This week In the Hot Seat with Larry LeBlanc: Tom Silverman, CEO of Tommy Boy Entertainment, and co-director of the New Music Seminar.
If Tom Silverman isn’t the smartest person in the room, you can bet he’ll stand next to the smartest guy, figure him out, and then move on.
You see, Silverman—CEO of Tommy Boy Entertainment, and co-director of the New Music Seminar—lives for great music and the chance to analyze people and trends.
In the ‘80s, Silverman and a handful of other pathfinders pushed rap, new school hip hop and dance beyond fringe markets into the American heartland.
Tommy Boy Records’ roster consisted of such edgy acts as Afrika Bambaataa, Queen Latifah, De La Soul, Force MD's, Stetsasonic, Digital Underground, House of Pain, Everlast, Coolio, Club Nouveau, and Naughty By Nature.
A native of White Plains, New York, Silverman attended Colby College in Waterville, Maine as an environmental science major. He then attended graduate school at Western Michigan University in Kalamazoo, Michigan, where he studied environmental ecology.
Significantly, he served as the music director of Colby’s student-run radio station WMHB, where his disco specialty show indirectly led to his entry to the music industry.
In 1978, Silverman and two college friends began publishing Disco News, a newsletter for the growing DJ community. Disco News evolved into Dance Music Report, a bi-weekly tip sheet that many regarded as the bible of the dance music scene until it stopped publishing in 1992.
Silverman released the first Tommy Boy 12-inch single, "Having Fun" by Cotton Candy in 1981. The success of "Jazzy Sensation," recorded in two versions by both Afrika Bambaataa & the Jazzy 5 and by the Kryptic Krew, paved the way the next year for the label’s blockbuster mainstream hit, "Planet Rock" by Afrika Bambaataa & Soul Sonic Force.
In 1980, Silverman co-founded the New Music Seminar as a catalyst for change. Despite the seminar’s enormous popularity over the next decade, Silverman left in 1992. Two years later, New Music Seminar went on hiatus until Silverman relaunched it in 2009.
Meanwhile, Tommy Boy Records was sold to Warner Music Group (WMG) in two stages—half in 1986, and the other half in 1989. Silverman became a VP at Warner while Tommy Boy was allowed to use independent distribution as he saw fit, with an option to place artists through Warner.
In 1995, when Silverman's contract ended, he negotiated a renewal that gave him back 50% ownership of the label. In 1996, the relationship with WMG ended. Catalog releases to date went to WMG; while Silverman retained the right to the Tommy Boy name and logo.
In 2002, Silverman launched Tommy Boy Entertainment as an independent imprint.
In the 1995 rap track “Labels,” Wu-Tang Clan’s founding member GZA began with caustic lines about Silverman, “Tommy ain’t my mothafuckin’ boy,” as part of a sharp criticism of the traditional corporate system that had long included Tommy Boy.
Today, however, Silverman is trying to find a way to steer the recording industry into a world where artists might develop 50/50 joint venture deals with labels or managers.
At the same time, as he began to plan this year’s New Music Seminar last month, Silverman realized that the music industry was celebrating the first anniversary of what he calls a “resurrection.”
In a recent blog, he gave reasons for such new-found optimism, including: the healthy growth of digital album sales; growing digital performance revenue; and CD sales at retail holding somewhat firm.
All of this will be discussed at the New Music Seminar taking place in New York, June 17- 19, 2012.
Among the speakers announced to date are: SoundExchange president, Michael Huppe; Pandora CEO/president, Joe Kennedy; Clear Channel Entertainment president, John Sykes; BMI CEO/president, Del Bryant; Violator Management CEO, Chris Lighty; producer Nile Rodgers; Reverb Nation CEO/founder, Michael Doernberg; Topspin Media CEO Ian Rogers; and eMusic CEO/president, Adam Klein.
Was it 2010 when the recording industry hit bottom?
No. It was in 2011. The record business always has it worst week right before Valentine’s Day, although that’s in the physical world. I’m not sure if that applies in the digital (space). We will have to see in the future with the digital numbers at Christmas time, because gift giving is such a big part of sales. A lot of that is Christmas shopping. We will see if we are still going to get that kind of huge bump at Christmas time three or four years from now when most of the (music) buying will not be physical.
But yes, I think that we are now in the first anniversary of the resurrection of the music business. I think that we hit bottom. It had to come at some time. We have been looking for it each year. All of the signs are that this is it. We have looked at numbers; we have backed out Adele (sales); and we are still positive of that (resurrection) even without Adele.
