A Conversation with Tommy Boy Founder Tom Silverman – HuffPost 5.9.12

Mike Ragogna: How are you doing, Tom?

Tom Silverman: I’m doing fantastic! A little crazy, but fantastic.

MR: Is it fantastic because of what’s on this year’s New Music Seminar slate?

TS: Indeed, it is. It’s really coming together, and it’s a key change in the history of the music business.

MR: It’s going to be held at Webster Hall?

TS: Yes, Webster Hall, the oldest night club in America. In 1886, they started having parties before the first phonograph record was even sold.

MR: And what did they call the New Music Seminar then?

TS: (laughs) The New Music Seminar was just a gleam. There was no music business yet, but Webster Hall was, I guess, a pre-vaudeville nightclub and performance center on 11th St. in New York. It’s the oldest nightclub in America, which is really interesting. It makes it an interesting place that predated radio by like 40 years. It’s even older than the one in Nashville where The Grand Ole Opry had it’s home. It’s pretty exciting to go into a place with that much history.

MR: When you combine its history with the concept of new music, it’s like a bridge, a reminder of the heritage of where entertainment has come from.

TS: It is amazing, yes. And there have been disruptors, if you can say that Thomas Edison was a disruptor, and now you think about the disruptions in the music business with Sean Parker, who’s one of our key notes. Napster, back in the day, disrupted the music business, and all of the other digital players, changing the whole business and how the industry is trying to adapt to that and reinvent itself to remain relevant and to thrive again.

MR: It’s interesting how imperative it is that artists’ management and labels continue to apply whatever the latest social media is and the latest marketing tools that are available.

TS: Yep, that has to happen. And the other thing that has to happen is the economics have to drive investment into the music sector. People have to invest in artists and help artists develop, and that used to happen a lot more. 80% of the money that was going into artist development is gone now from where it was ten or twelve years ago, and we need to see that come back because fewer artists are getting a shot than used to. You can put plenty more artists out there that are doing it themselves, but very few are breaking through because the investment money is dried up. Now we’re seeing it start to turn around again, but it hasn’t affected investment in artists yet. We do believe that we’re on the cusp of a revival of the music business, or a resurrection, as we like to call it.

MR: It seems like Napster and the like forced the downsizing of an industry that was so bloated.

TS: Yes, it’s true. It was a wealthy business. The change of CDs really increased the business by about 70%. People were re-buying their old libraries of music again on CD, and the CD was almost double the price of the vinyl and cassette that it replaced. Initially, you remember, the CD wasn’t a recordable format, and once it became recordable, that kind of changed the game a little bit because people could start recording files. Recorded a file is a clone, unlike a recorded file on a cassette. You’re just cloning. You’ve got copies, so it’s an exact duplicate, and that changed everything, and that made Napster possible, the whole concept of music files. And then the invention of the MP3 file, which was a much smaller file, was a big breakthrough too.

You can always look at technological advances that made possible changes in music listening habits and music sharing habits and acquisition habits and access habits. That’s what we’re looking at now, and what are our potentials to grow the business based on looking ten years to see what’s happening. The big thing is the growth in cell phones, specifically music-capable cell phones and smart phones. In America, 50% of all cell phones are smart phones, and that’s a total growth area everywhere, not just here. All around the world, there are over 1.3 million activated smart phones. I mean 1.3 billion, and there are 6 billion cell phones. There’s probably a couple billion activated music-capable cell phones between the smart phones and the other ones that are music-capable. So that shows the potential size of the music market.

MR: Will this be one of the many subjects that will be talked about at the New Music Seminar?

TS: Yes, everything will be talked about at the New Music Seminar, everything to do with change and vision and new directions, and how we grow the business from the low point it’s at now to well beyond the highest point it ever was twelve years ago. We believe there’s a path to a profitable and sustainable music business, and we’ve assembled the real leaders and visionaries in that space to discuss it — the CEOs, founders, and presidents of most of the companies that are innovating.

MR: Yeah, I was looking at this list, and you have some pretty powerful people that have been confirmed for NMS. Tom, is there anything tangible that comes out of the New Music Seminar in the end?

