Tom Silverman is the founder and the head of TommyBoy Entertainment.  Throughout his amazing career Tom has worked with and broken artists like De La Soul, Digital Underground, House of Pain, Queen Latifah and Afrika Bambaataa.  In addition Tom helped revive the New Music Seminar and is now one of its principal executives. He’s been kind enough to allow me to feature his candid thoughts about the changing music industry on the Musician Coaching site on several occasions. In January of this year, he shared some insights about what he termed “The Music Business Resurrection.”

After our conversation about “The Future of New Music Business Models,” Tom and I went onto talk about what artists are going to need to do from a business and artistic perspective to be successful in the evolving music climate. We also talked more about what is in store for artists attending the New Music Seminar – where we will both be speaking – in New York City, June 17-19.

Musician Coaching:

Thanks for continuing this conversation, Tom. We obviously hear a lot about artists that have achieved legend status, like Lady Gaga. The attention on her made Polaroid decide to give her a title and a stipend. They wanted to bask in the glow of her celebrity. But on a smaller level, can you identify anyone that does monetize the attention their music career has bought them?

TS:

Not really. We’ve talked about Vevo before. Vevo was really the first attempt by labels to monetize attention. All of Universal’s, Sony’s and EMI’s music videos are monetized by Vevo across all the platforms. They have a team that does the sales, and that team controls the flow of all that. That’s a good example of the labels using the monetization of attention model.

Musician Coaching:

What I don’t quite understand about Vevo is how their service involves synchronization licenses, but they haven’t paid a single independent publisher.

TS:

I don’t know about that. I’ve really just looking at the ideas surrounding labels getting into that business. All of these online technologies, for the most part, have value based on the amount of visitors they have; their monthly average users or weekly average users are how they value themselves. If you can get to “X” million, it’s worth “X” dollars. That’s why Huffington Post and Daily Candy sold for as much as they did. The value is in the eyeballs. That’s why they say we’re in an attention economy.

So, if you collect all the eyeballs that are affected by The Beatles’ songs, The Beach Boys catalog, all of Frank Sinatra and everyone else that still get played everywhere in audio and video formats and were controlled by Capitol and EMI, the value of Capitol and EMI could be monetized at a number much bigger than what Citibank sold them for – another zero, at least.

If you were a company like Instagram, you could say, “I had 30-million active users. And my 30-million active users monetized out to a billion dollars when I sold it to Facebook.” Obviously there were other factors involved, so there’s not necessarily a direct correlation there. But if EMI could monetize on a similar level, based on the amount of attention its collective, aggregate artist roster and catalog generated across all platforms – online, on the radio, in venues and any other place the music could be heard – those impressions  would be in the tens and hundreds of billions. But they can’t monetize them right now, because they only think of themselves as creating a music product and selling that product. If they were able to sell the attention, they’d be worth way more.

Musician Coaching:

I totally get it.

TS:

But the labels don’t see it. They still think they’re in the business of making and selling records. They need to say, “We make records and sell records to build brands and build attention … and then we sell the attention.” One of the ways they sell the attention is with records. But it’s not the only way. And based on the calculations that we currently have between 200- and 250-million people buying records, the business of selling records doesn’t have room to grow much more than that. Maybe it could double. And even if it doubled, it still wouldn’t be as big as it was in 1999, so it wouldn’t even be an interesting target. We have to come up with a paradigm shift that allows the business to monetize on a much bigger level.

That should be the lesson we learn from Larry Page and Sergey Brin, and from Mark Zuckerberg and all these other guys who figured out how to do that. It’s not just the technology, it’s the aggregation of attention. And now they’re selling the aggregation of attention. The fact that I can communicate with you on Facebook isn’t what they’re selling; they’re selling the ads to the eyeballs. And it’s the same thing with YouTube, with SEO and AdSense and all those other companies who are selling attention.

