expects which is 100k distribution as the floor. Well run the numbers at $10 per disc. $1m gross. Deduct 5% for production costs. (Yes that cheap.) Zero out distribution costs as most bands at this level would sell either direct over the internet or more likely direct at the concerts wher they make most of their money anyway So out of say $900k split 10 ways with band, light, stage men that is still $80-100k. No you won’t get overnight rich at those numbers, but that is a descent upper middle class income with unlimited upside you you do break thru.

To an extent Mr. Silverman’s lament recognized for what it is runs head long into supply chain economics. The Internet has eliminated the middle man in most cases. Producer and retailer become one. No industry is immune from it even music. And for a lack of a better analogy, iTunes IS WalMart in the music industry.

Linky