TS: Absolutely. We have a history at the New Music Seminar that runs back to 1980. It started in 1980 and ran to 1994 before it took a hiatus, and then we came back in 2009, but we always were a catalyst for changing the business. Things that were spoken about at the seminar became reality in a matter of years in some cases. The same thing will happen here. Everything starts with a vision. Nothing turns into reality before it’s spoken about or seen as a vision, so these are people who are seeing things others haven’t seen yet, and they can talk about them in a way that’s understandable, and then we can create a path to make that a reality. We have the real change agents, all of them, and also the power brokers who can really plug into change and lead this thing. So in every area — the creative area, exposure area, and in the monetization area — we have those people, founders of all of these new businesses like Slacker and the founder of Pandora, the chairman of IHeartRadio and Clear Channel, the CEO of HD Tracks that downloads high definition music tracks, all of these new concepts. They’re all here — the CEO of ReverbNation — basically, pretty much all of these various areas like Rhapsody, all of them, pretty much all of them are coming to the seminar. It’s the first time they’ve all come under one roof. Then we expect the CEOs and presidents of all of the major labels and most of the independent labels will also be in the same room, and also it’s the first time that there’s been an additional broadcasting summit that SoundExchange is hosting. SoundExchange is the agency that collects and distributes royalties from licensing fees from digital broadcasters to artists and rights holders, and that’s a business that’s growing to be a $350 million business from the small percentage of radio listening. As more radio becomes digital, all of those fees are collected and paid out to artists and labels.

MR: I noticed that the performance rights organization BMI is involved. What’s the relationship there?

TS: Yes, BMI and SESAC are both involved. They are performing rights organizations for songwriters, and SoundExchange is a performing rights association for the recorded song or for labels and artists. They may not be the composition creators. For example, a good way to look at it is Diana Ross, who never wrote any of her songs. All of her songs were written by other people, so she doesn’t get any royalties when her music gets played on the radio in America. In the rest of the world, she would get them because every other country has that right except for US FM radio, which doesn’t pay for music to artists. They only pay for the composition creator, so the songwriter gets paid and the publisher who controls the composition gets paid, but the actual artists don’t get paid who perform the song.

MR: Right, and that’s always been a sort of bone of contention, hasn’t it, because the angle has always been that radio is a promotional tool for record for sales?

TS: Those days are coming to an end. Just because you get promotion from exposure to something doesn’t mean there shouldn’t be payment for use of that creation. If you look at the internet, most of the big businesses are driven by eyeballs or by attention that’s gathered by user-generated content or other use of creative content. They don’t pay for the content, so they fill their sites with content that attracts eyeballs that they then monetize and create businesses like Instagram that they can sell after two years for a $1 billion.

MR: Right, exactly. And going back to the ’80s, MTV started up with free content.

TS: Viacom exists off the back of the major labels’ investment in hundreds of billions of dollars in videos that they created, and there was only a very small annual fee paid for that usage, which doesn’t begin to cover the cost of making the videos.
MR: And now that YouTube has everything up for free, that’s another investment that the labels inadvertently made.

TS: I don’t know if you notice, but I watch YouTube and there are more ads on there than ever before, and it’s frustrating. One thing that consumers are going to have to get used to is more commercials on stuff they watch on the Internet that in the early days of the Web was free because they couldn’t sell spots. Now, not only are they selling more spots, they’re selling for higher prices, so you’re going to see advertising. There’s already almost $50 billion a year in online advertising, and you’re going to see that go well over a couple hundred billion in advertising over the next five years, which means more commercials interrupting what you want. So at that point, if you want that, you’ll have to pay a subscription. That’ll be your choice.

MR: Yes of course. You pay a subscription or you get subjected to the advertisement, so an entity like YouTube ends up making profits, right? Now, if the entity makes profits, where’s the excuse that it’s promotional, so they should be able to use clips for free?

TS: Well, they all have deals with the creators where they do share the revenue, so there is a revenue split with labels, not on all of their revenue. It’s only on the revenue for whatever video is playing at that time. However, there’s plenty of advertising that comes around YouTube that doesn’t get paid out, and it is generating content that’s not licensed or set up for payment. But more and more, artists and labels are actually getting paid. One of the artists that we’re looking at hoping to come to the seminar is a guy out of the UK who had the #4 record on Christmas week without being on the radio for sales off of YouTube alone. It generated enough YouTube spins to really blow up his music sales, and he didn’t have airplay, so it’s a really unusual thing. He didn’t even have a label. He did it all on his own.