In 2010, we (the recording industry) had Michael Jackson dying; and we had all of the Beatle reissues. We had all of the new big products in the marketplace. We didn’t have any of those things in 2011.
How did you come to this conclusion?
There are tons of reasons to believe that we are now in the first anniversary of the resurrection of the music business. They can say that (it’s because) they shut down Limewire. But if you look at the numbers from the time Limewire was closed, and there wasn’t any significant blip in sales. You would have seen a quick increase in sales if there was any effect from that. We didn’t see that. Did it have an effect? Yes, but it wasn’t significant. We also had Borders going out of business last year, and shutting down all of those stores. So less music was being sold (at retail). There was less shelf space in the physical world. And yet, things were trending up. So I believe that we have kind of crossed the threshold.
Album sales were up 19% in 2011, which is significant.
That proves that if the CD was more ubiquitously available, (physical) sales could have been flat or up last year. But we will never know. We have all decided that CDs are dead. So they will be. I said in an article three years ago that rumors of the CD’s death are greatly exaggerated. If you just read the press, you’d think that nobody was buying CDs at all. Yet 68% of all album sales last year were physical sales still. And who could believe that?
[In 2011, U.S. recorded-music sales posted their first annual increase in album sales since 2004. According to Nielsen SoundScan, album sales rose 1.4% to 330.6 million units in 2011, up from 2010's total of 326.2 million units. Digital track sales grew to 1.27 billion, up nearly 100 million units, or 8.5%, from the 1.17 billion in 2010. Digital album sales had a 19.5% increase to 103.1 million units from 86.3 million units. However, in the physical format, CD sales went down 5.7% to 223.5 million units from 236.9 million units in 2010.]
Other than Adele, what were the significant music events of 2011?
There were three major events last year. One, the turnaround of the music business a year ago. To see a 10 year trend turnaround is a big thing.
The second thing was to see to see a dance artist sell out Madison Square Gardens (Dec. 16, 2011) in nine minutes on Facebook in pre-sales without even going public sets a ridiculous precedent.
First of all, Swedish House Mafia selling out Madison Square Gardens is enough; but to do it without even going to the public sales; by selling off their own Facebook page shows you the power of Facebook. It raises a lot of questions about what artists can do without promoters that people are going to have to think about now.
The third big event was Mac Miller on an independent label (Rostrum Records) going to #1 with his first album with only 27 spins on commercial radio, but over 40 million views (for his “Donald Trump” video) on YouTube.
[Malcolm "Mac Miller" McCormick—a white 19-year-old rapper from Pittsburgh—made modern-day music industry history when his debut album, “Blue Slide Park,” jumped to #1 on the Billboard 200 album chart with 160,000 copies sold in its first week of release.
It marked the first independently-distributed debut album to reach the #1 position in years. The album was digitally distributed by iTunes and INgrooves with Fontana Distribution handling physical retail sales.
Rostrum Records released the album independently of major label support, and there was virtually no radio airplay. Sales were the result of Miller’s towering social media following (over 1 million Twitter followers) and a creative pre–sales strategy that Rostrum worked out with iTunes and INgrooves which engaged fans prior to the release date.]
The New Music Seminar acted as a catalyst for change in the music industry when it began in 1980. What is its role now?
Well, it is still a catalyst for change, but the change is a matter of life and death right now. We are in the middle of a revolution; where we are seeing the end of the old record business, and the building of a new, more intelligent business. Where we are learning more things about what people want; and how to give it them; and how to create a value matrix that makes sense, and generates enough revenue to create a sustainable music business again.
For the last 10 years, it looked like we were gone. It looked like this (music industry) was a dead end street. Now it feels like the resurrection has begun. The New Music Seminar is here to explore the people who are leading the charge of this new music business which includes access and acquisition, streaming, digital downloads, physical sales, and different ways of dealing with live music; the licensing conundrum; and the domestic and international balances that are going to shift enormously as the markets that never bought music before become big music markets through smart phone streaming.
The international market for digital music remains largely untapped.
I heard someone at MIDEM this year say that only 200 million people in the world buy music. I believe that is probably true. I never thought about it before. Two hundred million people buy music in a world of seven billion. There’s a potential of two billion people paying for music. They might not be buying it to acquire it but it might be built into their phone service or in some other way. For a few bucks, between $2 and $10 a month, they end up coming to the music community for the first time.
