Label owner: music industry needs to reform

Music industry veteran Tom SIlverman knows his business. He owns his own label and is a board member of representatives for the indie labels Merlin and A2IM, as well as board member of the RIAA. So it’s safe to say Silverman knows his business. And that business, he says, has to change.

Surprisingly, however, his view on change does not revolve around the internet, either as a distribution or marketing channel. Despite the promises of engineers and futurists, Silverman states in an elaborate interview with Wired, technology is not the great democratiser. It has not made it easier for talent to be spotted or for small bands to break through. There are fewer artists breaking through on their own now, than in the eighties, before the cell phone started the personal communications revolution.

Especially social networks, Silverman points out, are a big disappointment as a means for artists to generate a paying fan base.

The most that can be said about the mass adoption of IT is that it has made it easier for people to produce music and get it out there. But that, Silverman points out, is no guarantee for quality. The Long Tail theory, the idea that the internet created a market also for songs that are in low demand, falls short of delivering, says Silverman.

The problem lies in the clutter. 80% of releases are made by hobbyists. That in itself is not a bad thing, but it clutters the market and it overshadows talented releases. Last year alone, 35.000 out of 132.000 releases did not even sell one copy. “That means not even the artist or their mother bought a copy, and all those artists are out there gigging, they’re all on social networks, they’re all doing stuff to clutter the marketplace.”

The other side of the story is that of the artists that did break through, very few did so with an elaborate online strategy.

This ‘clutter’ means that the big hits are no longer able to cover the label’s losses on unsuccessful artists. Even signing a superstar like Lady Gaga does not help cover the costs of two ‘stiffs’. Earlier, the rule of thumb was that a star could recover the losses for up to ten unsuccessful artists. The risks of the investments have gotten much higher.

The solution to this increased risk, Silverman proposes, is setting up the industry differently. In the current system, the label ‘owns’ the artists. “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.”

Artists get paid when an album is produced. After that, it is the labels that get the proceeds. Thus, artists are more or less treated as a company resource, rather than as a creative partner. This system, argues Silverman, has become unsustainable.

Silverman looks toward the movie industry for answers. There, LLC companies are established for every movie. This move would put the labels and the talent at the same side of the table, both of them working to make their company a success. All the parties involved get a stake in the LLC. This way, everybody has an incentive to work and make money. “As long as they want to maximize profitability, nobody makes money unless everybody makes money.”