That’s why I applaud Vevo. I’m not saying it’s perfect. But it’s the first time the music business has said, “Let’s get into the business of monetizing attention.” I don’t even think they knew what they were doing when they did it. But if you look back at it historically, you can say, “Vevo was the first.” Let’s hope it’s not the last.

Musician Coaching:

It looks like Makers Studios is giving Vevo a run for its money.

TS:

Yes. Exactly. You get it. I read the description of your NMS talk – “Everything You Need to Forget about the Music Business” – at the seminar and I got very excited. It’s very similar to what my keynote is going to be. We’re almost exactly on the same page with what we’re talking about, and I can’t wait to hear it. Of the descriptions I’ve seen, it looks like you’ve picked the most interesting, new and provocative subject. And I haven’t shared what I’ll be talking about yet. But what I’m thinking about and you’re talking about are so close, it’s almost scary.

Musician Coaching:

Well, and I’m going to be talking about some positive things people can do, the things they can take into their own hands. But I’m also going to be talking to them about how there’s a really big disconnect. Mass media has sold us a lie. One of the things I’ve done to prepare is, I’ve watched VH-1 Behind the Music, and I’ve measured out exactly how much attention was paid to the different phases of artists’ career, particularly the developmental phase – when the artist is actually in the van or in the studio. That’s only about three percent.

The way we perceive things on television is interesting. If you’re watching Friends, you realize you’re watching Jennifer Aniston play a role. But what you might not understand is that a waitress can’t afford a three-bedroom apartment on Central Park West. So, there’s this peripheral information and lack thereof that trickles through to people. And so many people are so dismayed by the journey.

TS:

You mean people are dismayed because they have expectations that aren’t being met?

Musician Coaching:

They’ve come to believe that there is somebody out there to save them. There is so much data around passive music search terms, like “how to find a music manager,” “how do I find a booking agent,” “how to get a record deal.” And I knew this when I went to build my website several years ago, because I went and targeted all these people. And before I did research, I thought I knew all the right terms:  “music marketing and promotion;” “book your own tour;” “take charge of your career.” Nobody searches for that. 10- or 15-times over, people just want to be saved. And I think a lot of the reason is because we’re exposed to this false idea. The story, “They worked hard for 15 years, and then eventually, people started to care” is not interesting.

TS:

When you and I did that notorious interview a couple years ago that was so hotly contested on the Web, that was my point:  There were so many hobbyists out there that really were not interested in doing what it takes to take the Malcolm Gladwell road to fame, where you persist, work very hard, practice and hone your craft and redirect yourself until you get it right. They just wanted to send a demo to a label, and have the label roll up in a limo with a bag of money and have their career begin.

I don’t know if you were at the last seminar, but I said, “Anybody who has a CD, give me your CD now.” Then, I talked about what the odds would be of having their CD ever heard by anybody. And if it was heard, I discussed the odds that they would get a call. And if they got a call, I discussed the odds they would get signed . And if they did get signed, I talked about the odds of the record ever coming out. And then I talked about the odds of the first song being a hit if the record did come out. And if the second song came out, I talked about the odds of it being a hit and actually leading to a career. All the different things that could happen after they gave their CD to someone pointed to the fact that the odds of that CD turning into a career were only about five times greater than the odds of winning the lottery. And the lottery ticket only costs a buck.

So, I said, “Rather than waste any more time or money on your career, you should just buy lottery tickets, if you think you’re going to give someone a CD, and that’s going to help you get  where you’re trying to go.” And I gave them lottery tickets. I bought about 36 lottery tickets and gave everyone who gave me CDs a ticket.