I talked with Axel Dauchez, head (CEO) of (Paris based international streaming music service) Deezer, and he said that he felt that five years from now that 60% of the revenues from music will come from countries that are almost non-existent in music revenues right now; and that only 40% will come from Europe, North America and Japan which are traditionally 90% of the world’s music business. He says that as South America, Africa, India and the bigger parts of Asia start to become connected and have music services like Deezer that he believes huge revenues will start coming from those territories.
The Middle East as well.
And Russia is coming next. They have Zvooq.ru which is a similar kind of thing in its infancy. They are not fully connected. They are not one-click. They are not as easy or convenient as they need to be. Most people who like music are passive people. They are radio listeners. They want to set it and forget it. They don’t want to build playlists and share them and spend hours online.
[Zvooq.ru, a new site in Russia, is still in its beta test version. It's already gaining impressive traction among Russian Internet users with its free streaming offer, and its advanced functional design. The site claims to have cooperation agreements with 25,000 international record labels.]
When you were a kid how many people were making tapes? I was a tape maker but it took forever to make tapes, and not everybody can make tapes. Who are the tweakers that are bit-torrenting music? You have to be really into it. It’s not for everybody. It’s a time consuming thing. It’s for young people who have more time than money and don’t really want to buy music because they don’t have to and they have limited resources.
But music is pretty inexpensive now, and it’s so easily accessible. So we are seeing a turning point now because of the ease of access and also because of the viralization and peer pressure with sharing music. Facebook is driving a lot of that—the whole sharing of music. The other thing is that YouTube is like a social network itself, music is breaking off of YouTube.
These are all topics that will be discussed at the New Music Seminar with the leaders in those fields.
With the growth of digital music services, the recording industry has faced a seismic shift in its existing business model. One that sells 99 cent singles rather than a $15 album. Labels now argue that an investment in nurturing and promoting talent must come in multi-rights deals which give them a cut of ancillary revenue streams. However, the 360 deal is not a true joint venture.
It’s not a true joint venture, and I am a proponent of the holistic joint venture. I think the traditional record business needs to reinvent itself at this time, while the entire business is re-inventing itself. It has to throw away the old, 70-page opaque contracts and have a shorter, easier to understand contract that is fair and transparent.
When I say fair, I don’t mean that it favors the artist. I mean that it’s fair, and it’s honest, and that it is a document representing what is really happening. I believe that labels deserve a huge return on their investment because they are in a high risk environment. So, if they are investing $1 million in something, there is no reason that they don’t deserve at least as big a return as a venture capitalist would make from making a similar investment—if not more because they are investing a lot more than what a VC would normally invest in an early stage business.
All artists, for the most part, are early stage businesses, and their chance of success over the long term is very tiny. It is just like starting a new business for a venture capitalist. That’s exactly what it is.
There is a fair model that could come out right now that would redress some of the issues that artists have; that have created such an adversary relationship between artists and labels. And I don’t think it’s been necessary, really.
Reversion will always be contested in contract negotiations. A venture capitalist putting money into a business doesn’t have to deal with reversion.
That’s because a venture capitalist has a business that they plan to flip at the end of the business. But if the artist owned a company and they sold shares in that company to an investor like a venture capitalist—meaning a label—and all of the rights were owned by that company which they were both owners of, then I don’t think that there would be an issue of reversion. There’s nothing to revert. They are both owners. It eliminates the whole issue of reversion because all the copyrights are now owned by the company. Some shares are owned by investor/label and the other shares are owned by the artist.
We have a big breakout session at the (upcoming) New Music Seminar. We call it “The New Deal.” I think it’s very important for lawyers to start having this discussion about changing from ridiculous voluminous 70-page contracts that really put artists into a kind of indentured servitude kind of place; and change it to something much more modern, clear and transparent.
Lawyers aren’t leading this charge. Labels aren’t leading this charge. Somebody has to lead this charge. So we are trying to create a place to have a discussion about a replacement for this antiquated 50-year-old record contract based on albums which is, maybe, the wrong way to base any kind of contract in this day and age.
In essence, you are suggesting a true joint venture, really.
Yeah, it’s a company. You can create an LLC (a limited liability company operating agreement) like a movie producer creates a limited liability corporation around each new movie that is made. And people invest in that company. It makes so many things possible.
