4 Insights on the Future of the Music Industry

    by Jason Feinberg
    February 22, 2011
    Busy P spins CDs to move the crowd

    The music industry is still in tremendous turmoil. Yet it is also full of the kind of discussions needed to remake and rebuild the industry.

    Fostering those conversations is the purpose of the revamped New Music Seminar (NMS), the most recent edition of which took place last week in Los Angeles. The conference focused on the music industry’s evolving economic models and gave artists a look at the future of the business — from do-it-yourself (DIY) outfits up to the major labels. Tom Silverman founded it 30 years ago as “a new kind of grassroots music industry gathering for disenfranchised music business upstarts,” according to the NMS website. (You can hear more from Silverman in Mark Glaser’s Q&A with him previously on MediaShift.)

    A great live show is still the most important tool in an artist's arsenal." - Peter Malkin

    I spoke with panelists, industry veterans, and aspiring artists at the conference. Here are a few points that were on most everyone’s minds:


    1. No single product defines the industry.

    For decades the single song was the music industry’s core product. Then for a few more decades the album reigned. The industry was well suited to meeting these consumer preferences because the profit margins were significant and selling more of anything in a single transaction is generally good business.

    Endless choice has altered consumer behavior significantly. But with this change comes an opportunity to market substantially more products to fans. As album sales have declined, the industry now profits from a complex puzzle of revenue sources: merchandise, video, high-fidelity audio, karaoke tracks, song stems, artist access, and many other diversified offerings.


    Today, there is no magic formula that works for all artists. Knowing what fan’s preferences are and offering up tiers of products seems to be the winning equation.

    2. Don’t believe the hype.

    Every year or two, a core trend is over-hyped and eventually disappoints. For years, it was ringtones. Likewise, DIY and direct-to-fan have proven to be more complicated and less successful than expected. And the bottom fell out on music-based videogame sales, culminating this month in the shuttering of the Guitar Hero franchise.

    The newest hot trend is cloud-based music services. In Silverman’s keynote (as well as his MediaShift interview), the founder of NMS and Tommy Boy Records made it clear that he didn’t believe these services will revolutionize the industry, as many are predicting.

    The numbers just don’t add up, he said. Currently, online CD sales are only down three percent from last year. Physical CDs still count for 76 percent of album sales. Clearly, people are not abandoning music ownership just yet.

    An interesting fact Silverman pointed out is that music storage is actually cheaper than the bandwidth to stream it. This isn’t a consumer-facing factor as cloud services typically don’t charge based on consumption. But it may have a long-term impact on the financials of ownership vs. access: Unless the cost of bandwidth drops, cloud-based streaming services will struggle to compete on price with digital music sales.

    3. It’s all about the music, after all.

    What the past few years have shown is that technology and clever business models mean nothing without music people care about. In his NMS introduction, longtime artist manager Peter Malkin reprised this video, which lists the plethora of tools that enable musicians to run their enterprise. The point of the list is to show that there are a tremendous amount of tech platforms, but none of them really matter if the music isn’t any good. Here’s his presentation at NMS:

    I spoke to Malkin after his presentation, and he expanded on this point, saying that a great live show is still the most important tool in an artist’s arsenal. A strong musical foundation is key no matter what tools one chooses to use, he said.

    4. New opportunities for artists at every level.

    A number of companies announced new product lines at NMS, many of which cater to artists interested in offering goods and services directly to their fans. It used to be only the biggest acts who had the resources needed to pitch niche products.

    > ZMX Music launched their direct-to-fan sheet music service at NMS, allowing smaller artists to enter America’s $600 million sheet music industry. They cater to artists that do not have deals with the major publishers (e.g. Hal Leonard) and wish to sell their sheet music directly to fans. The non-exclusive service evenly splits revenue with the artists and offers embeddable widgets that allow for direct sales across many platforms.

    > Topspin, considered the direct-to-fan leader for high-end artists, announced the launch of a self-serve model aimed at bands earlier in their career. A monthly fee of $9.99 and 15 percent of sales gives any artist access to serious marketing and sales tools.

    > GigsWiz offers a ticketing system that encourages artists to actively sell tickets to shows rather than simply informing their fans of them. By sharing revenue, the service creates an incentive for artists to get even more involved in their show promotion.

    > JamBase has expanded their service, allowing fans to connect via Facebook and be alerted when their favorite artists are playing local shows.

    Other companies had launch announcements and platform upgrades, including Mozes and SoundExchange.

    Just remember, as Malkin pointed out, these tools are only as useful as the music they power and the personal connections they are used to enhance.

    Photo by Caesar Sebastian via Flickr.

    Jason Feinberg is vice president, direct to consumer marketing for Concord Music Group. He is responsible for digital and physical direct-to-fan solutions for CMG’s frontline and catalog including the Rounder, Fantasy and Stax labels. Recent campaigns include Paul Simon, Allison Krauss, Paul McCartney, Elvis Costello, Carole King/James Taylor, and Crowded House. Follow Jason on Twitter @otmg

    Tagged: digital music jambase mozes new music seminar nms soundexchange tom silverman topspin

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