That’s the mentality you’re talking about. Nobody’s searching for “how to book your own tour” or all that great Hypebot stuff that’s out there about how to do it yourself and build your audience. I hear all these stories of Hoodie Allen, Mac Miller and all these guys who are building it up for themselves, and I think, “These guys are the new heroes.” And we’re really going to be putting them up as the new heroes at the New Music Seminar. Hoodie Allen is going to be on the artist panel this year and maybe perform. Mac Miller’s team is coming in. We’re going to tell that story of the people who have persevered. And none of these people had a limo full of money show up at their doors. In fact, they still are controlling their own destiny. And as I mentioned before, we’re also doing a YouTube Innovators panel of people who broke off YouTube and are selling out venues and selling songs and doing it on their own. Because, these are the examples. I think people respond better to examples. When everybody reacted to that interview a couple years back, the big thing was “1,000 True Fans,” and it was all theoretical. But now it’s becoming real, because YouTube and all the other tools are really starting to work.

The point is, there are a lot of things that are going to help more people do this. Things like YouTube and Makers Studio are becoming important. The Collective has a whole department just signing people like this. And Sony/ATV has Larry Mills trying to sign everyone up for publishing who is on YouTube, because they’re seeing a new section of the business where they can really dig in. And nobody is doing it yet. In a minute, everyone will be doing it. It makes you wonder if YouTube will be dead in a few years because there are so many people filling it with crap. The model for YouTube now is still, “Cover, cover, cover, original.” You do a million covers, and if you’re good at doing covers, like someone like Karmin, you get picked up. But it begs the question:  Is Karmin going to be a star on Epic, or does Karmin work best on YouTube doing covers?

Musician Coaching:

I did an interview with a guy named David Choi, who had 90-million views. And it was mostly covers. But something took off. He was a guy with a Warner/Chapel publishing deal who has co-written a bunch of songs for people. He’s making a living at it. Does he have a chance to become an icon outside his niche? I have no idea. I’m very comfortable saying, “I don’t know” these days.

TS:

And it’s the same question you ask when you ask, “Is this American Idol finalist going to have a career just because they just because they were seen?”

I think you can count on one hand the people who have been on American Idol or any of the other shows in America that have built lasting careers. I think there are probably only two or three.

Musician Coaching:

This goes back to my days at Atlantic Records. I’ve told this story many times before, and it always has me scratching my head. Atlantic was mining the Southeast looking for the next Hootie & the Blowfish. They would sign a band, and the band stop everything, quit their jobs, wait, spend the advance money a little bit. And the publicist would come in and say, “You, cut your hair. You, wear leather pants. And everyone get shiny shirts.” And they’d re-master the same album, maybe put it out and stop all the momentum.

TS:

I’ve heard that’s what has happened to Karmin since she went to Epic. She stopped her regular communication with her fans on YouTube, because now she’s in the major label system. I think people think that once you “arrive” you can stop doing all the things you did before. But you can’t stop.

Musician Coaching:

The point I was making is that I rarely see it work for people when they get thrust into these situations where they are overnight sensations and suddenly get tons of exposure. A switch doesn’t just go on and allow you to stay.

I was lucky enough to work peripherally with Kid Rock. The guy had been building his career for twelve years, fan by fan. A label can’t replace that.

TS:

And he still thinks of his career that way. When he makes his records, he still thinks about the screaming guy in the balcony – the guy half-a-mile away from the stage who came to the show. He makes his music for him and tries to serve the fans. Because, he knows that’s why he is where he is. He’s not trying to serve radio or labels. He’s trying to serve his fans. That’s what you’re supposed to do. If you always follow that policy, I think you’ll always be successful. He’s very smart.

Not all artists are that smart. Many of them think their fans should serve them.

Musician Coaching:

I’ve watched a big, fat wallet try to replace development time. You can’t force or speed up artist development. It happens on its own terms. Patience has never been the major labels’ forte, particularly since they’ve had to report to their parent companies on a quarterly basis.