On the other hand, there could be another model which is the limited rights deal where the label doesn’t put up much money. They sign artists; do a short term deal—one or two years—and there’s reversion rights five or six years after the deal ends. But they (the label) don’t pay advances. Maybe, they don’t even pay for making the record. The masters are owned by the artist; or co-owned for the term; or, maybe, they are owned by the artist, and they are licensed for a term and then revert (to the artist).
There are tons of ways that this can be worked within a reasonable risk/reward ratio. The problem with the music business is that the risk/reward ratio is upside down. So nobody wants to invest in music. If nobody invests in new artists, new artists aren’t getting signed. The majors are probably signing probably 80% less artists than they used to sign. They also have less than half the staff; and they are signing so many fewer artists. So they are taking less shots. So fewer artists get an opportunity.
As a result a lot of those artists are forced into DIY. A lot of new independent labels are starting to put some of those artists out. But the reality is that there is less money flowing to artists, and the artist development process needs to be in order to test and develop new artists. In order for that to change, the economics have to change. We need to get the investors to come out—whether the investors are labels or others—and start putting money into the artist development business again so that more new artists have a chance.
You are saying the recording industry needs a significant overhaul.
We need a long term strategy that gets beyond technology, and goes to paradigm. We need a paradigm shift in the way people think. We need to stop calling them “record companies.” They aren’t record companies. They are representing artists, and they are trying to manage and monetize the artist’s relationship with the fans. That’s their job. Once they understand that’s their job, the whole thing changes. So they need a change in perception. Until there’s a change in perception, nothing else will change.
If Lucian (Grainge) or Lyor (Cohen) or any of the guys running the companies start seeing the business as not a record business anymore—that they are not selling music, they are selling the relationships that their artists have with their fans; and that, maybe, music is one of the things they sell, but they will sell everything—at that point, you stop even needing a 360 deal. They (labels) are going to try and sell everything. They are moving in that direction but they don’t see that as their mission because they don‘t see how yet to monetize it. It’s not clear yet, but it is starting to become clearer.
I think that (Russian-born billionaire) Len Blavatnik (chairman of Access Industries, owner of the Warner Music Group as of July 20, 2011) really has to step out in that space to really shake it up, and make it work. He really needs to change the model because he’s going to be left as the smallest major by a long-shot once that (Universal/EMI) merger goes down.
Many artists feel that they don’t need a label today.
Well, I asked myself that question a few years ago, and I wasn’t sure what the answer was. So I did an analysis to find out. I went deep into Soundscan and looked at artists that sold over 10,000 albums in 2008. There were only 208 or so artists that year that had never sold over 10,000 albums before. These were rookies. A full 200 were on majors or indies: 50% were on majors; and 50% were indies. There were only eight or nine that were DIY artists. One was backed by a big real estate company and had a ton of money or others had labels that were well-heeled and were spending a lot of money on them; or had something going for them, like they being on “American Idol” or some TV show that drove them, but they came out on an unknown label.
To be successful internationally, an act does need an affiliation with a significant label.
The purpose of a label is to help expose and monetize your creation. How is it possible that an artist can focus on writing, recording, and performing songs and dealing with their public, especially with the Twitter, and the Facebook stuff that they have to do today, and stay in touch with managing their website?
Doing all of that stuff is a nightmare for artists. It is so much work. Just to focus on that is a full-time job.
If they are also expected to oversee all promotion and marketing and distribution and the monetization of the 27 streams of revenue—where there only used to be two or three in the past—it’s not realistic. They are not going to get the most out of their creation. They need a partner that is going to expose and monetize for them; whether it’s a label or someone else.
If they have $1 million in the bank, and they want to hire a quarterback to quarterback or have a manager manage the 30 different companies and deal with aggregators all over the world; and have people doing marketing and promotion and PR and radio promotion on a worldwide basis; and plug into all of the different revenue streams while making sure that they are collecting every penny, probably it is going to be much more expensive and inefficient if they do it themselves; rather than if they have a company that is efficiently set up already to do all this.
In 2007, you wrote an impressive editorial in Billboard listing the values that lead people to buy music.
As an industry, we should think about who customers are and how they buy and why do they buy so we can find a way to address the issue of perceived value. There has been a loss of perceived value of at least 50% over the past decade. People thought music was worth twice as much 10 years ago. We are not addressing that. We have to think about all of the reasons that people attribute value to music. The reasons are not all the music itself. A lot of them are convenience.
