Live@NewMusicSeminar (#NMS): Garland, Silverman Talk State of the Industry

Live coverage from New Music Seminar, Webster Hall, NYC.

Eric Garland, CEO BigChampagne.

Tommy Silverman, New Music Seminar.

Garland starts by discussing some basics – differences between one-to-one, one-to-many, many-to-many formats, democratization of the web.  Interesting discussion over whether there will ever be a new Michael Jackson.  Garland says no, “there isn’t that level of scarcity” to make it happen.

Silverman discusses a huge drop in music sales – not just by units, but also by value.  Inflation-adjusted values now bring the business back to the 60s, “which is mind-blowing” according to Silverman.  “It looks like a cliff to me, you better show me another slide,” Garland jokes.

Also, there’s a huge swell of content, thanks to direct-to-fan channels like TuneCore, Amazon.  Still, “this is strictly releases” according to Garland, and most don’t sell.  81,000 – or roughly 81% – of all releases last year sold under 100 copies.  So, how do those artists under 100 do something different to get over 1,000 or 10,000?

Meanwhile, the number of artists selling over 250,000 – just 85! – down from 214 in 2001.  “It’s not much more than a third of what it was.”  Physical albums are simply dropping faster than digital gains.

Another look – in the US, just 2% of albums released last year sold 5,000 copies or more.  Meanwhile, singles are leveling – most recently at 1.243 bln in 2009 – according to Soundscan – while albums plunge.  “Still, by dollars it’s still an album market as well,” Garland noted.

Album fixation?  “This album-centrism is like saying the sun revolves around the Earth,” and “most people buy songs, they relate to songs, we listen to collections of songs.”

And YTD tracks sales?  “It’s slightly down,” Silverman said, though the flattening is happening in the catalog.  “It’s older stuff that is not really working,” people “have got their collection, their iPods are full.”

Another look.  Albums selling under 1,000 units in year of release = 92,601, though some data issues at Soundscan could be happening.

And, albums selling more than 10,000 albums – 1500 went down to 1300 – more specifically 1,314 from 1,515 in 2008.  “That’s because stores are carrying less records, and physical stores are moving racks out,” Silverman explained.  “People still love buying physical, but the retailers have decided they don’t.”

Another crazy stat.  The top 50 songs generate one-third of new song sales.  Are we losing any hope of a musical middle class?

But the album bundle still rules.  By units, it’s all singles, but by bundle, albums still rake more cash.  Also, about 14% of UMG album sales are complete-my-album sales.  So, $9.99 seems to be an approachable price per Silverman.

And Facebook?  Facebook is “taking over” according to the slides.  There tends to be a huge emphasis on grabbing friends across Twitter, Facebook, MySpace, but “what does it all mean if you don’t have engagement” Garland posits.

Facebook is becoming an increasingly important and dominant platform for artists.  Except, there are some counting details to examine, including the instant creation of fan pages that created huge followers overnight.  Those clubs were based on the inputs of fans – ie, typing an artists name or something in  a thread.  “It’s important as an artist to be aware of what this really means,” Garland said.  That partially explains why Facebook is trumping Twitter across many fan metrics.

MySpace – major traffic declines.  So, as MySpace decreases so do your fans.  “It means the places that people are hanging out on the internet is shifting around,” Garland said.

Location, location, location.  Garland: still unclear exactly what location-based services mean to artists.

Then, top music blogs are holding steady – including Brooklyn Vegan, Stereogum, nah right, you ain’t no picasso – most of the growth in music blogs happened in the middle of last decade.  Some of that has to do with one-click hosting sites.

SoundExchange.  ‘Total Pureplay’ category is largely Pandora, more than half of that category, “dwarfing the other webcasters” per Silverman while internet formats overall are edging traditional broadcaster revenue contributions based on percentage.

Pandora stats.  Nearly 60 million registered users – 52% of all internet radio – and users are over half mobile (per Garland).

Google.  It’s huge, very huge for partners.  When Lala got integrated into Google Onebox, it caused an incredible spike in traffic.  “But that impact led to the acquisition by a competitor,” ie Apple, opening the question of how Google positions companies moving forward.

Cloud services.  Just getting started in the US, but “all of the giants are eyeing the cloud” including iTunes, MOG, Rdio.  “It’s a very difficult thing here [US] because of the licensing,” Silverman noted, while noting that the only other two major free streaming sites are YouTube and MySpace.

Vevo.  It’s 90% YouTube.  Vevo unique viewers from YouTube 89.1%.  Vevo unique viewers from Vevo.com = 10.9%.  “9 times out of 10, you went to YouTube.com not Vevo.com,” Garland relayed.  Still, WMG is not there.  Also, regarding an earlier holdout on YouTube, videos kept leaking onto the site anyway – “it’s increasingly harder to sit it out,” Garland noted.  “YouTube is the show.”

Meanwhile, the cloud is already huge – on YouTube, through FB, whatever.  Access beats acquisition – not in the future, right now.  Plus, people tend to stockpile music that they never listen to, particularly when it’s for free.

But acquisition clearly pays a lot more.

Also, annual music transactions.  The number is leveling off and not increasing, thanks to increased streaming acquisition, and potentially increasing download pricing ($1.29).

And what about SuBo?  Relatively low social networking connectivity, but Susan Boyle album sales beat Gaga’s.  Sales were largely physical, “a hell of a story” for Silverman that is “based on a good story” [though this is also largely due to an older more traditional demo].  Nearly all sales were physical.

Meanwhile, P2P file-sharing total users (USA) keeps gaining (also on a WW basis).  But, this used to be a real growth category – sometimes 15-25% yoy, but “you don’t see that anymore yet it didn’t go away and it’s not even declining.”

NPD: Ripping and burning is actually greater than P2P.  Ripping and burning “is actually hurting the business even more” according to Silverman – yet it’s not talked about as much.

One-click hosting is on the rise (Rapidshare, Megaupload).  But “there is a location we can bomb” says Silverman.  “There is a central location for this,” yet Garland notes that “you can always bomb the provider,” but the “people and their insatiable appetite for free content is the real problem.”

Now, artists play it cool on leaks.  Drake: “Enjoy!”  Then again, Kanye, not so cool: “F&*K you, pay me!”.  But “tremendous pressure not to be a joy kill about spreading material on the internet,” according to Garland.

All other things being equal, one-clicks are probably the fastest way to get high-quality music.  Faster than iTunes.

How many clicks does it take?  Lots of clicks on AmazonMP3 and other sites, but only one click on blogs, sites, social networks.  “Minimizing clicks is a really important thing,” says Silverman.

One more thing.  “Biggest, most important product” is Ultimate Chart – ultimatechart.com – ranked list of all sorts of inputs, etc.   This blends the digital, physical, radio, etc., this puts everything into “one measure so that we really know where we stand.”  The product already launched is the Ultimate 100, but the company is also working with DIY and independents to make the “Ultimate Independent & DIY” chart.  Every artist should know where they stand in their communities. 

Ultimate 100 is a weekly chart – includes traditional sales, airplay, then audio & video streaming, plus fans/friends/followers but illegal downloads are charted separately because it’s hard to attach any revenue to that [yet it shows tremendous engagement].  Also, We Are Hunted is measuring the chatter and blogging.  “We’re working with a Who’s Who in the DIY space” to make the upcoming chart happen.