TS:

That’s true. And that’s not getting any better. Unfortunately, because the seeds they have to plant right now in order to make their business be ten times bigger in ten years, they can’t afford to plant, because they can’t fund it. They need to say, “We have to change our business model. And while it’s being changed to the new model, we have to support the old model.” And that’s going to be a cost center for five years, just like Spotify or Pandora will lose money for a couple years before they start really making money. But that’s the way it is when you’re transitioning into a business that didn’t exist before. You have to be willing to invest and wait.

I’m sure the process of inventing the iPod and iTunes probably cost Apple hundreds of millions of dollars if not more over time before it bore fruit. We only saw it coming out and being a really big thing. But they didn’t know it was going to be a big thing when they came out with the idea. There were a million things that could’ve gone wrong between labels, publishers and everything else. And it paid off. It’s the same thing with the iPhone and iPad. The cost of creating all those products, physically and from a licensing and programming perspective, before any revenue comes is hundreds of millions of dollars. And it takes years.

If the music business wants to become a business that is a $100-billion business, they will have to invest hundreds of millions of dollars over the next few years, and I’m not sure they’re willing to do that.

Musician Coaching:

Let’s hope somebody does.

TS:

I’m optimistic, though. And at the New Music Business Seminar this year, we plan to be optimistic – no whining and complaining. If you don’t have a way you think the business can be better or that artists can do better, get more exposure or make more money or do something better than has been done before – if you don’t have a way to improve things – stay home. This is not a whining session.

At a lot of the other conferences, people talk about what a mess everything is, but, that’s not the way we want to look at it. It’s the way it is. So, let’s get beyond that and say, “How do we get to Point B?” If “Point B” is a $100-billion business, how do we get from where we are, to that $100-billion point? What do we have to do in the U.S. and around the world? And what are some of the various ways we can get from where we are to where we need to be?

I have a bunch of ideas. But I want to hear what everyone else’s ideas are. That’s why we’re bringing people like you in, because you’ll have ideas, too. And in your talk, you’ll likely talk about these artists who are waiting for success to happen to them. Whether it was the new era or the old era, there were always people like that, and they never achieved success. The people who have always been successful go out and get it; they don’t wait for it to come to them.

I totally understand that frustration though. That’s why I changed the seminar this year. For the last five, we tried to cater to artists and give them the tools to do it themselves and lift themselves up out of obscurity and into success. But what we continue to find that some artists don’t necessarily care about that. All they want to do is give an A&R guy their CD.

Musician Coaching:

It’s amazing.

TS:

It is amazing. But I decided that rather than complain about it, we should just shift the model and make a bigger music business. Because, people need to stop their fear of cannibalization of the record business. They need to stop complaining about illegal downloading. The people who are stealing music probably never paid for it in the first place, and probably will never pay for it. Does illegal downloading have an impact? Sure. We might be able to get another 10 percent out of it. But who cares about another 10 percent? We need to figure out how we get 30-times more than what we have now.

That’s what I want to talk about at the seminar and beyond. While people are arguing about how to get rid of piracy, the music business has gotten 75-percent smaller in inflation-adjusted dollars. Obviously, the protectionist model is not working. It’s like winning the war on drugs: It doesn’t look like we’re winning.

Musician Coaching:

I hope we’re at a place sooner rather than later where those that have the power to change the system aren’t incentivized to keep it broken because they stand to make more money that way.

TS:

Well, but maybe they’ll just be dis-intermediated by companies like Makers Studio and The Collective. These companies are probably the biggest threats to labels that are out there. Anybody who thinks about managing and monetizing the artist-fan relationship as the thing you need to do is a threat. If the labels don’t get into that business, somebody else will, from a different angle. The labels will wake up one day and realize their industry has been disrupted, if they haven’t realized this already.

The New Music Seminar is really about how we can stop being disrupted and start being disruptors.

To find out more about this year’s conference, visit the New Music Seminar website. If you haven’t already signed up, you can get a 20% discount by using the code NMSNYMC2348 at registration

Be sure to also read the first part of this conversation with Tom Silverman, “The Future of New Music Business Models.”