[In his July 28, 2007 Billboard editorial “Compelling Criteria For Quality Consumers,” Silverman had argued that before the CD runs its course that the industry must seek to change its pricing model to one of consumer value perception. In effect, create a compelling package for the status/quality consumer.
“Beginning with the consumer, this is criteria we should use to develop the next physical music product for consumers: 1. High perceived value; 2. Strong emotional connection—touch and feel components (high touch not high-tech); 3. Status association—peer pressure; 4. Best possible sound quality and audio features; 5. Great gift item; 6. Collectibility (infers resale value and possible appreciation; 7. Easy and convenient.
“From the music industry's perspective, we should create a product that has
1. Maximum yield per unit (high markup); 2. Product acceptance by consumers (and even 15% might be economically rewarding with the right margin ingredients); 3. High barrier to duplication (especially by consumers but also by counterfeiters); 4. Viral awareness mechanism built-in; 5. Highly connective so we can know our consumers directly; 6. Flexibility for artists and designers to continue to reinvent package (like old record albums); 7. Corporate partnership to help fund promotion and awareness campaign for new format/configuration; 8. One standard, no format war; 9. Must be green.”]
I would add to what was written is how many clicks to the purchase. How difficult is that? I guess I did say that in a way.
You said “easy and convenient” which is the same thing.
I guess so, yeah. One of the problems up to very recently was that it had been difficult for people to acquire or access music. It’s getting easier because you don’t have to enter your credit card (each transaction). People are now more comfortable buying on the web. Once your (credit card) information is with Amazon, iTunes and many of the other places, all you have to do is to click to buy something. So it’s a one-click purchase. That changes purchasing to make it more impulsive. Music can now be an impulse buy, 365 and 24/7, instead of going to a record store, and having to find something. It was pretty difficult before.
If labels had considered that list a decade ago we might have been further along the digital road.
Actually, you are taking it a bit out of context…
I know I am.
The idea was that there could be a physical music product that would replace the CD. The CD has expired its life expectancy. If you look at vinyl and cassettes, they had 20 to 30 year life expectancy. The CD has been running that long (being commercially available since 1982) and we should have already been thinking about something else physical that could have replaced it. People were talking about that at the time but everybody had given up on anything physical. The reality is—and we are seeing from some of the studies from last year—is that people still like a physical thing.
Many people like a tactile product that they own.
Yeah. And they want to have it for gift giving which is a huge part of music buying. It doesn’t feel as much of a gift when you are giving a file than when you have something wrapped up with a bow.
Physical music goods are difficult to buy today.
Hard to find it. Harder to get it. And yet in America, we only had a 5.7% decrease in physical. We saw a 17% increase of physical online. A lot of physical is being sold at places like Cracker Barrel, Hot Topic and non-music stores. Alternative places are doing pretty well with physical. It just shows you that people want physical. We would probably be selling much more physical if it was possible to buy it or find it. It just is not right now.
With the introduction of CDs, the recording industry raised album prices from $9.99 to $15.99. Many consumers didn’t agree with that.
I think they did. They went back, and re-did their collections. And they thought the CD was better (than vinyl). You didn’t have to flip it over. You didn’t have to put the needle on the record. You can search, and find things. Later, it became portable and became recordable too. Then it became ubiquitous because it was (playable on) computers and everything.
With the introduction of the CD in the ‘80s, consumers didn’t necessarily buy new music. They replaced the vinyl and cassettes in their collections. Fifteen years ago, about 40% of the record market was catalog that wasn’t selling for $15; it was budgeted to sell at $8.
Yeah, and that is what is happening now—the $5 dump bins at Wal-Mart. In the ‘80s, when I was working with Warner Bros. as senior VP, between 40% and 45% of their sales were coming from catalog. That wasn’t even including record clubs. That was beyond record clubs. And every year the catalog becomes bigger because there’s more and more music available.
Now with online sales, it’s easier to find catalog, obviously. It was always hard to find physical catalog because stores didn’t carry that much (catalog) depth. There’s instant depth in the iTunes and Amazon stores and at all of the other stores. Access to deep, deep catalog is pretty much infinite. That’s changed accessibility and opened the door up to even more catalog sales than previously because catalog tends to be long tail.
Other than the lack of availability, there has been a lot of crappy music around for a number of years. I think it’s a better time for music today.
I hate to bust your bubble here but I think that there’s more crappy music now than ever before.
