Wrecking the record labels’ buzz
Tom Silverman is the guy who gave the world one-time hip-hop powerhouse Tommy Boy Records and the New Music Seminar (NMS), the New York-based music business gathering which did the job which the likes of SXSW and Eurosonic are doing …
Tom Silverman is the guy who gave the world one-time hip-hop powerhouse Tommy Boy Records and the New Music Seminar (NMS), the New York-based music business gathering which did the job which the likes of SXSW and Eurosonic are doing now.
With NMS back on the schedule as a touring event, Silverman has been doing some talking heads’ stuff and especially turning his attention towards the area of record sales. We all know from kicking the tyres, reading the tea-leaves and seeing how much money acts are charging for live gig tickets that money is too tight to mention in the record side of the house. Nonetheless, Silverman’s stats and analysis make for desperately gloomy reading.
In a lengthy interview (and here) with Musician Coaching, Silverman points out that most major label album releases have little chance of breaking even unless they sell north of 250,000 copies. Even at that – and only 112 albums hit that target in 2008 – many don’t even turn a profit due to the size of their production and marketing budgets.
“A good part of those records that sell over a quarter of a million they hoped would sell over a million or two million, and only sold a half a million or less. So they overspent on them and didn’t make money on them. So those 112 records are the only records they could make money on at all. Probably 25-50% of those didn’t make money either. So only 60 releases make money, and the amount of money they make except for maybe four or five giants hits – the Lady Gaga and Black Eyed Peas level of hits – aren’t really making significant money. In the old days, one hit used to pay for 20 stiffs. Now one hit doesn’t even pay for one stiff.”
So, you think, that’s the majors screwed unless they cut down on costs. Happy days for the DIY and indie sector, right? Well, no. As we have seen with Radiohead, the DIY route is fine if you’re an established act who have already used major label largesse to build an audience, but Silverman points out that the DIY route doesn’t always work for acts who want to get on the radar. Taking 10,000 album sales as a benchmark – “when you sell 10,000 albums, you’re no longer an obscure artist; people know about you. You may not be a star yet, but you’re in the game. That gets you out of the glut and into the game” – Silverman points out that of the 1500 albums which sold over 10,000 units in the US in 2008, only 227 were by new bands with only 14 of these truly DIY ventures.
If there an upside, Silverman points out, it’s in the growth of digital sales. Yet as regular OTR readers know, the only way labels will able to take advantage of this will be by cutting their costs to match the new levels of revenue. If they do become more cost-effective, it may mean more releases becoming profitable. However, with revenue from digital sales unlikely to ever match the revenue received for the last few decades from physical sales, you have to wonder how many labels will be willing to take a punt on a new, unproven acts?
More and more, I expect to see labels adopting a football club “galactico”-like approach, where they’ll sign acts who’ve already proven they have an audience by hitting that 10,000 sales target under their steam or on a smaller label. The job of the label then is to turn those 10,000 sales into 100,000 and beyond. The question remains, though: are the days of a band who can reach multi-million sales status over the course of a few albums well and truly over?