MR: Where does one go to find information on attending the New Music Seminar?

TS: The New Music Seminar is in New York City. You go to the websitehttp://www.NewMusicSeminar.com and you’ll see everybody who’s speaking, and it also includes the New Music Seminar New York Music Festival, which will have over 150 artists playing in at least 15 venues throughout New York, which will get you into all of that as well. There’s an amazing guide book that comes with it that’s sort of a guide to the new music business and how to plug into it right now, and it’s filled with great opportunities to meet all these people and connect with basically the future now and build your business and relationships around all of the right people in one place. It’s a fantastic opportunity for anybody within the business or thinking about being in the business to learn and expand their connections and walk away with actually potential business plans, and maybe even partners.

MR: Tom, what advice might you have for new artists?

TS: My advice to new artists is that you have to make yourself happy. We do a thing at the New Music Seminar called the Reflection Award that we give to the top artist on the verge of breaking. Thousands of artists get nominated by different music industry experts, and we get them down to the top 100 artists most ready to break, and then the top three come and perform at the seminar, and the number one artist is picked and wins about $250,000 with promotional benefits and prizes and things like that. What they’ve all learned is that they have to do it themselves. They win the Reflection Award, and it’s like a gold record, except it’s a mirror. It’s a mirror in the shape of a record, and when you look at it, you see yourself. The purpose of that is that we tell artists that you are the ones you’ve been waiting for. Don’t wait for a record company to break (you) because it’s not going to work that way.

In the old days, the music business had scouts everywhere, and they were signing a lot of artists. Now, the only artists that are getting signed are ones that have a head of steam that are going 30 or 40 miles an hour, maybe even faster, and creating their own buzz, selling out bigger venues, selling music on their own, and have a huge number of YouTube views or have something going on that shows that they have an audience that they’re starting from and they’re not starting from scratch. Very few artists get signed and then are successful unless they build a big audience, so the whole game is to build your audience. The artists that are successful at building their audience are the ones that are going to be successful. The artists that are sitting around and waiting and they make a record and want to send demos around to people are going to be very unlikely to have a possibility. I always say a lottery ticket is a much lower risk investment than making a record and thinking you’re going to get signed by sending it to a record company. You have to have a plan to build yourself as an artist and build your fan base. If you’re not planning to build your fan base, then you’re not really going to be taken seriously.

MR: So Tom, how does the future look as far as the music business?

TS: The future is bright for the music business! It’s seen the darkest days and it’s coming to a point now where it’s starting to kick in. We’re getting closer to the one click, where when you hear music, you’re only one click away from owning it or accessing it, and the systems flow of revenue from the people who are utilizing music to the people who are creating the music are finally becoming fully formed. So there’s a great opportunity for the music business to start growing with the expansion of cell phones and smart phones and the advent of connected automobiles is going to even further drive that and accelerate the movement. I believe that we are going to see a new way of looking at the music business and the expansion of that. Last year, the music industry saw the most music transactions in history. That’s a big sign. A lot of those transactions were single transactions as opposed to album transactions. So the numbers weren’t as great as they have been historically, but it just shows the number of people that are engaged with music is continuing to grow. More people are going to shows and festivals; more people are listening to music in more ways than ever before. Music is more accessible and more engaged, and you hear people talking about music everywhere, so I think there’s a much greater awareness and involvement and engagement in music than ever before. Now all that remains is that we find a way to monetize that so the right amount of money can flow back to artists, and that’s what’s getting ready to happen. So the next ten years will be the beginning of skyrocketing growth in revenue for music.

MR: Let’s go over the dates.

TS: Yes, it’s June 17-19 at Webster Hall, and the Festival continues on right to the 21st of June. It’s New York Music Week in NY, and we expect to be involved with hundreds of artists performing, and we think that we’ll have thousands of people from the music business coming to NY for the concerts. We expect to probably be sold out because we’re limited at Webster Hall in how many people we can get in there, so it would be a good idea to go to http://www.newmusicseminar.com and get tickets as soon as possible.

MR: Thanks. I’m fascinated by the continued changes in the music business, things seem like they’re changing hourly.

TS: Well, one thing we can say is it’s not the record business anymore.

Transcribed by Kyle Pongan