Of course, but that’s because there is more music available generally.
Last year, I think something like 76,000 albums were released on Soundscan that sold at least one copy. Only 33,000 of them came out as physical.
But I can find more good music around to listen to today. With the internet, there’s a world market to pick from.
You know, I can’t agree or disagree. I would rather not have that discussion only because it’s totally subjective. There are a million subjective things that we could talk about that are really going to define what or whether there is going to be a new music business at all.
The optimism that I have—and I have been so pessimistic for the last decade—the optimism that I have now after last year is so unbridled because of all of the stats that I am seeing from every side: the new players that are coming in; a new openness by the labels to license; an acceptance (of the varied roles in selling and promoting music). Everybody is starting to get bullish instead of bearish as they had been for the past ten years. I think that we are ready to expand the business.
But before we change the topic completely, I started saying that the CD is also an outdated physical music carrier. Perhaps, there is a different physical carrier that can be designed to meet some of the criteria to be a great gift; to be collectible; to have high quality or whatever. Maybe, it’s not for everybody. But the price point needs to be a significant price point; not an insignificant price point.
What makes the CD outdated? Other than if it is changed, there might be a boost in physical sales with consumers seeking catalog. Why is the format outdated?
Why is a 10-year old car outdated? The technology hasn’t changed in 30 years. There is so much new that we could possibly include in a physical medium; if we designed a physical medium from the ground up to serve the desires of consumers. We are not addressing that.
You’re right. The CD is primarily limited.
We thought about a physical CD before there was technology. We built the (CD) business around a piece of technology; not around consumer desires. So go back to that list, and say, “We will build a new product that has built in all those new desires.” When the guys at Apple designed the iPad, there was no iPad previously and no concept of tablet and no market for a tablet. They created it from scratch, before there was a market for it, based on deciding what people would salivate over. So they started with saliva, and worked backwards. We need to start with saliva, and work backwards.
The CD isn’t very exciting for sure.
Even if there was no digital world, and no illegal downloading, the CD still would have peaked, and would have been coming down. It would have happened anyways—just as it happened with cassettes and vinyl. Vinyl had a peak in ’79, and started to fall. Once people have their collections, once we reach a saturation point (in the market), there needs to be something exciting to get consumers to go.
Everybody was waiting for the new iPad (released this week) and now they are waiting for the iPhone 5 and the iPod Touch. There is always something that drives people forward, that they can touch and feel. We don’t have anything like that (in the music industry) That’s the missing piece here. We are getting it with Spotify. We are getting it in the digital world; but we are not getting it in the physical world. There’s still an opportunity there.
Do you think that a new physical carrier will emerge soon?
I am not confident that there’s anyone smart enough or interested enough—or that there are investors—thinking in anything that is still physical. But if they should be able to come up with a magic combination that (design wizard) Jony Ive over at Apple (British designer and the senior VP of industrial design at Apple, Jonathan Paul "Jony" Ive) is designing, and we had people who could design what they are designing there—a physical product that could make people drool—I think that we would see a huge business in physical that would be running simultaneously to growth; both in digital acquisition and access models.
All the recording industry has been coming with are special editions and box sets.
I saw Neil Young at the Grammys, and he’s talking about quality. That’s his big issue. How do we get the quality back or improve the quality beyond. He’s into this whole 192K sound (24 bit, 192k) which is better than a wave file; and better than CDs. Why not?
Do you really think sound quality is an issue with teenagers today, really? Sad to say, I don’t think that it is.
Well, if it wasn’t I don’t think that the (Dr.) Dre Beat headphones would be as successful. People are paying $200 for headphones. You see them walking around with the red cords on their headsets everywhere. That company (Beats Electronics) is worth billions of dollars now. They understood something (about the marketplace). They have created a detachable red wire and associated with a producer and created a demand.
That is the kind of thing that the music business can do but we are not thinking about it. We are not thinking about, “How can we add value to music?” We never really sold music. We only sold the carrier. We sold a 78, a 45, a 33, a cassette, a CD. They are carriers. We didn’t sell the music. People never felt like that they were buying the music. They felt like they were buying a record or a cassette.
[In Aug. 2011, Taiwanese mobile phone manufacturer HTC Corporation purchased a 51% stake in Beats Electronics in exchange for a $300 million investment in the company.]
After Napster, it became difficult to find new music. With all of the digital music services today, people are surrounded by music.
The reason why I believe that the business has turned around is because we are inundated with music that is easy to touch; easy to reach; easy to share; and easy to turn your friends onto. We have Shazam in our pockets. If we don’t know what a song is we can just pull out our smart phone and figure it out in 20 seconds. And there is a buy button on Shazam that is driving huge traffic to iTunes. We can discover music on Pandora and on Spotify. There are so many ways that we can discover new music now. Even people who are very passive (about discovering music) are finding out about music again in new ways. We had Adele sell more albums (with “21” at 20 million sales worldwide) than anyone has sold in a really really long time. And that woke up some people who had stopped buying music and got them buying music again which is very exciting.
The smart phone is akin to the transistor radio that we could take to the beach.
Like the Walkman when that was invented.
Today, with the smart phone, I’m walking around with an entertainment center.
And a computer. And a phone and a communing device that you can share with all of your friends what you are listening to all of the time. They say that a smart phone has more computing power than what NASA had when we put a man on the moon.
There are now new sources of revenue for rights, including from Vevo and others.
And Sound Exchange. A huge growth. It will break $400 million this year. It will probably surpass collections for the performing rights associations that collect for the songwriters.
[SoundExchange collects music royalties from streaming services, such as Pandora, SiriusXM Radio and Music Choice, and distributes them to artists and record labels. It distributed a record $292 million in 2011 from over 1,400 streaming music services; up 17% from 2010. Five years ago, SoundExchange collected $20 million in royalties.]
In 1986, Warner Brothers bought 50% of Tommy Boy Records. Was that in order to expand your label?
In ’86, I sold half of my company to Warner Brothers but I maintained my independence. I kept my distribution independent, and I still did my own promotion. Certain records went to them, and they helped me work them. I felt at the time that I didn’t get a straight shot with indies (independent promoters) at radio. I couldn’t get peoples’ attention, I couldn’t get a priority. It was hard for me to cross records beyond a certain point; especially at Top 40.
Did you take a deep breath before making the deal?
I wanted to do it. I worked directly with (Warner CEO) Mo Ostin. I created an unusual venture with him where even though they had half ownership; they didn’t take distribution and we were autonomous, and we had our full staff. At some point, we decided what went through their system, and what went through ours.
But the ironic thing that happened is that right after I signed my deal, within a month, the (music industry) payola probe went down, and Warner pulled out of using all independents. For two years, they stopped using independents. So it was worse than if I hadn’t done any deal at all.
You bought back the percentage of the company at one point didn’t you?
At one point, I got it back and at one point they picked up all of it. In 2002 I got the name back, but they got to keep the catalog. I got the name back, and we started again as a full independent. There was backend to the (original) deal where they could acquire the second half (of the company). They have the old name Tommy Boy Music; and I have Tommy Boy Entertainment. The publishing was part of the deal with them as well.
Bad timing in 2002 to start a label again.
It was a tough year to start a label because everybody was dealing with eight years of recession, and a downward movement in the business.
Has it been hard watching the catalog you created be handled by someone else?
It’s a little sad for me, especially seeing things like De La Soul’s “3 Feet High And Rising” (1989) is still not available on iTunes. You wonder if we could do more with the catalog. If we could give it that tender loving care that it is probably not getting (at Warner); especially since the cutbacks now.
The multinationals acquire great labels and tend to let the imprints sink into oblivion.
Once they acquire a label, they acquire masters. They don’t acquire the corporate culture. It’s the corporate culture and the leader that define the nature of the labels. It’s the Chris Blackwells and Jerry Mosses of the world that make a label what is. Once those guys are gone, it’s just a name. There still is a Geffen Records and there still is a Motown and a Def Jam; but there’s no Rick Rubin and Russell Simmons involved with them (Def Jam).
Tommy Boy certainly planted the flag for rap, new school hip hop, and dance in the ‘80s.
We did. We always tried to push the envelope. and do different things. We tested different types of marketing and different kinds of release possibilities, including doing different prices points. We were always experimenting and playing with it. I always had fun breaking rules. Basically questioning the status quo. How can we do better? How can we do better for our artists and for the business in general?
In the ‘80s, this was really alternative music.
I guess it was in those days. From today, it looks like old timey stuff but when you think about it, we invented bonus beats; and we were the first one to put instrumentals and acapellas (versions) on 12-inches. We helped drive the move from 12-inches to be 33 rpm instead 45 rpm, and we did all picture jackets so 12-inches would look like albums. We helped drive the value proposition of the 12-inch market up from $3.98 to $5.98 and $6.98. Can you imagine people buying a single for $6.98 in 1984? It’s like $12 for a single now. We were selling hundreds of thousands of them. It was a great market.
And the majors couldn’t get a handle on that market.
At least until about ’86, the majors hadn’t started getting into hip hop. They had a few. Mercury had a few (artists). But it was Sugar Hill, Tommy Boy, Profile, Next Plateau and labels like Sleeping Bag, Select and, eventually, Priority on the West Coast—and some labels in Florida. We were all able to evolve and incubate a new genre of music called hip hop without the majors fucking it up for 10 years so that it could become mature. Then the majors started getting into it around ’89 and ’90 in a big way. By 2000, or even a little before that, it became impossible for independents to be competitive in hip hop.
The majors would come in with a check book.
Yeah. A check book. Not only that but they were paying for promotion at a level beyond anything that we did so they raised the cost of getting your music exposed. It used to be inexpensive to get music exposed and the price got higher and higher. Then it just became a very difficult business.
As the hip hop scene change, Tommy Boy began working in other genres.
We were looking for new trends in music than what was happening. Tommy Boy really started with Afrika Bambaataa’s “Planet Rock” in 1981 and 1982. “Jazzy Sensation” had been the first hit record that we had and then came "Planet Rock.” They were electronic dance music and hip hop records combined. They were pretty amazing records back in that day.
At the Grammy Awards this year, we saw Chris Brown win for best R&B (album for “F.A.M.E.”) you really thought that it was a dance record. You can see that what’s happening now is going back to where Bambaataa had in 1982. It’s a wonderful thing to see it come full circle. That is sort of where we are looking at now with this Happy Hip Hop and club music. There’s a sweet spot where hip hop sort of meets electronic.
People might be surprised to know that your major in university was environmental science.
Environmental science, and then in graduate school, environmental ecology.
You were co-opted by Colby College’s campus station WMHB?
I was the music director of the radio station. I wanted to go into music, but I didn’t really feel that radio was going to be a good career. I didn’t know what little town I was going to end up in. I didn’t think that my voice was that great for radio. I wasn’t thinking about the record business. But my roommate Scott Anderson, who ran the radio station with me, got a job at Cashbox doing the R&B chart. We had stayed in touch while I was in graduate school. I used to do a disc live radio show from a disco downtown and he said, “Disco is really starting to break. Let’s start a newsletter for DJs." I left graduate school, came back to New York and did Disco News that became Dance Music Report.
Dance Music Report gave you a big window to the music industry.
Yeah, I used to ask questions, and I used to hang out with a group of five or 10 music executives talk about how fucked up the music business was; and if we were running it that we would do it differently. They were from publishing, retail, and some guys were from management. We used to go to the Yankee games every Wednesday night, and we’d hang out.
You started attending industry music conferences as well.
I used to go to the early Jack The Rapper (aka Jack Gibson) conferences. When we started the New Music Seminar, I had all of that knowledge about disco and all of the different genres from writing for my own publication. So I started thinking about what we could do differently. We tried to really change the game, put different people up to speak and bring in some voices that never got heard—that the (music) trades weren’t writing about. Trying to be provocative, and ask questions that other people weren’t asking. People loved it.
You are still trying to be provocative, and ask questions that other people aren’t asking.
I am always second-guessing the music industry and myself because the only thing that is certain is change. You embrace change or you get disrupted by change. The business has been disrupted by change, and we have to embrace change, and not be afraid of it.
You aren’t the Young Turk anymore
I’m the old Turk. I’m not (Atlantic Record co-founder) Ahmet Ertegun, but I am still trying to be a Turk. The issue is that I want to find those young kids who are looking at the business, and trying to reinvent it. We were outsiders trying to get in. Trying to figure out a way to do it so we could twist it differently. A lot of us went on to be somebody. I’m wondering if there are a lot of guys today looking at the music business today. Maybe they are, but they are all in tech.
Larry LeBlanc is widely recognized as one of the leading music industry journalists in the world. Before joining CelebrityAccess in 2008 as senior editor, he was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-89. He was also a co-founder of the late Canadian music trade, The Record. He has been quoted on music industry issues in hundreds of publications including Time, Forbes, and the London Times. He is co-author of the book “Music From Far And Wide.”
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